Opportunities in Commercial Real Estate in 2009

By Lisa Christianson, Christianson & Company

If only I had a dollar for every deal that we were working on
which has been put on hold to see what happens with this economy.
Despite the overwhelming “state of wait” gripping the commercial real
estate industry, there is real opportunity in 2009.
Yes, retailers are closing stores. But this means that great corners are
opening up for retailers who are expanding to come in and back-fill.
Michael Niemira, The International Association of Shopping Centers’
chief economist and director of research, says 105,000 to 110,000 new
stores will probably open in the U.S. this year.
 Retailers that are actively
seeking locations in Minnesota include childcare centers, food users,
grocers, and specialized fitness concepts.
Now is a great time for companies to buy real estate. There is more
product, prices have come down, interest rates are low and there is
still money available through a variety of loan programs. The once
“hard to find” small building for sale, now is not so hard to find. There
are currently 850 properties listed for sale on the MNCAR Exchange
which are 20,000 square feet or less. Interest rates are at historical lows.
US Bank recently quoted 3.62% on a one-year fixed rate, and 5.39% on
a five-year fixed rate.

In addition to conventional loans, the SBA 504 program continues to be
a valuable weapon for entrepreneurs. There are also new opportunities for
financing properties located in census tracts that qualify as Low-Income
Communities. This financing is know as New Market Tax Credits (NMTC).
Those who qualify can take advantage of very attractive terms:
  • 7-year interest only (Under 5% based on today's rates)
  • 85% LTV (plus land credit, up to 100% LTV)
  • "Debt Forgiveness" balloon payment reduction of
    approximately 15% after the 7 years. 
  • Loan amounts from $250,000-$2,000,000. 
Tenants have lots of choices and need commercial REALTORs to
navigate their way through them. We were told this week that one of
our southwest office listings made the first cut of the broker’s search for
a tenant – but we are one of 16 options they are still looking at.
Sublease deals are a plentiful and landlords are beefing up concessions.
Investors with cash should be able to pick up a few deals this year. With
an estimated 40% of commercial loans renewing this year, the combination
of lower property values and tougher lending requirements will force some
owners to put their properties on the market at a discount, and some properties
will go back to the lenders who will be anxious to clear the non-performing
assets from their books. 
We are facing uncharted waters in this economy, but great opportunities
exist for those brave enough to take action in 2009.

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Posted at: 2:41 pm on January 30th, 2009

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