Latest Market Conditions of Commercial Properties
The commercial real estate market, at least in Naples, Flordia, probably found the bottoming of valuations in 2011. In 2012, valuations have quickly firmed up. While unrealistically deep discounts on properties are largely a thing of the past, that doesn’t mean there still aren’t good opportunities out there…it’s just that a fair degree of fairness and reasonableness has entered back in. In fact cap rates on performing properties are historically at the low end of the scale, thanks in part to the low interest rate market, solid demand, and the lack of attractive alternative investor yields.
Having said that however, the pricing of commercial real estate is still generally well below replacement costs, probably by 25-50%, depending on how one would value land in determining replacement values. This largely keeps a cap on new speculative office and retail construction. Generally specaking we still may be 3-5 years before we see much in the way of new vertical development, except for perhaps user driven construction. At the same time, since the pre-developement aspects of building new office buildings and shopping centers can easily take a year to eighteen months to work through I am starting to see some developer activity. The nearly extinct commercial developer is begging to dip their toes in the land acquisistion arena to test the waters.
Perhaps the only exception to the rebirth of commercial real estate industry is the industrial market. In Southwest Florida a big portion of the industrial building market was used by companies directly associated with the construction industry, particularly residential. As that facet of the market is still years away from having any significant upside momentum, so will the fate of the industrial market. Sadly industrial building are easily 50-70% below their values just a half dozen years ago.
The real estate mantra of ‘location, location, location” will continue (rightfully) to be the guidnig light for most real estate investments. Those properties built in outlying suburban locales, areas that had that there hopes pinned on the populatoin ever expanding, will continue to be be the slowest to recover.
I think 2012 will prove itself to be a solid year for investors and sellers alike.
Dougall McCorkle, MBA
Sales Associate and Commercial Specialist
Premier Commercial, Inc., Licensed Real Estate Brokers
Direct: 239.213.7234
Cell: 239.860.3368
dougall@premiermail.net
