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Office Condos, A Good Place to Start Buying Commercial Prop.
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If you read the paper or get on-line newsletters, you will continually hear that the sky is falling on commercial real estate. The truth is, that the market is soft, REAL soft, but there are people buying and selling commercial real estate. With everyone so paranoid about the future, most folks are opting to lease rather than purchase. This has been good for the office condo market. There are lots of bargains on the market that allow a buyer to get in for relatively small dollars and lease the property for small gains. Not the profit margin of three years ago, but allows the owner to carry the property with a positive cash flow while they are waiting for a rebound in the market. The vacany rates in office condos, in our market, are lower than general office numbers. The leases are not as lucrative as they used to be and they are not as long as they used to be. The normal average length of an office condo lease used to be 3 to 5 years. Now, they are 1 to 2 years. People are nervous and afraid to make the committment for longer. That is understandable.
Where are the tenants coming from? When people were laid off or fired in 2007 and 2008 and unable to find someone to hire them back, many started their own companies, working out of their homes. The one's that were successful and have businesses that are growing, outgrow their home offices and look for other venues. Office condos are the of a size that is affordable and a great first step. Many of those forced entreprenuers are looking for just a couple of offices. Most of the condos that have been built have 4 to 5 offices. This scares many potential tenants away, but a number of condo owners are subleasing their offices to other professionals, reducing their overhead, and filling the office. As their companies grow, they either take more offices within the unit for find new units to rent or purchase. Some opt to purchase an entire unit and sublease it until their company grows into the space.
Will the market rebound soon? Probably not. Estimates are three to five years before the growth returns, and we will probably not see the kind of growth that we had in the first decade of the century. But if you have the capital or borrowing power, you many want to consider looking at an office condo. If you just want information, give me a call at 904-281-8100. |
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Posted By - Jim Akers - 08/14/2010
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