Wed 7 Jul 2010

Use, Common Areas & Parking

Posted by jcazana under Commercial & Investment Properties, Commercial Broker, commercial real estate, Leases, Office space, Property Management, Retail, Shopping Center
[12] Comments

Some issues with leases can be solved pretty quickly so let’s clump a few lease issues together, shall we? 

Use:Easy isn’t it?  If you are taking about office space it is very easy.  Just insert language like this…

Class B Office Space

The Leased Premises shall be used by Tenant for general office purposes and for no other purpose whatsoever, without the prior written consent of Landlord.

Problem solved.  I have never gotten into a protracted lease negotiation that involved “Use” in an office lease.

Retail however, is another story.  Insurance companies don’t mind being next to each other in an office building but grocery stores don’t like it when you put there competitor next door.  Many anchors require “exclusivity clauses” that limit the shopping center’s ability to lease to a competitor.  An example is the Shops at Western Plaza.  The Fresh Market is the only grocery store allowed in the center. 

For that reason we have to write the “Use” section of the lease for new tenants carefully.  A tenant like Hard Knox Pizza will have the use listed as something like this:

The Premises will be used for operation of pizza restaurant, and associated food and beverages and for no other purpose whatsoever, without the prior written consent of Landlord. 

Without this language Hard Knox would have the ability, in theory, the change their store to a massage parlor, barber shop or grocery store (or anything else) and the landlord could do nothing about it; even if it did violate another tenant’s exclusivity.

Parking can be a big factor

Parking:

Things to watch for in lease language regarding parking:

  • Is the number of parking spaces in the lot listed on the lease?  They don’t have to be but if you are tenant that has a lot of walk-in traffic you need some way to protect your employees and customers parking rights.
  • Are their plenty of spots for visitor parking?  If not, ask for them.
  • Do you have reserved parking?  What protections do you have from getting those taken away?
  • Who has the right to tow cars?  The landlord and managing company must have the right to tow illegally parked cars.

Use of the Common Area:

This is one of those common sense things that are in just about every lease.  The lobby, restrooms, stairwells, etc…are for the use of the tenant, their employees, agents and guests.  Tenants are not supposed to use common areas for conducting business. See…common sense.

As always, if you have questions please feel free to contact me at 865-584-3967 or jcazana@ciprop.com

Next week we delve into….SIGNAGE!

 

Justin Cazana, CCIM

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Wed 30 Jun 2010

Subleases and Assignments

Posted by jcazana under commercial real estate, Leases, Office space, Retail, Shopping Center
[10] Comments

Back to our section by section review of leases.

 Assignment and subleasing. 

 This can sometimes be a contentious issue (but then again what isn’t in commercial leases?).

Here are the basics…a tenant has a lease at a certain piece of property.  The tenant wants to move out, shrink their space, or bring in another business to the property.  They can do this for any number of reasons: maybe they need someone to help cover their cost; maybe they have out grown their space and need to expand; or maybe they are going out of business and want to find another tenant for the landlord.

In general, a sublease is a legal agreement where tenants transfer their interest in the leased premises to a subtenant.

If you are tenant, read your lease. A tenant’s right to enter into a sublease may be expressly prohibited or restricted by the landlord. These restraints are usually clearly expressed in the lease/rental agreement or the courts will not enforce them. Landlords usually require written consent to subletting. 

If you are landlord, I would suggest getting this language inserted in your lease. You need to protect yourself.

A sublease is a contractual relationship between the tenant and the subtenant. The relationship between a tenant and a subtenant is essentially the same as the relationship between the landlord and the tenant. In general, the liabilities of the parties to each other are governed by the same rules that apply to the lease. From the time the subtenant takes possession of the leased premises, he/she becomes a tenant of the original tenant (I know, it’s confusing).

A tenant who subleases his interest in a leased premises to a third party (the subtenant) is not released from the obligations under the lease/rental agreement. The tenant is still liable to the landlord for rent and all other provisions contained in the lease.

There is no direct contractual relationship between the landlord and the subtenant. Therefore, the subtenant has no direct rights against the landlord under the terms of the original lease/rental agreement. This also means that a subtenant is not liable to the landlord for rent or for breach of any terms in the original lease agreement. However, the subtenant may be liable to the landlord if he/she expressly assumed the terms of the original lease/rental agreement.

In many ways an assignment is similar to a sublease except an assignment means you are transferring the total rights and responsibilities over the lease to another business. 

 Subleasing/Assignment Issues:

  • Excess rent:  Some tenants will sublease their space at a rate higher than what they are paying and try to pocket the profits.  A landlord’s lease needs language to make sure the proceeds from any sublease are retained by the landlord, not the tenant.  If needed this can be a negotiating point later.

 

  •  Use:  This is one of the reasons a landlord needs the ability in a lease to reject a sublease.  If a shopping center has a pizza restaurant (with the exclusive right to operate in the center) and a burger joint wants to sublease to a competitor of the pizza restaurant the landlord has to have the ability to reject this sublease.  If the landlord does not have this ability they could be sued for breach of lease with the original pizza restaurant.

 

  • Liability:  The landlord needs to be protected in the event that the tenant tries to assign a lease to a tenant with poor credit.  You don’t want a Fortune 500 what may be in one of your office buildings to assign their lease to a shell holding company that can easily go bankrupt at any minute.  In many cases language is inserted in a lease that states the tenant can assign the lease so long as the new tenant (assignee) has a net worth greater than or equal to the first tenant (assignor) at the time the original lease is executed.

 Lots of details but very important ones.  As always, feel free to contact me if you have any questions. jcazana@ciprop.com or 865-584-3967.

 Sincerely,

 Justin Cazana, CCIM

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Wed 23 Jun 2010

Knoxville Market Update

Posted by jcazana under Commercial & Investment Properties, commercial real estate, Economy, Industrial space, Office space, Retail, Warehouse
[7] Comments

Knoxville, Tennessee

We take a reprieve from looking at the details of a lease to look at the market update for Knoxville. 

Since our last market update (a month ago), I am happy to say that things have certainly improved in the prospect area.   The phone is ringing more often, retailers are starting to talk about expansion and corporate users are looking for office space.

Retail is blooming

Retail Growth

Retail:   We manage/broker four different retail properties in Knoxville and the activity at all the centers has picked up.  CIP has done about 11,000sft of retail leasing in the last six weeks (our first retail leases of the year).   Other retailers are moving into the area.  West Town is getting the tea boutique Teavana and a Tommy Hilfiger.  There is a new Brazilian restaurant moving into the former Amerigo’s and the former Boater’s World location across from the mall will soon be home to Nicola’s Fine Furniture and Aspen Dental.   And lets not forget that Sullivan’s will open another west Knoxville location in the old Italian Market at Franklin Square.

Office space is starting to move again

On the office side activity has increased although not many deals have been closed.  Most of the leases are for tenants relocating, not necessarily expanding.  From the deals CIP is working on you can notice that most of the tenants looking to move are corporate groups.  Most locally owned companies are staying put. 

The big office news is still technically a rumor.    Shopper-News reported earlier this month that Powell-based medical products manufacturer DeRoyal Industries is negotiating to buy the JCPenney Building, on Gay Street, as a possible new corporate HQ. 

The story gave few details and company president Bill Pittman this morning said that “We have no plans to move downtown.”

Knoxville Industrial vacancy has risen 3% in the last two years.

The negative news is on the industrial side.  According to an MPC report, the vacancy rate grew from 11.1 percent in the fourth quarter of 2007 to 14.1 percent in the fourth quarter of 2009.  That is a pretty significant jump.

Four notable industrial properties were vacated since 2007 adding a combined 1,137,825 square feet to the market and making up 33 percent of the area’s vacant space.  That does not include an additional 102,000sft that has gone vacant since this report was completed. Vacancies also continued to grow at the national level, with the national vacancy rate registering 13.2 percent availability in the fourth quarter of 2009. 

Reading real estate is like reading tea leaves…tough to do and can leave a bitter taste in your mouth.  Things do look better as a whole but the market is still volatile. 

As always, if you have any questions please feel free to contact me at 865-584-3967 or jcazana@ciprop.com

Justin Cazana, CCIM

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Wed 16 Jun 2010

Utilties in your leased space

Posted by jcazana under CCIM, Century Park, Commercial & Investment Properties, commercial real estate, Retail
[7] Comments

As we continue our tour through a basic lease the topic today can be a big subject when it comes to cost savings but it can be covered pretty quickly.

UTILITIES!

Utilities are handled one of two ways (typically).  One, the utility bill is part of the rent.  The landlord pays bill when it comes in every month.  This is part of a full-service lease.  Two, the tenant contracts separately with the utility provider and pays their own bill.  This is typical most retail leases and some office leases.

There is no better or worse way to do it.  Some tenants prefer to control their own utilities; others would rather just right one check every month instead of having to pay a separate utility bill.

Depending on the tenant and the type of HVAC systems, a considerable amount of saving can take place with full service utilities.

Utility systems are often set up because of the style of building.  For example, at the

Admiral Pointe-Medical Office Building in Farragut

Atrium, Admiral Pointe, Century Park I & III tenants are pay their own utility bills.  These buildings are two and three stories, respectively.  Over our 40 years of development we have found that tenants like having the ability to control their own systems and own hours.  It allows them to keep the utility bills down by instituting set-backs for non-work hours.  Most of they time these tenants are served by split-system, roof-top units. If a someone comes in to work on the weekend all they have to do is turn on the system in their section of the office.  This saves money in the long run.  However, it is very difficult to use a split-system on anything over three stories.

New, larger buildings have highly efficient HVAC systems

Larger (or taller) buildings are typically serviced by water source systems, cooling loops, chillers or VAV systems.  These highly efficient systems can cool large buildings at a rate 15-20% cheaper than a split-system.  They do have a draw back however; each system services a large area, therefore if a tenant has multiple shifts or does weekend work they have to cool the entire floor (or more) of the building and that can get expensive.

In many large buildings, with full service leases, tenants are charged an “after hours utility charge” of about $40 per hour if they use the systems after standard building hours.

Regarding water; in most building water is “commonly metered” meaning it is paid for by the landlord.  If there is a tenant that uses more than standard amounts of water (like a restaurant) they can be separately metered or have an increased rate to cover the increased usage.

Next week will be a market update…lots has been going on in Knoxville and commercial real estate in general lately.

As always, you can contact me at 865-584-3967 or jcazana@ciprop.com for questions or for more information.

Justin Cazana, CCIM

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Wed 9 Jun 2010

Construction, Allowances and Build Out

Posted by jcazana under Commercial & Investment Properties, commercial real estate, Leases, Office space, Retail
[5] Comments

Comparing apples to apples; that is what you want to do when you are making a decision on the location of your new office or store.  To do this you need to make sure the services the landlords provide are all equally matched.  This includes items like electrical service; janitorial service and today’s topic…build out allowance & construction.

As is the case in most of lease s, there are  many different terms to consider.  Most popular are phrases like:  Cold dark box, warm box and plain vanilla shell.  While the last of these sounds like part of a nice dessert the differences can cost a tenant or landlord thousands of dollars.

Quick definitions:

Cold Dark Box-Usually reserved for new retail.  This would mean a tenant is moving into a space that has no lights or HVAC.  No restrooms.  Sometimes there is a store front (often not) and the floor is gravel.  It is the tenant’s responsibility for all construction to ready the space for occupancy.

Warm Box-Similar to cold dark box, only there is HVAC in place and power to the premises.  Usually a store front is already in place.

Plain Vanilla Box-Sheet-rocked walls (ready for paint), restrooms in place, and concrete slab ready for flooring. Drop ceiling with lights installed.

There are a hundred different variations of these conditions but these are the most popular.

While you have to compare the different conditions of the space you also have to compare the construction allowance that the landlord may, or may not, be providing.   This is where there is a lot of confusion. 

Every developer or landlord has a different formula for the way they provide their building and allowance.  These days for new (often called “first generation”) space Commercial & Investment Properties provides an allowance of $25psf.  So if you lease 10,000sft you get $250,000 for construction.  Some developers will provide allowances up to $35psf (more in larger markets).  But the difference is in what else the developer is providing.

In new office space, CIP provides all standard HVAC units, ducts, diffusers, mini blinds and turn down of sprinkler heads.   Total cost of these items is typically around $10-$12psf.   If another developer is giving a $35psf allowance but is providing only a cold, dark box the tenant will have added cost of purchasing HVAC units, providing engineers to make sure they are properly zone etc…These items can add up quickly so you have to make sure that you are truly comparing apples to apples when deciding on office space.  

Before the lease is signed you also need to determine who will handle construction.  Is it the complete responsibility of the tenant or will the building owner be involved?  In multi-tenant office buildings, many times the landlord will request the building contractor do the work.  This can save time and money since the GC is already familiar with the building.  In many retail leases the tenant is solely responsible for all aspects of construction.

Additional factors…

  • What if you spend more than your allowance?  Most office leases require the tenant to reimburse the landlord for any overages with in 30 days of construction completion.
  • What if the tenant can’t afford the overages?  Depending on the financial condition of the tenant and landlord, sometimes the landlord can agree to amortize the additional cost over the term of the lease.  There will be a higher interest rate but this is done very often.  This cost is added into the rent and paid back monthly.
  • What if construction is not completed on time?  This depends on who is handling the construction.  If it is the tenant’s responsibility, or the tenant has caused a delay, rent will typically start as it is stated in the lease.  If the delay is caused by the landlord rent can often (but not always) be abated until all the work is complete and the space ready for occupancy.  It all depends on the language in the lease.

As always, it is important that the section of the lease regarding construction be reviewed thoroughly prior to execution.

If you have any questions or need additional information please feel free to contact me at 865-584-3967 or jcazana@ciprop.com

 

Justin Cazana, CCIM

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Wed 19 May 2010

Lease Specifics: Rent & Operating Expenses

Posted by jcazana under Commercial & Investment Properties, Commercial Broker, commercial real estate, Economy, Leases, Office space, Retail, Shopping Center
[3] Comments

Surely paying rent is easy, right?  All you do is write a check at the first of every month.  Piece of cake.   Yes it is easy. 

Rent:

In most leases, rent is paid to the landlord on the first of every month.  The language is very specific in the lease document as to how it is paid, when it is paid, to whom it is paid and what happens when you don’t pay it.   To make sure you don’t forget to pay your rent many landlords suggest, or require, automatic draft of all payments from your account. 

A couple of things to watch for…

  • When you are starting a new lease make sure the rent commencement date is negotiated.  Rent rarely starts the day you sign the lease.  Do your best to make sure that rent does not start until you open for business or until your construction is complete.  Nothing can put a crimp in a business plan like paying for construction and rent at the same time.
  • Negotiate free rent periods.  In this economy many landlords are giving incentives. Free rent is one of them.  Two to three months of free rent is not uncommon.
  • Pay attention to late fees.  Rent is due the first but most late fees are not charged until the 5th of the month.  This is not a hard and fast rule but something to watch for.  Also, late fees can be as much as $25 per day. Those can add up quickly. 
  • Load factor:  You may notice you pay rent based on “Rentable Square Feet”.  This is based on the amount of “Usable Square Feet” you occupy, multiplied by the load factor.  This is the percentage of the building taken up by the common area (restrooms, hallways, lobby etc…).  This varies from 0% to 20% depending on the building.  Learn your buildings load factor before signing the lease to make sure the rent is properly calculated.

 Operating Expenses:

These costs are defined as the amounts paid to maintain property, such as property taxes, utilities, insurance, repairs, maintenance, legal fees etc…These have more than a dozen names.  They can be referred to as CAM (Common Area Maintenance), NNN charges (known as triple net), operating expenses, pass throughs…you get the idea.  They are handled differently depending on the type of lease but to simplify the process we will look at basic retail and office leases.

Admiral Pointe-Common Areas

Office Operating Expenses:  In typical Class-A office leases the tenant pays a full-service rent.  The tenant writes one check each month to cover rent, utilities, CAM, etc…However, in the lease there will be what is called a “Base Year” or “Expenses Stop”.  This defines the amount of annual payments that goes towards operating expenses.  For example, if you pay $20.00 per square foot in rent in a full service lease your “expense stop/base year” may be $6.00psf.  At the end of the fiscal year the landlord will reconcile all the operating expenses.  If the operating expenses exceed $6.00psf the tenant will be required to cover the difference (Example: if it ends up at $6.05psf, the tenant will have to pay $0.05psf to reimburse the landlord).  But it goes both ways, if costs come in under your expense stop/base year the landlord is sometimes forced to writes the tenant a check for the difference.   

There are some leases that do not have operating expense stops; these are typically called Gross Leases.  There is no year end charge to the tenant; however, these leases typically include annual rent increases to cover the increase costs of services.

The Gallery on Kingston Pike

Retail Operating Expenses: In most retail leases these are called NNN pass through or Triple Net Charges.  It is the same scenario as offices lease only the rent and NNN charges are broken down into separate categories.  The tenant usually rights only one check per month for rent/NNN but the NNN charges are more volatile and fluctuate more year to year than an office lease.  Remember the retail leases often don’t include things like janitorial service, HVAC repair or light bulb replacement that you might find in office lease.

Protect yourself:  There are ways both the tenant and landlord can protect themselves from outrageous increases in operating expenses in both office and retail leases.  

  • Put a cap on controllable expenses:  Landlords have the ability to bid out many of these services, landscaping, janitorial, insurance etc…this allows them to keep operating expenses lower.  In your lease try to negotiate a cap on year to year increases.  Most landlords can agree to around 7% per year.  Note:  Landlords can not control some expenses like taxes and utilities so these are excluded from this type of cap.
  • Carefully read the section of your lease regarding operating expenses (it may be called Additional Rent, Operating Expenses, Rental Adjustments or Excess Operating Costs).  Some landlords reserve the right to charge administrative fees on top of the operating costs.  Try and negotiate these out of the deal if you can (its tough).
  • Make sure the landlord provides you with a reconciled record of the operating expenses for each year and review it.  If expenses went up 10% make sure there is a reason for it.  
  • Negotiate the ability to audit the landlord’s records, but be reasonable about it.  The tenant is paying the rent and the operating expenses so they deserve the right to review the costs.  This is done at the landlord’s or managing group’s office during normal business hours.  Depending on the way the audit rights are negotiated, if the operating expenses are incorrect the tenant can be reimbursed for the excess cost as well as the cost of the audit.

You might have noticed I used the words “typically” and “usually” often in this blog, this is because every lease is different.  Just about everything in a real estate lease is negotiable, these factors are no different.

Be diligent when reviewing these sections of the lease.  A property negotiated lease can save your business thousands of dollars per year.

As always, if you have questions please feel free to contact me at 865-584-3967 or jcazana@ciprop.com

 

Justin Cazana, CCIM

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Wed 12 May 2010

A detailed look at commercial real estate leases

Posted by jcazana under CCIM, Commercial & Investment Properties, Commercial Broker, commercial real estate, Leases, Office space, Retail
[9] Comments

First a word of warning…commercial real estate leases can be MASSIVE!  I have negotiated leases that are ten pages and I’ve negotiated leases that are 110 pages.   Don’t let the size of the lease intimidate you.  You should have a commercial brokers and an attorney that will get through the finicky details that you may have never heard of; subordination, estoppel, force majeure and the like. 

Over the next few weeks we will delve into the world of commercial leases, everything from Assignment to Warranties.

First stop:  Term

Definition:  The period of time which something is in effect. Typically a condition specified in an agreement. 

Every real estate lease must have defined beginning and ending date to be legally binding.  It sounds quite simple.  A lease starts January 1, 2010 and ends December 31, 2010. 

The term can last any period of time from one week to 100 years (this is usually reserved for ground leases).  Typically they are for set periods but these times can be flexible depending on a number of factors. 

Some of these factors can be:

  • Construction timing
  • Governmental approvals
  • Tenant delays, etc…

This is where things can get complicated.  Both the tenant and landlord will negotiate the lease with an eye to protecting their interest in the lease.  

Office space leases

For example, if a lease term, and rent, are set to being June 1st and the landlord is doing construction for an office tenant in preparation for their occupancy, the tenant will often put in language stating that the term (and rent) will not being until construction is complete.  That way the tenant is not stuck paying rent if the landlord has not completed construction. 

In retail leases, where the tenant might be performing their own construction, the term may consist of language stating that the term commences on June 1st or the first day the tenant opens for business, whichever comes first.  This protects the landlord from the tenant opening early without paying rent or the tenant never completing construction and hence not being forced into ever beginning the lease term.  

A properly determined construction schedule for both the tenant and landlord can alleviate many of these concerns.

Nine times out of ten the term is a simple starting point and ending point but it is important to have a commercial broker and attorney on your side when negotiating these details.  The reason many of these lease points are so hotly contested in because landlords, tenants and attorneys have been burned in the past by unscrupulous parties who prosper by taking advantage of the ignorant or inexperienced.   

As always, if you have any questions feel free to contact me at 865-584-3967 or jcazana@ciprop.com

Justin Cazana, CCIM

Commercial & Investment Properties

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Wed 5 May 2010

Lease vs Buy—Tough Question for Small Businesses

Posted by jcazana under CCIM, commercial real estate, Leases, Office space, Retail, Uncategorized
[9] Comments

Lease or buy? This is the question. Small businesses have difficulty raising capital – that’s no secret. This difficulty (among other reasons) has caused many to look at leasing as an alternative financing arrangement for acquiring the use of assets. All types of  leasing have become more and more attractive.

This lease vs buy analysis describes various aspects of the lease/buy decision. It lists advantages and disadvantages of leasing and provides a format for comparing costs of the options.

Office, retail and industrial building leases are very common. A building lease is usually written for a specific term and will provides that:

  • Periodic payments be made,
  • Ownership or possession the building or space reverts to the landlord at the end of the lease term,
  • The tenant  has a legal obligation to continue payments to the end of the term, and
  • The tenant agrees to maintain space (however there are different types of leases that have the landlord maintain the space, this is typical in office leases).

You may also hear leases described as net leases or gross leases. Under a net lease the tenant responsible for expenses such as those for maintenance, taxes, and insurance for the building. The landlord pays these expenses under a gross lease. Net leases are typically found in retail and industrial buildings.  Gross leases are found in office buildings.

Advantages of Leasing

The obvious advantage to leasing is acquiring the use of an asset without making a large initial cash outlay. Compared to a loan arrangement to purchase the same office space, a lease usually

  • requires little to no down payment, while a loan often requires 25 percent down;
  • Spreads payments over a longer period (which means they’ll be lower) than loans permit; and
  • Provides protections against the risk of obsolescence, since the tenant can leave the building at the end of the lease.

There may also tax benefits in leasing. Lease payments are deductible as operating expenses if the arrangement is a true lease. Ownership, however, usually has greater tax advantages through depreciation. Naturally, you need to have enough income and resulting tax liability to take advantage of those two benefits.

Finally, there is one further advantage of leasing that you probably hope won’t ever be of use to you. In the event of bankruptcy, claims of the landlord to the assets of a firm are more restricted than those of general creditors.

Disadvantages of Leasing

In the first place, leasing usually costs more because you lose certain tax advantages that go with ownership of an asset. Leasing may not, however, cost more if you couldn’t take advantage of those benefits because you don’t have enough tax liability for them to come into play.

Obviously, you also lose the economic value of the asset at the end of the lease term, since you don’t own the asset..

Further, you must never forget that a lease is a long-term legal obligation. Usually you can’t cancel a lease agreement. So, if you were to close a business that leases space, you might find you’d still have to pay as much as if you had used the office space for the full term of the lease.

Look Before You Lease

A lease agreement is a legal document. It carries a long term obligation. You must be thoroughly informed of just what you’re committing yourself to. Find out the landlord’s financial condition and reputation. Be reasonably sure that the lease arrangements are the best you can get, that the offices space is what you need, and that the term is what you want. Remember, once the agreement is struck, its is legally binding.

The lease document will spell out the precise provisions of the agreement. Agreements may differ, but the major items will include:

  • Payment amount,
  • Term of agreement,
  • Who is responsible for maintenance and taxes,
  • Renewal options,
  • Cancellation penalties, and
  • Special provisions.

If you are looking for more information about leasing vs buying please contact me a 865-584-3967 or jcazana@ciprop.com.

Justin Cazana, CCIM

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Fri 23 Apr 2010

CCIM Mid Year Meetings…wow things are changing!

Posted by jcazana under CCIM, commercial real estate, Investor
1 Comment

Its been a while since I have been to New Orleans.  It is safe to say I have matured since I was last there.  Bourbon Street used to be a great place to have fun in college.  Now its just disgusting.  Seriously there should be an age limit just to walk down the street!  

New Orleans-2010 CCIM Mid Year Meetings

But if you are going to NOLA to eat…you have plenty of choices.  I had to privilege of eating at Drago’s, Red Fish Grill and the Pelican Club (twice).  All were fantastic, as expected.

The reason for the excursion was the CCIM Mid-Year meetings.  As the president of the Knoxville chapter I had the opportunity to sit down with several hundred CCIM leaders to discuss the direction of the commercial market as well as the how the CCIM Institute is growing.

If you are not familiar with CCIM; a Certified Commercial Investment Member (CCIM) is a recognized expert in the disciplines of commercial and investment real estate. A CCIM is an invaluable resource to anyone in commercial real estate.  If you are on this side of real estate it is imperative that you work with a professional with these four letters behind their name.

As you might imagine this economic cycle has been hard on commercial real estate, and the CCIM Institute is no different.  In his “State of the Union” CCIM President Richard Juge said that the institute has stayed above the projected budget and should break even for the year.

What is exciting is CCIM’s growth in technology and education.  For the past few years CCIM has improved its training and education plans to meet the needs of its candidates and designees.  That will continue over the next few years.   You can get many of the details from the CCIM website www.ccim.com (which is about to get a make over).  Many have considered the CCIM designation to be the equivalent of a graduate degree in commercial real estate; if anything it will be a more difficult and informative degree in the coming years.

The most impressive display of the weekend was the update on CCIMREDEX. This real estate exchange platform is the most comprehensive commercial real estate web site in the world.  The list of features is much to long to list here but the best description came from one of its creators Todd Kuhlmann.  He said REDEX is like the I-Phone; on its own there is not much to it…but when you add in all the apps it can practically run the world.   REDEX allows you to list a property and then send it out to all the other listing services you subscribe to with one touch of a button.  It can run demographic reports, create marketing flyers, create postcards to mail with just a few clicks of a button and even create flash-enabled web sites for your property.  I haven’t even come close to scratching the surface of what the platform can do.

If you are interested, and a CCIM member, REDEX training will be held in Knoxville on July 22nd.  I suggest you attend.

I would be remiss if I did not congratulate the three Knoxville realtors who earned their CCIM designations this week.  Solange Velas (Southland Realtors), Bill Beecher (Wood Properties) and Joyce Anderson (Caldwell Banker/Wallace & Wallace) all passed their final exam and earned the pin.   This is no easy feat; each broker completed more than 160 hours of education, a detailed portfolio (some are over 500 pages long) and passed a 6 hours final exam.  Congrats.

Justin Cazana, CCIM

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Thu 15 Apr 2010

Knoxville Market Update

Posted by jcazana under Commercial & Investment Properties, commercial real estate, Economy, Forbes, Josh Flory, Knoxville News Sentinel, Leases, Office space, Retail
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Knoxville Real Estate

The Knoxville market has been an interesting place the last couple of months.   I just returned from the Knoxville Area Association of Realtors (KAAR) Trade Show and found many residential realtors content with the market’s direction, not thrilled just content.  Of course they are residential realtors, not commercial.  Commercial tends to lag about 12 to 18 months behind the residential market.  That is what happened on the way down, will it happen on the way up?

There is good news from the lenders side.  From several developers and mortgage brokers I have talked to institutional lenders are loosening the strings and getting more aggressive.  Most of that is for permenant financing.  Banks however are very tight fisted with the money on commercial deals and that may not change anytime soon.

On the leasing and sales side of the market it really depends on who you talk too.  Many brokers say they are working hard and showing space but not many deals are closing.  

If you talk to Spery Van Ness/RM Moore you will get a different story.  In today’s Property Scope put out by the Knoxville News Sentinel you can read about the success RM Moore has had in the first quarter of 2010. 

http://blogs.knoxnews.com/flory/2010/04/local_brokerage_sees_jump_in_c.html

Looking for some good news in commercial real estate? Sperry Van Ness/R.M. Moore is happy to oblige.

The local brokerage firm said this week that its sales and leasing transactions were up 450 percent in the first quarter, compared to the same period in 2009, while volume was up 863 percent.

“We feel it is a great sign of the economy recovering and heading in the right direction,” firm president Roger Moore said in a news release. “Our leasing activity in both retail and office has been excellent in the first quarter with over 150,000 square feet leased.”

As far as businesses coming to Knoxville, the city contiues to be one of the top locations for business, although the city did call a few spots in the release of yesterday’ s Forbes Best Places for Business and Careers. 

From the Knoxville News Sentinel:

Metropolitan Knoxville dropped to No. 56 on Forbes’ 2010 list of the Best Places for Business and Careers.

That’s down from No. 43 on the 2009 list and a high-riding No. 10 in 2008.

Plummeting 46 spots in two years, that’s the bad news. The good news is that Knoxville still ranks higher than 144 of the 200 largest metros in the country.

It’s all relative.

 

Forbes considered a dozen metrics for its 12th annual rankings, including the cost of doing business, projected job growth, cost of living, income growth, educational attainment, crime and others.

 The leaders on the metro list are mostly “Midwestern and Western cities, areas with reasonable business costs, strong economic outlooks and a solid quality of life,” the Forbes story says.

Des Moines, Iowa is No. 1, followed by Provo, Utah; Raleigh, N.C.; Fort Collins, Colo.; and Lincoln, Neb.

Knoxville’s overall ranking was hurt by lower rankings in the cost of doing business, income growth and job growth categories. The sharpest decline was in income growth, falling to No. 193 from No. 142 in 2009.

The cost of doing business (labor, energy, taxes and office space) ranking in 2010 is No. 27, compared to No. 19 last year. The job growth ranking (five-year annualized figures) for this year is No. 116 compared to No. 92 in 2009.

As I mentioned, the news wasn’t all bad. Knoxville showed improvement in some metrics. The city’s ranking for educational attainment (share of population with a bachelor’s degree or higher) rose 11 spots to No. 84 from No. 95 on the 2009 list.

Metro Knoxville’s crime rate, sensational crime stories notwithstanding, also is better. Knoxville’s ranking (crimes per 100,000 people) improved to No. 117 from No. 126 last year.

The Knoxville area’s cost of living ranking (based on cost of housing, utilities, transportation and other costs) also improved, rising to No. 76 this year from No. 83 in 2009.

And, finally, Forbes expects Knoxville to generate more jobs than it did last year. The city’s projected job growth ranking rose to No. 126 from No. 142.

I think Roger Harris put it best when he writes is all about your perspective.   Being one of the top 60 cities in the country for business is a great accomplishment.  Also, these surveys can be cyclical.  If Tennessee or Knoxville has a bad year in recruitment or another rated metric it can significantly effect the rankings.

Knoxville is still getting shots a quite a few big projects.  From what I have been told the Knoxville Area Chamber Partnership has been inundated with requests for information from major companies.  And I expect to see the trend continuing in the near future. 

If you have any questions pleaes feel free to contact me at 865-584-3967 or jcazana@ciprop.com.

www.ciprop.com

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