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    3 Replies Latest reply on Dec 19, 2007 2:22 AM by Lighthouse24

    Are commercial/retail values going downward? What about leases?

    Generation4 Adventurer
      We all know about the flattening or decrease of real estate prices for housing but does that hold true for commercial/retail properties as well? My friend is in the market not to buy but to lease and someone advised him to wait a few months due to the mortgage industry crisis. Are the two correlated? Neither of us have any experience in real estate so thanks in advance for giving your perspective.
        • Re: Are commercial/retail values going downward? What about leases?
          DomainDiva Ranger
          Once again its location...location...location. There are some places in the DFW area that are screaming hot (like Grapevine near DFW and North Euless even closer to DFW as well) then there are the not so hot areas. A good indicator of commercial value is to take a look at what is already there....write down addresess and go online to the property tax section in your local area to get an idea of valuation.

          If there are good restaurants, boutique stores, office-loft apartment mix then you will probably want to take a closer look. Be sure to do your homework on the going rate per square foot and always always negotiate.

          The current crisis in sub prime lending is for residential..however there are bleedovers into the commercial sector as business is affected by the number of people that have money to spend....

          The best advice is do your homework and get a commerical realtor. Make this realtor your friend as well.
          • Re: Are commercial/retail values going downward? What about leases?
            LUCKIEST Guide
            Big Question. If neither one of you have any experience in real estate, why are you getting into real estate NOW??
            Tell us more about your backgrounds and why real estate??
            Do you have a Business and or Marketing Plan??
            Be Careful, LUCKIEST
            • Re: Are commercial/retail values going downward? What about leases?
              Lighthouse24 Ranger

              They residential and commercial real estate markets are related in some ways, but not in others.

              A major reason for the housing market decline was defaults on subprime loans, and the default rate was about 20 percent for the last reported period. By comparison, defaults on mortgage-backed commercial property was running about 0.4 percent for the same period (and it's traditionally around 1 percent anyway). So commercial real estate doesn't have the same set of problems right now.

              Even so, when there is a credit crunch, businesses don't (or can't) expand. They also fail at a higher rate, and fewer new businesses start-up -- so the demand for commercial property declines and so does the price. Right now, about a million additional square feet of commercial space is opening up each month, and the average lease price of commercial property is dropping a little over 1 percent a month nationwide (but then, the Wall Street Journal reported that average commercial lease price per square foot hit record high in July, so it was starting from an "up" position).

              There are areas where it remains strong, and areas where it is falling even faster than the 1 percent average. Unless you're in a hot area, I'd advise your friend to wait. If retailers have a marginal holiday season, retail lease space will open up at an even faster rate in a couple of months, and prices will continue to decline a little.

              Hope this helps. Best wishes.