Commercial Real Estate is Opaque
London at Future of Commercial surprised me with the availability of high leverage commercial loans of up to 90% LTV, some of the products being offered as SBA loans. These loans seem to fly in the face of the current subprime outcry with most lenders exiting the residential subprime market. Online information on the commercial real estate market is so thin, I could only find one year old article discussing "subprime commercial" and stated income loans. I am assuming these types are loans are offered by certain agents based on their relationship with the lenders who underwrite them.
The commercial market is opaque, still run by a tight network of companies and individuals who make a higher commission living in "high finance". My friend just worked with a leasing agent in San Francisco to find new space for his 70-member law firm. Once he hired an agent, he was shown various spaces that met his criteria. Yet without an "MLS" or other real time space database, his experience was a lot like 1980's real estate search - the agent led him around to the spaces for perusal, provided some comps and seemed (to him) to have very cozy relationships with the other leasing agents and property managers.
Technorati Tags: commercial leasing, SBA, Future of Commercial, transparency
In Commercial Lending "subprime" is called "private" and is low loan to value. The 90% SBA you reference is Full Doc lending and will cross collateralize other assets, like the borrowers primary residence. There are a company or two that provide 90% financing and the rates for Full Doc loans will exceed 9% and Stated will exceed 11%. These are not popular or high use products.
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LoopNet is the closest thing to MLS for commeercial property I have found.
http://www.loopnet.com/
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I'm not sure I understand the point of this post. You mention your friend's experience looking for space with a commercial agent. The reality is that commercial agents, which I happen to be so I must preface my comments with that statement, are a rare breed. It's nothing like selling a house. You can't go online and see pictures of a commercial property like you can a ranch in the suburbs and decide it's the place for you. I could be mistaken but the impression I got is that your friend was taken to the cleaners by this member of some elite group that takes advantage of business owners that have no basis for comparison when it comes to commercial space so basically whatever they are shown must be the best option for them and then their broker makes his commission and goes on his way. If I have it wrong, I apologize but I definitely take offense to the negative light you shed on the commercial real estate brokerage community.
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No offense intended, it's just the nature of how commercial real estate leasing has been conducted, similar to residential real estate before internet llistings existed. My take is - is there an online commercial leasing site where one can peruse and analyze leasing listings? If that exists, there is at least more room for comparison.
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A few options out there for the general public to view commercial real estate leasing listings are Loopnet; www.loopnet.com , the basic MLS Service which in my area has a nice selection for some of the suburban markets but nothing for the larger cities, MyNextDeal.com which is a newer service that basically imports listings from several commercial listing services and bundles them together. It's looking to be a great option. The problem is in the analysis of the space options. There is not much of a vehicle to do side-by-side comparisons which is where the expertise of a commercial real estate professional comes in. A perfect example which I see all the time is that a user could see a building advertised for $11/SF annually and another for $18/SF annually and not realize that the two spaces are identical except for the fact that the less expensive space must be built out and that expense is either one of the user's out of pocket (up-front) funds or it's paid for by the landlord and is amortized over the term of the lease and then the user is right up to the $18/SF rate like the other space. The $11/SF option is not such a great option anymore...
I am glad to see your blog discussing these types of topics though...it will keep me coming back.
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Thanks for coming back... your commentary is quite valuable because there is still sparse content on commercial real estate on the internet.
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Hi Pat.
I just came across this post through one of your recent tweets...
2007 seems like such a long time ago. Unfortunately not much has changed since then. I've continued (on and off) my blog and have learned so much in the past few years. There are very few "commercial" real estate blogs out there even today unlike the residential side of the real estate world which has exploded since 2007. I have gotten some business over the past year or so from my blog and I still believe that an online presence is key to my future success. I owe so much to some of the "old-timers" like yourself...
I just thought I'd check in and keep a three year old string going a little longer...
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Hey Rob, I remember our conversations like it was yesterday. 2007 is really not that long ago, but it is a lifetime when you consider the word social media didn't exist then (it was called "blogging"). I thought blogging jumped the shark in 2008 because it was too challenging for anybody to blog. And I think it's too late for specialized social media for niche areas like commercial real estate to gain enough critical mass to be used widely by an industry (http://mediatransparent.com/2010/01/27/social-media-application-consolidation/). Online presence is no longer just a blog too, I think being ubiquitous on the social media provides a far more pervasive presence.
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