Merry Christmas & Happy New Year

I hope you have a Merry Christmas and enjoy the time with your family and friends this week!

"The Blue Sky Always Wins" by William H Hudnut III

This was on the backpage of the ULI October 2008 magazine. Some items to point out:

1-Commercial Real Estate will likely not lose value as preciptously as financial assets; in general, real estate has outperformed stocks over the past 10 years;

2-About half of the homes, office buildings, stores, and factories needed by 2030 do not exist today;

3-Urban infill has become attractive

4-Transit use is growing - walkable shopping districts key

5-High quality always wins.

Email me if you would like a complete copy of the article.

Commercial Real Estate Foreclosures

These are trying times, many real estate investors are finding themselves in positions they never dreamed of; commercial real estate foreclosures are on the rise and are expected to get worse. If you find yourself being challenged by the market, I can help.

Short sales in commercial real estate are going to become the reality for some investors. The process can be simple really; it can be certainly better than dealing with the lender if you are in foreclosure.

Here is how it works. Utilizing my marketing program I find a willing and able buyer who will purchase the property at its current market value and then renegotiate the loan with the lender.

I have had numerous conversations with clients and lenders over the past several months; lenders are not renegotiating current loans. You have to prove current market value by bringing a qualified buyer, or talk with them during foreclosure proceedings.

I hope that all my clients can weather this storm, but I’m finding even my most sophisticated clients are being challenged.

I’m helping them, can I help you?

Excerpt from Bizjournal----Positive News about the Phoenix Market

They rated Phoenix at the 5th metropolitan area in terms of recovery from the recession. Some stats appear below.

Bottom line
Phoenix's raw numbers are breathtaking. Arizona's capital region has added 681,000 residents and 285,300 jobs in just five years. That's the statistical equivalent of creating the Knoxville, Tenn., market from scratch in half a decade. A recent slowdown in hiring is the only cause for concern.

Quick stats
Growth score: 27.50 points
Population: 4,179,427 (13 of 100)
Private sector employment: 1,668,800 (13 of 100)
Per capita income: $34,215 (67 of 100)
Gross metropolitan product: $179.49 billion (15 of 100)5-year growth rates
Population: 19.49% (4 of 100)
Private sector employment: 20.62% (6 of 100)
Per capita income: 19.37% (52 of 100)
Gross metropolitan product: 43.25% (13 of 100)

This is very positive news! Now is the time to be aggressive in looking for well located assets.

Election Is Over, It's Time To Get Back To Business

Regardless of who you voted for, the count is in, the concession speech was given and in January a new President of the United States of America will take the command.

What does this all mean? Specifically, what does this mean to you as a commercial real estate owner?

A couple thoughts to consider:

1-The Capital Gains Tax is going to go up. How does this affect you? If you are looking to sell your commercial property and you do not want to do a 1031 Exchange, the amount of tax you would have to pay is going to be MORE.

2-The Credit Crunch hasn't eased, yet. How does this affect you? If you are looking to buy or sell your commercial property, financing is difficult. CMBS money is still out of the picture. Life Insurance Companies, for the most part, have loaned the maximum amount of money they will lend for 2008. Local banks and even larger bank, are hoarding their cash for reserves. The statement, "cash is king," is slowly working its way to the head of the pack but for how long?

3-Commercial Real Estate is a great long term investment. You have a true asset that is not a piece of paper. Businesses can come and go, but the real estate is still there.

Remember, LOCATION, LOCATION, LOCATION is only half of the answer. TIMING, TIMING, TIMING is the other half.

Call me today to discuss current opportunities!

Good Article about 2009 and the increased Investment Activity Forecasted

Here is the article:

JLL Survey: As Values Fall, Players Plan to Pump Up the Volume in ’09
Oct 31, 2008By: Paul Rosta, Senior Associate Editor

Plunging commercial property values this year could lead to a flurry of investment sales activity in 2009, according to a study by Jones Lang LaSalle Inc.

Almost two-thirds of the property owners, development firms, service firms and consultants polled for the biannual study said they intend to bump up their activity next year. Jones Lang LaSalle surveyed professionals who planned to attend the Urban Land Institute’s fall conference this week in Miami.

The findings reflect a big jump in the percentage of real estate players that are eyeing increased opportunities for 2009. Jones Lang LaSalle’s most recent poll, taken in the spring, found that slightly less than half of those surveyed planned to step up activity.

The capital markets crisis is the main catalyst for the shift, explained Jack Minter, managing director for investment sales. Sixty-two percent of participants in the study think that stabilizing the debt markets will take at least a year; the remaining 38 percent said that equilibrium would arrive between three and 12 months from now.

In a statement yesterday, Minter termed the survey results “a clear indication that investors are ready to start buying at distressed prices that will likely drop an additional 15 to 25 percent in the coming year.” Since the market peak in Jan. 2007, property values have slipped only 12 percent, according to Moody’s/REAL Commercial Property Index, which synthesizes a variety of industry research. That reflects the nature of today’s conservative investment market, which currently favors high-quality, fundamentally sound assets.

Many professionals apparently feel that the coming investment values will result from the declining prices in all property sectors. Respondents to Jones Lang LaSalle’s survey expressed greatest concern about the retail sector. Fully 94 percent of those surveyed said they expect the retail sector investments will decline in value somewhere between zero and 50 percent next year. That reflects a more pessimistic view than the Jones Lang LaSalle study uncovered just six months ago, when 56 percent of respondents predicted that values would drop between zero and 50 percent.

Other property sectors will have little more to boast about in 2009, respondents said. Seventy-five percent expect that the office sector values will slide as much as 30 percent, a jump from the 47 percent who agreed with that outlook this spring. Another 74 percent of those surveyed said that the hotel sector will underperform anywhere from zero to 40 percent.

The prospects seem only slightly better for the multi-family and industrial sector. Sixty-seven percent of respondents told Jones Lang LaSalle that they expect multi-family investments to slide in value by somewhere between zero to 30 percent; just six months ago, only 26 percent held that view. And 66 percent of respondents agreed that the performance of industrial assets will drop by as much as 30 percent next year. Only 40 percent of poll participants this spring expected a decline that size.

"The Creature from Jekyll Island " by Edward Griffin

This link will take you to a video discussing the Federal Reserve. It is a longer video, but very insightful.

http://video.google.com/videoplay?docid=-8484911570371055528

Daily News October 17, 2008

Here are the news stories you might find interesting today:

Arizona has lost 65,600 private sector jobs over the last year with 47,900 of them in the Phoenix area, according to September state employment figures.
View article...
Government-backed assets helped MidFirst Bank turn in strong earnings in the third quarter, while many of its Arizona competitors wrangled with real estate portfolios bloated with bad loans.
View article...
A new automatic parking system using plastic coins embedded with microchips was introduced at Phoenix-Mesa Gateway Airport this week. The coins replace the traditional paper receipts issued from parking gates and carried in the pockets or suitcases of air travellers.
View article...
Arizona’s jobless rate took another jump last month and now hovers close to 6 percent.
View article...
True Food, the new Fox Restaurant Concepts brand co-developed by Scottsdale-based eatery industry giant Sam Fox and health and wellness guru Dr. Andrew Weil, has settled on an opening date of Oct. 27 at Biltmore Fashion Park, 24th Street and Camelback Road in east Phoenix.
View article...
Payless ShoeSource has announced plans to begin selling environmentally friendly purses and shoes.
View article...
MC COMPANIES ACQUIRES 182-UNIT APARTMENT COMMUNITYSUN CITY, ARIZ. — MC Companies has partnered with an investment group to acquire The Fountains at Sun City, a 182-unit apartment community located in Sun City. Terms of the transaction were not disclosed. This transaction is MC Companies’ third apartment acquisition within the last 150 days. Most recently, the company acquired Bay Harbour in Houston and Cooper’s Hill in Austin, Texas.
Brown & Brown Renews at 2800 Tower
Phoenix Ins. Co. Extends 20,200-SF Lease for 7 Years
Insurance brokerage Brown & Brown Insurance of Arizona has renewed its 20,200 square foot lease with Gaedeke Group for seven years at Phoenix's 2800 Tower. The 20-story, 364,533-square-foot office building at 2800 N. Central Ave. was constructed in 1988 in the Downtown North submarket. Brown & Brown occupies the building’s entire 16th floor.




Chandler Industrial Fetches $1.1M
DWP Developers Sells Bldg. 1 of Technology Ctr. West
DWP Developers sold Building 1 of the Technology Center West in Chandler, AZ, to locally based Pure Air Systems for $1.14 million, or $114 per square foot. The 10,000-square-foot industrial building at 2115 N. Nevada St. was built in 2007. Features include heavy power, two drive-in bays and 16-foot clear height. • Libor at 1.67 Percent, a 4-Year LowFirst the good news: the global bailout appears to be loosening banks' purse-strings, to each other at least. The London interbank offered rate, or Libor, is at a four-year low of 1.67 percent, says the British Bankers' Association. That's all for the good. Housing? The National Association of Home Builders/Wells Fargo index of builder confidence fell to a record low of 14, down three from September, reports Bloomberg News. Ahead of today's Commerce Department report on starts, a Bloomberg survey of economists put the range from 840,000 to 935,000 units and a building-permit pace down 2 percent to 840,0000. Then Reuters/University of Michigan preliminary estimate of October consumer sentiment, ahead of its release this morning, puts it at 65 vs. end-September's 70. These are "steep declines," according to an AP report. To boost volatility today: almost 80 million options are due to expire. To cover these, expect much hedging. Dow Jones Industrial Average futures are now at 8918. Adding to the economic zeitgeist President Bush is slated to explain the details of government efforts so far at the U.S. Chamber of Commerce D.C. headquarters.

40,000-SQUARE-FOOT INDUSTRIAL PROPERTY FETCHES $1.99 MILLIONPHOENIX — MMS Phoenix LLC has acquired a 40,000-square-foot industrial property, which is located at 2229 E. Magnolia in Phoenix. CAL/AZ Portfolio No. 1 LLC sold the property for $1.99 million. Built in 1977, the property was 100 percent occupied at the time of acquisition.

If you have any questions about any of the above articles or would like a FREE market evaluation of your property, please do not hesitate to give me a call.

Rescue Bill’s Passage Holds Good Tidings for Real Estate - CPN 10/3/2008

Here is an article I just read:

Oct 3, 2008By: Scott Baltic, Contributing Editor
President Bush wasted no time whatsoever in signing the Emergency Economic Stabilization Act of 2008, inking it into law swiftly after its passage by the U.S. House of Representatives this afternoon.

The bill passed the House by a surprising margin, especially given its unexpected defeat on Monday.

The $700 billion financial industry bailout passed the House by a final vote of 263-171, a crushing victory compared to the 228-205 defeat an earlier version suffered on Monday. The 91 Republicans who voted for the bill were still outnumbered by their GOP colleagues who opposed it, but they, along with 172 Democrats, were enough to ensure the bill’s passage.

The final version contained numerous additional features aimed at enticing its opponents, primarily but not exclusively House Republicans, into supporting it. The changes included an increase to $250,000 in the cap on federal deposit insurance, $100 billion in tax cuts for businesses and the middle class, provisions to help 20 million middle-income taxpayers avoid the alternative minimum tax, and $8 billion in tax relief for people hit by natural disasters in Texas, Louisiana and the Midwest.

Although the stock markets obviously welcomed the news, a Labor Department report that in September employers cut 159,000 jobs was apparently among the factors that kept the Dow volatile in the immediate aftermath of the bill’s signing. Treasury Secretary Henry Paulson reportedly announced his intent to begin using his new authority quickly, with Federal Reserve chairman Ben Bernanke saying that the Fed will work closely with the administration. So it appears that commercial real estate folks might actually be able to relax more this weekend than they usually have lately.

National Association of Realtors chief economist Lawrence Yun told CPN that the bill’s enactment will boost commercial real estate even more than it will help the single-family residential side. He sees the commercial sector as having been disrupted “far more” than the residential end recently, as “even worthwhile loans were not being made.”

Yun told CPN that he expects to see clear signs of recovery in the commercial real estate market as soon as a month from now, with things essentially back to normal in perhaps three months. What’s “back to normal”? According to Yun, that’s when decisions are based on the fundamentals of the real estate, not on the availability of financing.

There was, and still is, a lot at stake. Last night, when the outcome of this afternoon’s vote was still in doubt, billionaire investor Warren Buffett told TV host Charlie Rose that the current situation “really is an economic Pearl Harbor.” Buffett noted that in the previous seven days, the U.S. Treasury sold $40 billion worth of T-bills at a yield of one-twentieth of one percent. That’s the equivalent, Buffett said, of “putting money under the mattress…. You don’t want 300 million Americans putting their money under the mattress.”

The market is just vastly overleveraged now, Buffett said. “What looked so easy to borrow against a year ago now looks like rat poison."

“There is only one countervailing force” that has the power to deleverage that much debt, he said, “and that is the U.S. Treasury.”

Get ready. We are getting close to a bottom and we will have to move quickly.

Recent Survey of Retail Owners

Recent survey of retail owners:

Execs expect retail property recovery by 2010, survey showsA majority of commercial real estate executives believe that the credit crisis is having a greater impact on the industry than any other event of the past two decades, according to a survey by global law firm DLA Piper. Of 424 commercial real estate executives queried, some 60 percent said they believe that the situation has been more detrimental to real estate than the savings-and-loan crisis of the late 1980s and early ’90s. The survey was taken last week after Lehman Bros. declaration of bankruptcy; the government’s bail out of AIG, Fannie Mae and Freddie Mac; and the sale of Merrill Lynch at a discount to Bank of America.

The survey also indicates that hotel and retail investment has fallen out of favor and will be among the least attractive investments for the next 12 months. Just 6 percent of respondents chose retail as the most attractive commercial real estate sector to invest in. Multifamily housing appears to be the most appealing sector, with exactly 50 percent of respondents choosing that option as the preferred investment class. By comparison, 15 percent of respondents to a similar survey in 2005 chose retail investment as the most attractive, and 14 percent in 2007. Roughly 62 percent said they do not expect the real estate markets to stabilize until 2010, and 22 percent do not expect it until 2011. Two out of three respondents said they think Sen. McCain is likely to have a more favorable impact on the industry as president than Sen. Obama. (SCT Week Vol. 12 No. 38)

If you are thinking about selling or buying, now would be a good time to talk.

Commercial Real Estate Loans?

This article discusses the potential issues that are starting to arise from the liquidity issues. There is a significant amount of commercial real estate loans that will be maturing over the next 12-18 months. Will there be financing for these deals? Let's all hope so!

Here is the link to the article:
http://seekingalpha.com/article/96956-commercial-real-estate-loans-may-be-next-shoe-to-drop

Great Article on "What's Your Next Move?"

This is a great article. If you can't read it, email me and I will send you a pdf.

New Retail Investment Opportunity in Flagstaff, Arizona

I just listed a new opportunity in Flagstaff, Arizona. The property is just under 16,000 Sq. Ft. It is 2 commercial properties on 1 parcel for $2,850,000.

Please email me for a complete offering package.

"Looking for the Silver Lining"

Here is a section from an article I just read that explains that why some areas are bad, other areas are starting to see the light at the end of the tunnel. That light is not a train that is coming straight at them and they need to get of the tracks, but a light that we have all been looking for.

Here is the section:

Economic Focus:
Volume 12, Issue 33 For the week of September 8, 2008
LOOKING FOR THE SILVER LINING
As the housing market(s) bob for the bottom and industry professionals scramble to survive the market, it is easy to overlook the positive signals that are beginning to appear.

A slowdown in business thins out the ranks
Over the past decade, ease of business and extraordinary commissions has attracted a multitude of people into the real estate and mortgage professions. A few real estate transactions a year could supplement the family income. And a loan officer could earn a nice living by refinancing a small number of clients several times.

That was then and now is now. Truth is tough times thin out the ranks of marginal producers and the uncommitted. When the market settles down there will be fewer competing for a steady stream of business and most will make a good living.

Some sunshine is breaking through
While the slump is more severe in some communities others offer encouragement.

Case in point - Springs, CO
Here are some July '08 numbers to consider:
• Y/Y listed inventory have shrunk 13.2%
• M/M sales has increased m/m since February '08
• The largest sector of sales has been in the more affordable price range: 88% sold under $400,000; 12% over $400,000
• 802 homes sold out of a total 5,358 active listings (15%)
• Total sales volume: $204,239,293
• Median price: $225,000 • Average price: $254,662
• Sale to list price ratio: 97.3% • Average days on market: 89 days
• Sold in less than 120 days: 76%

The local multiple listing service currently has 3,700 participants. Annual dues are due this month so the impact of the market is yet to be seen in the ranks.

While other markets are experiencing different conditions, Colorado Springs like many other communities did not have meteoric increases in property values and may be benefiting with a milder down side.

The point is there are signs of the housing market settling, giving hope to recovery.

Now is the time to buy a commercial property. Once the market starts to turn around, it will be a "V" recovery vs the "U" that will be seen in other markets. Phoenix is a market leader for the nation. We have higher peaks and lower valleys but we always recover quickly.

Call me to discuss current opportunities that you can take advantage of!

Article that I Just found in SCT Newswire Home

This article has some really great reading points.

Act now, distressed owners told

Owners of distressed retail properties will need to do some fancy footwork to stay afloat in the coming year as many of their loans come due, speakers said at ICSC's Florida Conference in Orlando, Fla., today. Without enough cash flow to maintain mortgage payments, these owners will need to try and re-negotiate loan terms with lenders and rethink CAM and other operating costs to help troubled tenants keep up with their rent payments.

More than $1 trillion worth of U.S. commercial properties will undergo foreclosure in the coming year as owners default on their loans, predicted Stanley Tate, president of North Miami, Fla.–based Tate Enterprises and an advisor to the Federal Reserve. "It's just beginning to start. Those who are heavily leveraged are going to have a very difficult time," Tate said. He pointed out that the FDIC has hired 500 new regulators to help shut down 85 banks within the next 30 days. As more and more subprime borrowers default on loans, "there are very serious problems in the banking industry," he said.

Not all of that foreclosed commercial property will be retail, but Tate expects a significant portion to be small open-air centers tenanted by mom-and-pop shops. Such tenants have been hit hard by inflation and are having trouble keeping up with rent payments, he said. And landlords can no longer count on securing new debt to stay afloat. "In the past few years, every deal was bailed out by more easy money," said John Kozyak, a commercial bankruptcy lawyer with the Coral Gables, Fla.–based firm of Kozyak, Tropin, Throckmorton. "Now, with a lot of loans coming due next year, the easy money has run out."

Troubled owners should not put off trying to renegotiate loans until the last minute, Kozyak said. "The main thing is to get to your lender early and with accurate information," he said. "Lenders are demanding more information in the current economy and they're not tolerating the sneaking around that's been going on in the past 18 months."

To avoid write-offs, lenders are willing to be flexible and work with distressed borrowers, particularly insurance companies and publicly traded lenders who might be more willing to play ball as their quarter is drawing to its close, said Raul Valdez-Fauli, president and CEO of Coral Gables, Fla.–based CNL Bank. "Banks are dusting off forebearance agreements, which include the extension of amortization periods and even reduction of mortgage payments for several months if a borrower can prove that an impending increase in cash flow is on the horizon,"Valdez-Fauli said.

Landlords should do their part to help troubled tenants make rent and keep cash flow up, said Craig Sher, executive chairman of St. Petersburg, Fla.–based The Sembler Co. "Developers will have to reduce CAM expenses penny by penny, and try to save money on insurance. We've attacked every appraiser," he said. "Save tenants money on the expense side so they can afford to pay rent."

Tate recommended that landlords approach troubled mom-and-pop tenants now to renegotiate rents and lease terms. "An occupied store is better than an unoccupied one," he said. "Even if it is at half the rent."

If you are thinking of buying or selling your commercial investment property, please give me a call to discuss how I can assist you in achieving your goals.

Not that bad

Here is an article I just read Commercial Property News:

CBRE’s Torto Sees CRE Correction, No Catastrophe
Aug 4, 2008By: Paul Rosta, Senior Associate EditorMore pain is in store for the U.S. commercial real estate market and the for the rest of the year, but reports of a meltdown are greatly exaggerated. That is the conclusion of CB Richard Ellis Inc.’s global chief economist, Raymond Torto (pictured), in a mid-year report. Difficulties in areas ranging from the job market to CMBS that will take time to resolve. Still, the economy should avoid the severity of the doldrums a generation ago, Torto argued. “We feel the headlines do not accurately reflect U.S. or global real estate fundamentals,” the report states. A generation ago, 12 months of job losses more severe than this year’s pounded the economy, followed by another 9 months of flat growth. Job losses will continue nationwide for the next three to six months; however, the slump in the employment market will not reach the scale of the early 1990s crisis. Indeed, considering the adjustments experienced by the housing, auto, and airline industry, “it is surprising that the job losses to date have not been greater,” the report states.The short-term outlook for commercial real estate is comparable to the job market’s: a relatively shallow, if extended weakening. Commercial real estate is already reflecting the softening of the economy. Second-quarter vacancy rates are up 50 to 100 basis points year-over-year nationwide. In the industrial sector, for example, vacancy for the markets tracked by Torto Wheaton Research, an affiliate of CB Richard Ellis Inc., rose from 9.3 percent to 10.3 percent since the second quarter of 2007. Office vacancy is at 13.2 percent, up from 12.5 percent a year ago. For the rest of the year, vacancy will continue to rise and absorption will dip into the negative across property types. Another indication of the downturn’s shallow nature is economic rent, which Torto defines as a measure of the change in a property’s gross income. That metric is expected to dip only 1.2 percent during the current downturn, a much lower drop than either the 6.1 percent falloff registered in the 1990s or the 23.4 percent slide tallied in 2001. Meanwhile, strong cash flows are keeping a lid on CMBS delinquency rates, which are less than one-half of one-percent for all property types.

CRE is a long term strategy. If your strategy for a 5-10 year hold on your CRE was your initial game plan when you purchased it, just focus on keeping it leased and managed well. If you are towards the end of your hold period and you are thinking about selling, now is the time! Depending on the 2008 election, capital gains rates are sure to change. This can make it more difficult for selling your property at your target rate of return. It might stretch your holding period beyond your expectations.

I welcome your comments and thoughts. If you need anything, please do not hesitate to contact me!

One of the best Economists I have listened too

I was lucky enough to attend a economic discussion with one of the most intelligent economist I have personally met. His name is Barry Asmus. He offers some extreme insight on a very macro level and has the keen insight to narrow that down into our local market in Phoenix.

In his most recent post on his blog, he discusses the current macro economic situation, "the rise of the rest."

I hope you enjoy reading his blog, it is very insightful.

If anyone has any other insightful economists they would like to share, please post them to the blog!

Revised Population Counts

I just read the recently published article in the East Valley Tribune, Arizona dealing with inflated population counts (click the name to get the full article).

My only comment to this article is that there are always 2 ways to look at anything you read. Pessimistic or optimistic. The article is very pessimistic in nature and instead of saying that we grew by 83,000 people, which is still in the Top 10 for population growth, it focuses that it is 19% less then projected.

Last time I checked, projected is just that, a projection. These new 83,000 residents are going to have to have a place to work, live and shop. All of which help with the fundamentals of CRE.

Arizona Economy in a Recession?

Here is an interesting article about the Arizona Economy and if we are in a recession or not. Here are a few interesting facts from that article:
Is Arizona in a recession?
No one can say for sure, but because of these symptoms, economists say it probably is in one:
• Job growth has been stagnant or declining every month for five months now. The Arizona Department of Commerce predicts a 0.5 percent decline in non-farm jobs this year.
• Retail sales have declined 9.5 percent since peaking in December 2006.
• The Arizona Business Conditions Index, a survey of purchasing managers, fell below 50 every month from January through March but did rise to 52.2 in April. Indexes below 50 indicate a contraction in the economy.
• Claims for unemployment insurance have increased every month since September 2006.
Sources: Arizona Department of Commerce, W.P. Carey School of Business at Arizona State University, Eller College of Management at the University of Arizona, U.S. Bureau of Labor Statistics.

How is this going to play into the commercial real estate market? It will obviously have a negative impact, the only question is how negative? And then a follow up, how long will it last?

CRE is a hindsight business. We really won't be able to know for sure how to answer the questions above until next year. I will make a forecast that it is not nearly as bad as the media portrays. There are businesses still expanding and moving into our market and when a new business moves in it fuels the demand for more retail, housing, medical offices, etc.

ICSC ReCon Convention in Las Vegas - Status of the Retail Market

My partners and I attended the ICSC conference in Las Vegas. The expectation was one of potential "doom & gloom" because of the credit market mess.

To say the least, it appears that this was not the case. The meetings I had with owners and developers were definitely more positive then expected. Most people understand that commercial property is a long term investment. Sales and leasing activity has slowed, but it when you try to compare it to one of the busiest years ever, everything is going to seem slow. On the macro scale, there are signs of softening across the board. However, every person I spoke to that was out of state were still commenting on wanting to get into the Phoenix Market.

I overheard some comments about how people felt that it didn't seem as busy this year compared to last year. What most people were forgetting is that they actually expanded the amount of floor area for the convention! Final numbers haven't come in yet, but at the convention they were estimating over 45,000 people. That is a lot considering the whole focus of this convention was on retail properties.

Understanding the many market reports that are sent out

Many of my clients receive market reports from various sources. Each report seems to be just a little different then the other one and it can create some confusion when looking at the information.

One example, I was reading the May 2008 Western Real Estate Business periodical and there were some market statistics providing a snapshot of Phoenix MSA. When looking at such reports, before you really look at the numbers, you should make sure you read the footnotes of what they count or do not count for their market statistics. In those footnotes explains the real message in the report.

The challenge with CRE is not everyone in the business uses the same terms the same way and their is no perfect way of measuring CRE. CRE is not something that can be "day traded" like stock. CRE is site specific.

A couple of good examples:
rentable square feet (RSF) vs. useable square feet (USF) vs. gross leasable area (GLA)
NNN vs Absolute NNN vs MG vs IG vs Gross vs Full Service

Regarding some of the big brokerage firms report, they are only going to report on the properties that they target for leasing/sale/management assignments. The information is good, statistically speaking, but it generally will only capture approx. 80% of the market.

If you solely rely on a third party reporting company (such as RERC or Costar), they typically can only report on what has happened. This is really good information but you still need a qualified commercial broker to take that information and apply it to your submarket or specific property.

Where is the commercial real estate market heading?

My reply is simple; commercial real estate (CRE) is a long term hold. The days of a rapid appreciation in value are over for this cycle. CRE has a cycle like all industries. Many experts believe that the peak was reached in 2005/2006.

However, there are still opportunities in this market. Cash is more important. I hate using cliches but we are nearing the point of "cash is king."

Another point to consider, timing. Because CRE is a long term investment and the thought of buying today and selling tomorrow does not work for this industry should not keep investors sitting on the sidelines when there is a well located property. While CRE is a long term investment, the reason to buy now cash on cash returns is money that you see in the bank on monthly basis. It's not uncommon to look for a 10% cash on cash return and then when you factor in depreciation and equity buildup the real return is much higher!

Now is the time to make sure you have the right leasing and management team in place and operate the property to its full potential. That is how you will reap the benefits of your investment in CRE.