Why Corporate Space Users Are Top Bidders for Distressed Office Properties

Article Submitted by Saurage Rotenberg Commercial Real EstateProperty owners seeking a buyer to take a distressed office building off their hands should consider marketing to corporate space occupiers as well as conventional investors.

In four recent transactions negotiated by Newmark Knight Frank, that strategy produced the best returns available for the sellers and illustrated the impact that corporate users are having on the investment market.
To market a property successfully to these hybrid user-investors, it is critical to appreciate how a space occupier’s motivation to buy differs from a traditional investor. User-investors will consider locations that may not appeal to conventional investors, in part because a user is less concerned about the need to attract and retain tenants.

Acquisitions by corporate users are more likely to be motivated by a desire to drastically reduce occupancy costs. And the net cost of occupying an asset purchased at today’s low prices is far lower than the cost of leasing space, even if the buyer pays a premium for the asset.

In recent transactions, office user-investors have demonstrated a willingness to pay more for distressed assets than conventional investors are willing to pay.

In addition, this emerging force of user-buyers is willing to invest in facilities that exceed the buyer’s occupancy requirements. A corporate buyer will want to occupy a portion of the property, and can lease out unwanted space.

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Saurage Rotenberg Commercial Real Estate is a member of the Baton Rouge Area Chamber of Commerce (BRAC); the West Baton Rouge Chamber of Commerce; the Baton Rouge Growth Coalition; the Baton Rouge Better Business Bureau; the Louisiana Commercial Data Base (LACDB); and the International Council of Shopping Centers (ICSC). Several agents, on an individual basis, are members of the Society of Industrial and Office Realtors® (SIOR), the Certified Commercial Investment Member Institute (CCIM); the National Association of REALTORS® (NAR); and the Greater Baton Rouge Association of REALTORS® Commercial Investment Division (CID).