By Chris Shaheen, Development Specialist for Saurage Commercial Real Estate.
According to a recent survey by CB Richard Ellis, CAP rates in some of the larger capital markets are starting to come down. That is good news for property owners but whether it will continue or how long it will take to reach some of the smaller markets remains to be seen. I have negotiated some leases recently at below market rents, both in office and retail. With higher CAP rates, this causes a temporary decrease in property values. Some landlords are willing to take the lower income flow now with the hope that a market turnaround will result in the tenant staying and paying a higher renewal rate. Some are opting to stay with the vacancy, concerned that lower rents will devalue the properties and reduce their equity positions for future borrowing. The lessees and buyers I am dealing with are being extremely conservative in what they can pay. They want to do deals but are facing owners who still have not come to grips with what has happened. For the time being, I think we will continue to see lower rental rates and higher CAP rates in the Baton Rouge area. You will see some sales and leases that are far below what the owner is asking. You will see more concessions by landlords and sellers. Some investors are willing to weather the storm. When the storm will end is anybody’s guess but the center of it is in Washington D.C. For survey content click HERE.
Chris Shaheen is a graduate of Louisiana State University where he obtained a Bachelor of Science in Business Management. Shaheen obtained the Louisiana Real Estate Sales License in 1995 where he began work as a consultant with Saurage Company Inc. as a specialist in development, land valuation, and financing.Saurage Company, Inc dba Saurage Commercial Real Estate was founded in Baton Rouge in 1991 with the purpose of providing exceptional real estate services with an emphasis on commercial property and property management. Saurage Commercial Real Estate offers to its clients a full range of real estate services including brokerage, investment advising, development consulting, REO disposition specialists, asset management, fee based consulting, tenant representation, and buyer representation. The staff of professionals includes combined experience of 50 years, as well as CCIM Designees and Candidates and recipients of Master of Business Administration.
