The notion of buyer’s market or seller’s market is a real phenomenon in any form of real estate investment.
Seldom can it be said that the market is both a ‘buyers’ and a ‘seller’ market simultaneously. But this seems the case as we prepare to enter the second half of the 2009 commercial market.
Pinching down on Buyers is the absence of simplified capital lending, something necessary to their investment strategies. Sellers are experiencing what I call “refi shock” as banks tighten their rules for lending qualification in the wake of declining property values.
The conundrum is realized as buyers and sellers are forced to work in a market that favors both. The conundrum is one of uniquely creative transaction partnerships, where neither the buyer nor the seller can pop the cork on a Champaign bottle and light-up a victory cigar.
The Buyer vs. Seller Conundrum
This paradox of market realities or, clash of interests, is actually a moment of investment opportunities where banks can become the third party servants to buyers and sellers.
Cooperative positioning of the principals in a commercial investment transaction actually empowers the buyer and seller, making the market slave to both.
We are entering a new commercial reality, where winners and losers are not created so much as “beneficial parties” are created. It is time for the transaction principals to craft, not a winner take all deal, but a “partnership reality” that is necessary for the economics of a transaction to mutually benefit both in a way that creates market survivability.
I’m still seeing “attitude” with principals and this mental swagger is killing transactions, daily.
Our Brave New Weird
Ours is an industry high on client fiduciary and rightly so. Representing clients is what commercial real estate brokers do; it’s our core and the nucleus of transaction integrity.
What happens, however, when buyer and seller brokers, minimize the unnecessary and counter-productive posturing and gesturing seen in transaction negotiations? Nothing! Unless, of course, the negative energy of “I am right, you are wrong” is replaced with a new paradigm for cooperative transaction creation.
Sellers are going to increasingly find themselves on a razor edge as they face property turnover and reinvestment. Therefore, they must give and not just get.
On the other hand, buyers are facing a financing reality where they are going to not only need the good will of sellers, but perhaps some of the seller’s equity to convince lenders to lend.
I’m seeing a greater level of hostility born of a sense of market frustration that is counter productive to principals and brokers. As tensions rise in a frustrated market, the need for admission that we are indeed in both a buyer’s market and a seller’s market; they are becoming one-in-the-same.
Email Donald Teel – Senior Associate, Arizona Commercial for answers to your investment questions or, if you prefer, call him, toll free at 877-777-9100.