Marketing Session (mentored by Pete Chrzaszcz “Shunz”): The conversations between listing agents and myself focused on the gap between sellers expectations and buyers willingness to pay. Discussions ensued on how to uncover hidden values that might otherwise been overlooked. Numerous properties were presented- some coastal locations that clearly were choice locations and thus commanding of price. Various product types such as multifamily, office, retail, restaurant, day care centers and land were presented. A trial run with Power Point slides was introduced and well received by the brokers. For a complete list of available properties please contact me directly at: Pete@CommercialMasterMinds.com

Our guest luncheon speaker was Paul Chandler, Founder and Chief Executive Officer of Property Sciences, one of the largest privately owned real estate appraisal firms in California.  Mr. Chandler shared with us his observations on Commercial Real Estate values in Northern California.  During the marketing session, a discussion ensued regarding a day care facility and what might be the highest and best use of that facility once the lease expires and tenants choose not to renew.  Mr. Chandler offered his comments that an established business will certainly draw more like kind business because of the existing client pool familiar with that location. Excellent feedback as both the listing agent nor I thought of that idea at the time. My summarized notes of Mr. Chandler’s presentation:

  • Retail: Consumers are in recession, whether the government chooses to avoid that word or not- consumers are in recession.
  • Office: Lots of available space, good for tenants, not so good for owners
  • Industrial: Owner/User buyers dominate smaller properties
  • Residential: Rental market was strongest hit. Condo buyers were investing for appreciation. Rental rates are peaking.
  • Lodging/Hospitality: Slowdown will hurt hospitality. Housing recession affects timeshare sales dramatically
  • Land Development: Very Slow
  • Agricultural Business: Rising commodity prices drive the value of Agricultural land

  At most risk are the Affordable Housing Areas:

  • Sacramento to Bakersfield AND San Diego to the Inland Empire
  • Retail on the periphery is struggling
  • Suburban Office Parks are struggling

Cost of Funds; The temporary loss of the CMBS market leaves banks as the only source of prime and sub prime money for borrowers. This makes investors nervous. The market is different this time to the degree that the market is a global market and will never return as a regional market only. Banks are returning to smart underwriting and the CMBS is expected to start up again in late 2008. Chinese Banks are requiring three times the cash reserves previously required- this has pulled much money from the CMBS market.

What signs will we see as we turn the corner?  Buyers coming back to purchase the CMBS- in fact that return is already starting. Banks need to write off their bad debt, which will probably take another year at a minimum.

Coastal Locations vs. Inland Locations     Coastal locations hit a peak value where Inland locations always lag the coastal locations. Many Sellers moved their equity from coastal locations to inland locations for better cash flow- until this market cycle runs it’s course.