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Lease vs. Buy Trends

LEASE VS BUY TRENDS For Commercial Real Estate Developing equity in a property can be a great way to grow your business or portfolio, but before you make a buy or lease decision, look to your local market trends for additional insight. LEASE SALE AVERAGE ASKING PRICE PER SQUARE FOOT $11 (per year) $83 PRICE CHANGE OVER 2 YEARS Only dropped approximately 3% $.37 per square foot Dropped over 15%, or over $15 per square foot DAYS ON THE MARKET 221 days 216 days DAYS ON THE MARKET CHANGES OVER 2 YEARS Down 25 days Down 16 days Possible reasons for these trends: Access to capital Cash flow uncertainty WHO IS RIDING OUT the storm better? ?: The availability of commercial real estate loans continues to be at its lowest levels since 2007. Which is the best option for commercial real estate in this economy: Sale or Lease? LEASE SALE Asking rents have not dropped as much as asking sale prices, and lease rates have stopped falling perhaps foreshadowing a comeback. The prices do not include lease tenant Asking prices for commercial sale VS properties dropped dramatically during the 2008 fiscal year. They have continued to fall since but the rate of decline is requirements to improve the property, which are increasingly common. slowing. HOW FAR DOES a Dollar go? Commercial Properties FOR LEASE ($/sq ft) YELLOW = high cost markets BLACK = low cost markets NEW YORK > $18.17 (A38% Change vs. PY) > 6.5 months on market (A+24% Change vs. PY) MINNEAPOLIS $5.57 (V-3.7% Change vs. PY) 8.1 months on market (V-24.8% Change vs. PY) CINCINNATI • $8.45 (A+4.0% Change vs. PY) > 9.8 months on market (V-76% Change vs. PY) SAN FRANCISCO WASHINGTON DC $16.96 (A +1.4% Change vs PY) 6 months on market (V-6.2% Change vs. PY) > $18.82 (V-0.2% Change vs. PY) > 7.4 months on market (A+10.1% Change vs. PY) LOS ANGELES $16.00 (A 1.2% Change vs. PY) 5.9 months on market (V-8.4% Change vs. PY) JACKSONVILLE > $8.36 (V-4.1% Change vs. PY) > 9.3 months on market (V-10.6% Change vs. PY) SAN JOSE • $16.56 (V-0.8% Change vs. PY) > 6.7 months on market (V-12.7% Change vs. PY) MEMPHIS • $7.58 (A0.5% Change vs. PY) > 10.4 months on market (V-3% Change vs. PY) COLUMBUS > $7.79 (V-0.6% Change vs. PY) > 12 months on market (A+30% Change vs. PY) Commercial Properties YELLOW = high cost markets FOR SALE ($/sq ft) BLACK = low cost markets SAN DIEGO CLEVELAND > $175.85 (V-96% Change vs. PY) > 6.7 months on market (V-20% Change vs PY) $49.51 (V-2.1% Change vs. PY) 8.7 months on market (V -12.4% Change vs. PY) WASHINGTON DC $168.01 (V-1% Change vs. PY) 75 months on market (V-16% Change vs. PY) SAN FRANCISCO PITTSBURGH > $193.83 (V-3.1% Change vs. PY) >5.5 months on market (V-69% Change vs. PY) > $60.12 (V-5.1% Change vs. PY) > 11.4 months on market (A14.8% Change vs. PY) O CINCINNATI > $55.64 (V8.1% Change vs. PY) LOS ANGELES $179.80 (V-4% Change vs. PY) > 6 months on market (V-57% Change vs. PY) 9.1 months on market (V-39% Change vs. PY) DETROIT $50.05 (V-6.2% Change vs. PY) SAN JOSE $168.59 (V-79% Change vs. PY) 6.7 months on market (V-0.7% Change vs. PY) 6.7 months on market (V -38.6% Change vs. PY) MEMPHIS > $51.61 (V-0 8% Change vs. PY) 6.7 months on market (V-28 3% Change vs. PY) IS THE MARKET about to turn? Sale and lease asking prices are lower than last year. The rate change is slowing in both sectors. If this trend continues, asking In comparison to last year, lease prices have lease prices could see a positive NEARLY FLATTENED, year-over-year growth within 3-4 months for the first but have shown an increase in the last few months. time in more than two years. YEAR-OVER-YEAR CHANGE IN ASKING PRICE a ASKING RENT NATIONALLY Prices are still Nov-11 falling, but at a Jun-11 much slower rate. Dec-10 Jun-10 0.3% Lease prices are Dec-09 trending toward positive y-o-y growth, which could give a boost to pricing on sale properties. -1.8% -3 -34% -6,2% -74% -6 -5.2% -8.7% -9 ---9.6% -12 -14.6% -12.2% Asking Price -15 Asking Rent (Annual) WHAT ARE the recommendations? LESSORS INVESTORS Look for properties with the potential to rebound and specific upside opportunities. Now could be the time. for a long-term lease. Some property owners or management companies may offer additional discounts for early renewals and multi-year The sale prices are currently still declining but this could change SAVE with the increase in lease asking prices. lease extensions. DISCLAIMER Trend data reference LoopNet.com and The Moody's CPPI index of commercial property prices. The Moody's CPPI index may offer a bit more optimistic view on pricing, however it also showed a 16 percent decline over the 24 months between July 2009 and July 2011. Sources: http://www.loopnet.com http://www.uliorg/news/pressreleases/archives/2011/2011press releases/emergingtrendsus aspx http://www.census.gov LoopNet http://www.microsoft.com http://www.corelogic.com http://www.zillowcom http://www.federalreserve.gov/boarddocs/snloansurvey/201111/ defaulthtm

Lease vs. Buy Trends

shared by SharleneMusic on Dec 21
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Are you in the market to buy or lease commercial real estate? Make sure you check this infographic out on when and where to purchase the right property!

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LoopNet

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Business
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