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Archive for January, 2010

postheadericon The Commercial Rental Market

As the Economy Goes, So Goes The Rental Market

“The real estate economy is a large, integral part of the general business economy.  Housing affordability, the availability of credit and interest rates influence the demand for real estate. Local population trends also affect the value of real estate.  

The changes in supply and demand, due to the economy also affect commercial leases.  When the economy is doing poorly, there is lack of demand for a businesses services or product, the business may close and the unit can become vacant.   As this continues this not only affects the property owner’s bottom line but the remaining businesses leasing feel the effects.  Vacancy rates climb and the downward trend becomes more severe. 

Property owners must be proactive.   A good commercial property owner or manager tries to stay ahead of the market by understanding the distress of the economy on their tenants and working with the existing tenants to help them stay in the property during tough economic times.  It is better to collect reduced rents than no rents at all.   A vacant unit can take months to rent and thousands of dollars in needed tenant improvement money to attract a new tenant not to mention free rent. 

Work with existing tenants.   By working with existing tenants and anticipating changes in the market and adjusting rents accordingly, property managers can minimize the effect of contractions in the real estate cycle and keep vacancies as low as possible.   When space is in short supply, rents are high.    When there is a large supply of vacant properties, landlords have to be aggressive to lease space. 

New Tenant Leases.  “You don’t get a second chance to make a first impression.” Prospective tenants form their initial impressions of the premises based on “curb appeal”.   After the first impression is the usability of the space for the tenant’s intended use and price and terms.   Today it is a tenant’s market.   A landlord has to be flexible and have a clean, well positioned property with an attractive price point to attract today’s tenants.

postheadericon Is Las Vegas Ready for a Comeback?

 

When will the recession be over in Las Vegas?

Is Las Vegas ready to make a comeback?

After nearly a two year gaming slump, the city’s tourism numbers are beginning to climb.  Doe the improved gaming and tourism numbers mean Las Vegas has begun to rebound from the recession?  Gaming and sales tax make up nearly 2/3rds of the state’s revenue. Revenue was up in November 2009 by almost 28% yet convention attendance was down 13% from November of last year.  

In 2009, the sale of homes, condos and townhomes totaled 46,879 compared to 28,618 the year before.  Home prices have not stabilized yet and the median home price fell over 22% even while inventory of homes on the market declined 11%. The Las Vegas commercial market is still viewed as being very distressed.  The market is going to have to work thru existing inventory before any new construction is considered and that could be not until the year 2011.  The commercial market is going through a period of re-pricing. The floor in pricing won’t be seen until there are more transactions.  The buying and selling market are pretty much at a standstill wile the rental market is still negotiating downward.  It is expected that the capital market are going to have to expand and vacancies are going to have to be cut before lenders are going to view Las Vegas as a market they once again want to lend in.  With over $80 billion dollars in commercial mortgage backed securities reaching maturity in the next 18 months, the last thing lenders want to do is extend their position in Vegas until this mess has had a chance to work itself  thru. 

Is now the time to buy?  For financially well positioned buyers and all cash buyers, the Las Vegas market is a wealth of opportunity as Las Vegas has  much better recovery prospects than other regions of the United States, particularly the Midwest and the Northeast.   Conventions are being steadily booked, strip hotels are near full and with no new construction being developed, it should be a short time before Vegas is back on top and in full recovery mode.

postheadericon City Center is Open!

With Aria, the centerpiece of MGM Mirage's CityCenter project, opening earlier this week, I decided that it was time for me to get my first glimpse of the eleven billion dollar project.  When fully opened, this amazing mixed-use development will be composed of a “skyline” of two small boutique hotels, one4,000-room hotel and casino, a condo-hotel tower, two towers of  residential units, and 500,000 square feet of high-end retail, dining, and entertainment space. The total number of buildings will be between 40 and 50.  Even by Vegas standards, this project is stunning.

City Center is Open

Half of the center is not ready for prime time and about 30% of the high end shops at the retail shopping center, Crystals, are not open yet but if what is available is any indication of what is left to come, then this project is a must see when you come to Las Vegas!

The Veer Towers

Crystal Retail Shopping

Forget Shopping in New York and Rodeo Drive in Beverly Hills. When all of the retail stores open at Crystals

Prada – Coming Soon

 

 

postheadericon What is a Special Servicer?

  The most delinquent securitized commercial property loans are in New York at $2.2B followed by Phoenix, Los Angeles and Las Vegas.  These properties are among thousands across the U.S. facing foreclosure due to job losses, lack of refinance credit, vacancies and rent rollbacks. 

   In order to make any change to an existing commercial loan in default as a mortgage backed security (MBS), you need to be working with the “Special Servicer”.  A commercial loan may be handled by a “Special Servicer” when the loan is considered delinquent, at least 30 days past due, classified as a non performing loan or in foreclosure.

  “Special Servicing is when the management of the loan is transferred from the “Master Servicer” to a “Special Servicer”.  This can occur when the borrower has defaulted or is deemed likely to be unable to fix the issue within a reasonable time.  The loan may be placed on a “Watch List” by the Master Servicer if the servicer has a cause for concern on the loan but it is still considered a performing asset.

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