Experienced commercial real estate investors seem to sense market trends and take advantage of those trends when other methods of commercial investment begin to fade.
From 2005 to 2008, industrial land development and the construction of industrial offices and shop buildings on security fenced acreage seemed to constitute a no-lose proposition in the Grand Valley. When the energy business slowed considerably in late 2008, however, so did industrial land sales and investment and user sales of commercial buildings.
As prices have softened in commercial and industrial rents, some forward-thinking investors and developers have begun refurbishing and remodeling older buildings to make them more attractive to new tenants and buyers. Examples abound.
A builder and developer with a family owned commercial building on 32 Road lost the mechanic tenant that had worked at that location for many years. This enterprising owner cleaned the building thoroughly, repainted the interior, repaved the exterior parking area, added office space and carpeting and then easily leased the property to a regional flooring company at significantly higher rents.
The entire downtown area has enjoyed watching Shane Burton and his brother, Tyler, remodel the aging Reed Building at Fourth and Main streets and lease and sell the revamped condominium units. That major remodel and the revamping of buildings to the west of the Reed Building helped rejuvenate Main Street even before the latest street renovation projects. The Burtons are now completing construction on the former Cheers building at Second Street and Colorado Avenue, once again bringing life to a potentially blighted city block.
A few commercial buildings are being sold by banks that have acquired the properties through foreclosure. A typical bank tact is to determine the prevailing market value of the property, price the property to sell at that value and then systematically lower the price until the property sells, usually for cash. Some enterprising investors watch these properties for months at a time, waiting for the bank to reduce the price of the property to one that allows the new investor and owner to profit by buying the property at a lower price, refurbishing it and then leasing it profitably.
Some banks prefer to clean the property, maintain the landscape and try to obtain a higher sale value. Other banks just aggressively price properties to sell quickly. Both methods seem to work fairly well unless the market is softening precipitously. In that case, it’s best to price the property aggressively and make a sale.
As usual, one person’s loss is another person’s potential gain. As the old adage goes, you profit most when you make the best purchase. Paying too much for an investment property could mean several years of mediocre profits or even no profits. Negotiating the purchase price and terms well, understanding the remodeling needs and knowing market rents in every market segment and locale helps commercial property investors make reasonable returns on their investments. Here’s to happy returns on your next investment.
Dale Beede, a Certified Commercial Investment Member, is broker and partner of Coldwell Banker Commercial Prime Properties in Grand Junction. Reach him at 243-7375. For more information about Coldwell Banker Commercial Prime Properties in Grand Junction, log on to the Web site located at www.grandjunctioncommerical.com.