June 2009

    

Strictly Commercial

Baltimore Commercial Real Estate News and Opinions

 

 

Owner-Occupied Market Is Bright Spot

June 17, 2009

 

There is at least one bright spot in commercial real estate today:  the owner-occupied market.  This is the market for commercial real estate where a property is majority occupied by the owner of that property.

 

When one hears in the news that the commercial real estate shoe is about to drop the media are often describing mega projects that are in trouble like City Center in Las Vegas, headline foreclosures of trophy properties like the Hancock Tower in Boston, and overleveraged real estate owners like mall magnet General Growth Partners.

 

But the owner-occupied market is hanging tough and it is a bigger market than one might think.

 

The market consists of commercial properties occupied by businesses, non-profits, and government.   The typical owner-occupied property is freestanding (although condos have a small foothold) and they are spread throughout the metropolitan area, in urban locations but also in suburbia, often in business parks.

 

The size of owner-occupied property can range from the tiny (a store front) to the huge (an 800,000 square foot distribution center). In the Baltimore market, the sale prices range from several $100,000 to the $10s of millions.

 

Enterprises that prefer to own generally require specific physical characteristics:  the number of loading docks or drive-in doors, the amount of extra parking and maneuvering room, minimum ceiling heights and electric power, or the size of the office build-out.  These characteristics make the properties non-fungible, or something that is not freely exchangeable or replaceable by another.

   

Enterprises that are less likely to own often need critical mass:  service firms that prefer to be in downtown office buildings or retailers that need the critical mass of customers generated by a shopping center.

 

The good news is that the owner-occupied market is not in a free-fall.  While today’s recession has had an impact on almost every enterprise, many businesses and non-profits are doing fine.

 

The owner-occupied market, like the rest of commercial real estate in general, was not overbuilt.  Yes, demand has dropped from its peak but there is no over supply problem.

 

It is no secret that many of the businesses and non-profits that lease their commercial real estate would prefer to own.  For small business owners, the commercial real estate they own often is a great retirement asset.

 

The opportunity today is that the sale prices for owner-occupied property have moderated from their peak in 2006 and 2007.  Based on credit worthiness, banks are willing to finance owner-occupied property at rates that are still attractive.

 

If you are looking to buy a commercial property, now is a good time to be in the market.

 

 

 

 

 

Contact Mitch at [email protected] and share your thoughts with him.

 

 

We are pleased to announce that we have assisted in the following transactions:

 

 

  • Mistral Group, a Washington, DC area defense marketing and program management company purchased a 25,120 square foot tilt-up condo warehouse on Perryman Court located in the Brandon Woods Business Park, Curtis Bay.  The seller was a private partnership.  Jim and Alan participated in the sale.
  • Butcher’s Produce leased 10,000 square feet of warehouse space that includes freezer and refrigeration at 241 North Franklintown Road, Baltimore City.  Alan made this lease happen.
  • Autopart International, a Boston-based supplier of auto parts, leased 6,500 square feet of flex space at Oakmont Avenue in Gaithersburg, Maryland.
  • Autopart International signed another lease for 4,500 square feet on Old Alexandria Ferry Road in Clinton, Maryland.  Jim Chivers worked on both Autopart deals.
  • The Baltimore Zionist District, a non-profit organization that supports Israel, leased 1,734 square feet of office space at Beacham Square in Pikesville.  BZD is excited about the prospect of returning to Pikesville after a five-year stint in Owings Mills.
  • Pinnacle Granite, a granite importer and distributor, relocated to 13,866 square feet within the Menlo Industrial Park, Baltimore City.  Pinnacle has been a tenant at Menlo since 2001.
  • Shlomo’s Kosher Meats, a kosher meat provider, relocated to 6,240 square feet within the Menlo Industrial Park.  The new warehouse includes freezer and refrigeration space.  Shlomo has been a tenant at Menlo since 1998.
  • Pinnacle Business Solutions renewed its 1,100 square foot lease at Governor’s Plaza in the Rutherford Business Park.  Corporate Office Property Trust in the landlord.