Rental rates lag vacancies. An article I wrote last year for Colliers' Knowledge Leader further discusses the variables used to track rents and the difficulties associated with them. Analysis of the trends, again oversimplified, shows a lag of another 6 to 18 months between rental rate changes and vacancies. This puts the bottom of rents at roughly one year after the bottom of occupancy.
Rental and occupancy rates will hit bottom in mid 2011.
With this long to wait, what should you do? Will the transaction markets remain in stasis until then? The answer to this question will have to wait for the next edition where I will explore the forces that control buyers and sellers. A quick preview:
investors are ruled by their own herd. As professionals holding fiduciary
responsibilities, they are punished for straying too far from conventional
wisdom. As Geoffrey Dohrmann, President and CEO of
Institutional Real Estate, Inc. put it 'If they take a chance and win, they get
a bonus, if however they fail, they go to prison.' In that environment, few
would be willing to dramatically reduce pricing on assets now, and sell at 63
cents on the dollar. Instead, they will be forced to ride it all the way down,
waiting until the wall of CBMS debt hits in 2010, and sell for much less. But
there are always choices. Longer hold periods could prove the right course. As
debt markets recover, those able to extend their positions, may find it
worthwhile. In addition, derivatives and default swaps, which were just
beginning to gain favor in
Cash constrained owner/users yield excellent sale lease back opportunities.
With the dramatic shift in demand and pricing for CRE, the opportunities are equally greater than they were in the good old days of 2004 through mid 2007. But now, the risks are perceived more clearly as well'
This will be continued in the next edition.
What Really Happened Here?
This newsletter is more than it appears. It is a mix of the following skills:
Research - Writing about CRE in an informative and compelling manner
Marketing - Getting the message in front of the right people ' You!
IT - The distribution email was generated from a program I wrote that embeds unique links into each email while still sending it through Microsoft Outlook so I can find it in my Sent Items. The embedded links help me track when you viewed the email. When you continued to the web to view the article, it tracked that too, linking it to the originating email. These databases, programs, emails, and web pages are all integrated around campaigns.
Project Management - Getting it all done in a reasonable amount of time meant making choices around content, quality, timeliness, tool sets, speed, and more. Incorporating the efforts of proofreaders, editors, permissions from sources, and other demands on time requires strong project management experience.
Strategy - You are looking at it. I am an experienced professional with experience in multiple disciplines. The best way to explain what I can do is to show you.
So how can I help you? I am available to work full time or as a consultant. Let me help you take your business to the next level.
Ward S. Caswell