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Reflections on the Current Market: Summer 2016

17 Aug

In my November blog post, I described the how the commercial real estate industry is in sync with the economy. Good economic times are good for the commercial real estate market while recessions are definitely not. But what do current signals in the economy portend for the future for the commercial real estate market? Following extreme turmoil in equity markets at the beginning of 2016 and the Brexit vote in June, many of my clients have been inquiring about my prognosis for the future. Given current turmoil and uncertainty around the world, at this mid year point it would be a good time to look ahead.

First some basic important data points:

The greater Boston industrial market experienced 1,467,488 sf of positive absorption in the 2nd quarter. Vacancy rates decreased from 7.2% at the end of the first quarter to 6.9% at the end of the second quarter. Lease rates increased to $6.65 average quoted rate which is an increase of 1.7% from $6.54 per sf at end of the first quarter.* These are extremely impressive numbers with now three consecutive quarters of record-setting low vacancy rates.

The greater Boston office market experienced 770,417 sf of positive absorption in the 2nd quarter. Vacancy rates decreased from 8.7% at the end of the first quarter to 8.5% at the end of the second quarter. Lease rates also decreased to $20.47 average quoted rate which is an decrease of 3.5% from $21.21 per sf at end of the first quarter.*  While these numbers are more subdued than those seen in the industrial market, I see this more as a temporary pause in the market than a more severe event.

My observations of current economic conditions and connection to the commercial real estate include the following: There is an abundance of capital sitting on the sidelines. Investors are not comfortable with equity markets. Passive investors are suffering with ultra low yields. Historically low lending rates continue to act as a stimulus to the residential market, for investors and for owner/occupiers of commercial properties. Foreign capital is chasing both residential real estate including high-end condominiums such as Millennium Place where it is reported that 25% of buyers are from overseas, as well as multi-family and Class A office properties. All of this is generating a flight of capital and increased demand for real estate as a preferred asset class.

Many other economic indicators are positive. Employment is up, as evidenced by a robust July employment report, and jobless claims are way down. The GDP is positive and has improved quarter after quarter. Inflation remains low, while oil prices have more than substantially recovered. Foreign investors are investing in U.S., which is viewed as a safe haven.

Overall, I have an optimistic outlook for the commercial real estate market as we head toward the homestretch of 2016 with no recession in sight for 2017.

Please contact me to discuss your specific real estate requirements

Warren Brown, President, Boston Commercial Properties, Inc.

*Data source: Costar Realty Information.

Selecting a Full Service Commercial Real Estate Brokerage Firm

23 May

The most effective commercial real estate brokerage firm provides a full spectrum of services to its clients. Companies that require assistance with leasing or purchasing of properties and relocation can benefit from working with a firm that will assist with its search for property, i.e. tenant representation, and provide guidance throughout the relocation process.

A fully qualified tenant representative focuses on the client’s best interest, has thorough knowledge of the relevant marketplace, and deep experience in the industry. With the client’s best interests in mind, the tenant representative will provide the client with recommendations to procure the best solution to solve the client’s real estate objectives. An effective tenant representative will negotiate on the client’s behalf to secure the most favorable deal terms as well as augment the client’s legal team with review of lease and purchase and sale documents to avoid pitfalls in such contracts.

A full service tenant representatives job is not done when a lease is signed or a sale is closed. The client has the sometimes daunting task of relocating its business. This can be a stressful, time consuming and overwhelming task. A skillful tenant representative has the capabilities necessary to provide assistance to the client throughout the moving process. Such capabilities include the following:

  • Relocation scheduling and budgeting.
  • Facility planning services and financing of tenant improvements.
  • Obtaining the most professional vendors at the best pricing.
  • Provide guidance with purchasing of furniture, phones & IT.
  • Provide assistance with installation of Fixtures, Furniture & Equipment.
  • Guidance with miscellaneous items such as data storage management and new hires.
Real estate costs are typically the second highest cost on the expense side of a company’s P&L.  Identifying and finding the best solution for our client’s real estate requirements is critical to the success and profitability of the company. Boston Commercial Properties understands this and takes its client’s needs seriously.​ Please contact me to further discuss your real estate needs.
Warren Brown, President, Boston Commercial Properties, Inc.

 

Long Term Client Relationships Matter

12 Jan

Over the course of my 29 year career as professional in the commercial real estate industry, I have found that the role of a successful commercial real estate broker has evolved from serving in a rudimentary brokerage capacity facilitating transactions to the role as strategic and trusted advisor to my clients. This role involves diligence, patience and a dedicated position to serve the client’s best interest. One example of this dedicated role is my representation of M.S. Walker. M.S. Walker is a fifth generation wholesale distributor of wines and spirits and a proud manufacturer of spirits spanning all categories.

My relationship with M.S. Walker has spanned over 20 years providing professional advice, market information and assistance which ultimately lead to a significant relocation assignment. This family owned company has always been a pleasure to work with as they are professional, ethical, honest and kind people. The assignment involved the search for an approximately 175,000 sf facility to accommodate M.S. Walker’s spirits rectifying, bottling, warehousing and distribution space requirements as well as its corporate headquarters. The property would require rail service and the location would need to be convenient to M.S. Walker’s employees. The process was further complicated by an eminent domain procedure which initiated M.S. Walker’s relocation requirements. The project team included an architect, designer, engineer, real estate development services firm, law firm as well as my firm.

The search for the ideal property included a very thorough three year process of investigating various geographic areas and vetting of alternative properties. As trusted advisor, Boston Commercial Properties would help M.S. Walker evaluate, understand, tour and analyze the alternatives. Ultimately, my 20 plus year relationship with M.S. Walker culminated in the acquisition of property located in the Readville area of Boston to accommodate M.S. Walker’s real estate requirements. This property was chosen due to its proximity to Boston, M.S. Walker’s workforce, rail access, proximity to Routes 128, 93 and I-95 and ability to accommodate all of M.S. Walker’s space needs. The project team thoroughly evaluated the building and mechanical systems, and site and zoning feasibility to ensure there would be no issues to contend with. We subsequently negotiated a satisfactory deal. Today, we continue to provide professional real estate service and advice to this client. Boston Commercial Properties thrives on our success through long term relationships. Please contact me for a confidential consultation to review your real estate requirements.

Warren Brown, President, Boston Commercial Properties, Inc.