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Office Condos, A Good Place to Start Buying Commercial Prop.
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Posted By - Jim Akers - 08/14/2010
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If you read the paper or get on-line newsletters, you will continually hear that the sky is falling on commercial real estate. The truth is, that the market is soft, REAL soft, but there are people buying and selling commercial real estate. With everyone so paranoid about the future, most folks are opting to lease rather than purchase. This has been good for the office condo market. There are lots of bargains on the market that allow a buyer to get in for relatively small dollars and lease the property for small gains. Not the profit margin of three years ago, but allows the owner to carry the property with a positive cash flow while they are waiting for a rebound in the market. The vacany rates in office condos, in our market, are lower than general office numbers. The leases are not as lucrative as they used to be and they are not as long as they used to be. The normal average length of an office condo lease used to be 3 to 5 years. Now, they are 1 to 2 years. People are nervous and afraid to make the committment for longer. That is understandable.
Where are the tenants coming from? When people were laid off or fired in 2007 and 2008 and unable to find someone to hire them back, many started their own companies, working out of their homes. The one's that were successful and have businesses that are growing, outgrow their home offices and look for other venues. Office condos are the of a size that is affordable and a great first step. Many of those forced entreprenuers are looking for just a couple of offices. Most of the condos that have been built have 4 to 5 offices. This scares many potential tenants away, but a number of condo owners are subleasing their offices to other professionals, reducing their overhead, and filling the office. As their companies grow, they either take more offices within the unit for find new units to rent or purchase. Some opt to purchase an entire unit and sublease it until their company grows into the space.
Will the market rebound soon? Probably not. Estimates are three to five years before the growth returns, and we will probably not see the kind of growth that we had in the first decade of the century. But if you have the capital or borrowing power, you many want to consider looking at an office condo. If you just want information, give me a call at 904-281-8100.
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Proposed Accounting Rule Makes It Better to Buy Than Rent
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Posted By - Jim Akers - 03/04/2010
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The Financial Accounting Standards Board (FASB) is considering a new proposal (#13) Accounting for Leases, If it is approved, rent payments would go from being recognized as an operating expense, which doesn't appear on a corporations balance sheet, to a capital expense, which does appear. This would alter the way that companies show rent costs on their balance sheets, thereby cutting into profits.
It would cause corporations, in the name of financial transparency, to carry a reserve equal to the amount of rent over the entire lease term. (So much for 10 and 20 year leases!) This amount would show as a balance sheet liability. That makes it just as easy and smart to buy, particular now that prices are at a 10 low. If a company wants to control a particular space for 10 to 20 years, it makes more sense to purchase.
This allows the company to depreciate the building over 39 years instead of just over the length of the lease. The announcement came out to inform larger companies, but smaller companies can benefit as well. Since they can't or do not want to buy a large building, an office condo is the perfect alternative, and we can help you with that!!
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Great Time For Office Condos
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Posted By - Jim Akers - 08/01/2009
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An office condo is is a great option when it comes to the purchase of an office property. The price of land is still high and even a small building of around 3000 square feet can cost up to $1Million dollars. An office condo of equal size will cost less than half as much. With an office condo, the maintenance of the grounds, roads, driveways, roofs and the outershell of the building is usually the responsibility of the association. The association also carries liability and property-casualty insurance for the common areas and the building itself. Operating costs for your business are lower from the economy of scale and cost sharing amongst the other units.
If you are developing your own business after a corporate restructuring, you may be able to get a lease/purchase option. In the first couple of years, you can build your business and then be able to show banks a track record. With so many people in the process of starting new companies, there are great possibilities of subleasing individual offices to other professionals and thereby reducing your overhead, if you do not need the entire space. We know how to do that, and can show you.
Purchasing at current prices also make more sense than leasing over a long term because there are such great deals available. If you are going to be in business for 10 to 20 years, the cost savings for purchasing are considerable and can reach into six figures. If you would like to hear more about the advantages of buying an office condo, call our office at 904-281-8100. Or if you have questions, you can contact us at spoci@bellsouth.net.
If you currently own an office condo and need to sell it or come up with additional cash flow, we would be happy to speak with you about your options. Just call us!
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