Retail Tragedy and Triumph

Prescott retail commercial real estateNo, the dark moments of 2008 are not yet behind us. The Prescott and Prescott Valley, Arizona retail markets appear to be booming…emphasis on “appear.”

Looks can be, and often are, deceiving. Our local retail shopping centers we may be repeating history by overbuilding in a flat market that cannot sustain the economic demands of retailers.

Hearing the Giant Sucking Sound

Prescott and Prescott Valley are now two distinct retail markets with minimal consumer crossover. Frontier Village was Yavapai County’s first major retail mall. Prior to its development consumers shopped at what was then called “Ponderosa Plaza” located on Gail Gardner Way between Willow Creek Road and Iron Springs Road. At this point in retail history, Prescott Valley was still in a state of retail infancy.

As a result of the housing boom [Read more…]

The FED Rate and CRE fed reserveFinally, the Federal Reserve acted on the interest rate hike by bumping the rate upward by a quarter-point.

Long overdue, say most economists. An economy cannot be sustained indefinitely by a zero-based lending system coupled with a massive quantitative easement printing of trillions of dollars. It’s a formula for eventual disasters.

The rate increase is good news for Commercial Real Estate and will unleash some of the pent-up, sidelined investment. Another benefit is derived by CRE lenders who need margin to lend, not to mention that nasty word “profit.”

Janet Yellen, Federal Reserve Chair, stated, “…this action ends an “extraordinary 7 year period during which the Federal funds rate was held near zero.”

There will be no panic in the stock market… adjustments, yes. The rate will begin to impact the cost of money but also the savings return rates for the consumer.

What will occur between now and 2018 is an increase in the cost of products and services… inflation. According to the Federal Reserve, we are likely to see inflation at about 2.00% sometime in 2017.

Commercial real estate values will not be immune to the resulting ripple caused by the rate increase. My belief is there will be a return to a more predictable relationship between appreciation, property value and the cost to purchase and refinance.

My advice is quite simple. [Read more…]

2010 – The Disaster Verses Recovery Conflict

comm bldgs sunrise - cwpLike many who find themselves connected to the lifeblood of the commercial real estate market, I have been listening, researching and studying the myriad voices and have come to the conclusion that we are entering 2010 in a state of conflict.

Two camps have emerged. The first is what I will refer to as the “Disaster Camp” and the second is the “Recovery Camp.”

The Disaster Camp (DC) is the illusive analysts whose cryptic research clearly indicates we are entering an era of melt-down. The DC guys and gals come at us armed with their complex charts and narratives that prove conclusively that we are headed into doomsday.

The Recovery Camp (RC) is equally persuasive with their slick, bullet-pointed PowerPoint presentations. The RC camp trumpets phrases like “sidelined investor capital waiting to be spent” and “Bond money waiting to pounce on market opportunities.”

After all is said and done, more will have been said than done! I’m conflicted as a result of the plethora of combative voices that leave me feeling as if I have just stepped off a wild roller-coaster and cannot gain my bearings.

As we enter 2010, I’m a lot like many of my clients, nauseated and bewildered and I am vowing here and now to never ride that roller coaster again.

For at least the opening stages of 2010, I am going to go back to trusting the basic fundamentals of investment and my instincts. In the early part of 2010 I’m resolving to delete all of the emails that are in the DC and RC camp. Away with the charts and the PDFs that tell many tales.

Here is what I am going to do in 2010…return to trusting me, myself and I. Oh, I will be forced to gaze at many more PowerPoint prophets and read many more detailed documents designed to either scare me into sleeplessness or fill me with the phony messages of hope beyond reason.

My thought is that 2010 is going to be a year of disaster AND recovery. We will eat at both sides of that aweful table made up of vinegar and sugar. That is why I am going to return to trusting myself and to a healthy avoidance of investment extremism. I’m inviting you to do the same.

Donald Teel is Senior Associate with Arizona Commercial, an Arizona commercial brokerage and property management firm. Need more information? Please call 1-877-777-9100 or, if you prefer, you may email Donald Teel

Market Aloft: The Birdseye Approach

prescott-center-map-250Sound commercial investment is always based upon a perspective from aloft.

This aerial image of Prescott, Arizona’s downtown commercial area does not tell us much. It simply makes me wonder what is happening north, south east and west of the core area. There is a need to pan.

Market perspective plays a huge role in the analysis and decision making behind NOI, ROI and long term wealth accumulation for an investor. Putting distance between oneself and the market creates a better view.

Today, perhaps more than at any time in the last decade, market perspective counts and can easily impact a commercial transaction’s ability to perform and deliver the desired financial objective.

Lenders are looking at transactions with an eye toward long term performance based upon what I might call property actuaries. If a property segment (type) such as retail, medical, industrial, multi-family is on life support, the lenders are going to factor that illness into the capital risk formula.
[Read more…]