Tim Leigh’s Weekend Market Report
Hoff & Leigh, Inc.
Leasing; Sales; Management; Buyer or Tenant Representation
4445 Northpark Drive, Suite 200
Colorado Springs, CO 80907
June 21, 2009
Attached is our complete listing of all properties for sale in Colorado Springs, based on property type - office, industrial and condo. This is the most complete listing that we are aware of. It’s our goal to provide this information, updated weekly. We develop these lists by basic research and cross-checking data points from the PPCIE, local broker's individual web sites, The Turner Book and any other public information domain we can find.
You are receiving this information because, at some point, you asked or a friend referred your name to be included in our e-mail Insider’s List. If you no longer wish to receive this information, send an e-mail reply to me (tim@hoffleigh.com) and ask to be removed. Alternatively, if you know someone who could benefit from the receipt of this information, forward this e-mail to them, and suggest they contact us, so we can consider adding them to our exclusive list.
All Market Average Office Building Sale Price PSF = $112.23 (UP from $110.87 last week.)
We are currently tracking 142 office buildings for sale.
This is 1,447,163 square feet, which represents a total market value of $162,418,448.
All Market Average Industrial Building Sale Price PSF = $83.65 (UP from $78.30 last week.)
We are currently tracking 125 industrial buildings for sale.
This is 1,626,041 square feet, which represents a total market value of $136,016,006.
To view our most recent Colorado Springs Business Journal Ad please click below
http://hoffleigh.com/Doc/June%2019.pdf
Tim’s Market Report
I was chastised last week by my claims that the commercial building for sale market is overvalued vis-à-vis the assessor’s valuations. I’ll stand by the numbers. They tell a compelling story. I said the Colorado Springs office-building-sale market is currently overvalued by nearly $55,000,000 and the industrial-building-sale market by nearly $50,000,000. The average building owner will optimistically say, “We all know the assessor’s valuation is always 20% - 30% low; and besides, my property’s different; it’s worth more. . .”
OK, be conservative and add 30% to the assessor’s numbers. In the case of office buildings, the market’s still overvalued by nearly $23,000,000 and industrial buildings are still overvalued by nearly $22,000,000. Virgil McCormack used to tell me that “Liars figure and figures lie.” How about this? Let’s search for the truth (you don’t want the truth!) so we can make value decisions based on reality and quit deluding ourselves. Smart people told me they expect the commercial property market to tank another 15% – 30% before it starts the long, long road to recovery. They expect recovery to take 3 – 5 years. I heard a guy say that “if you want to monetize your property, this summer’s the time” to sell. I’d suggest re-reading that. They say “sell now or hold on.” There’s a gale wind blowing.
I enjoy hearing from my readers each week. The following was so well said, that I thought I’d share it with you. It’s from a very bright attorney friend of mine.
“ I was amused by your tome with last weekend's report. Seems to me that moderate inflation is what keeps a vibrant economy going, and that is exactly the purpose of the federal stimulus package (other than saving all of our asses). And, it seems to be working. While there has undoubtedly been big deflation in the real estate markets, the economic indicators are looking good for a moderate amount of inflation this year. Had the fed pumped all those dollars into the economy in the absence of the threat of deflation, we would have been in deep doo-doo with hyper-inflation (on the order of Argentina, maybe not as bad as Zimbabwe). In other words, if the effect of the stimulus package is to maintain moderate inflation, everyone is a winner, and it did exactly what it was supposed to do. So, be circumspect about criticizing the federal government response. They're trying hard to save us from ourselves.
But, even if the fed is successful in macro control of the economy, it ain't going to help real estate a whole lot. If real estate inflates only at the rate of the rest of the economy, it will take ten years to recover 2006 prices. And, that's what should happen. We wouldn't be in such bad shape right now if real estate had only inflated at the rate of the rest of the economy. And who's responsible for that? Don't get me started on my rant about the effect of common real estate practices (and practitioners) on the inflation of real estate values. Suffice to say that I agree with your observation that real estate asking prices in Colorado Springs are not realistic, but it is not speculators or government that is to blame; it's ordinary businessmen who bought in at the top of the market and can't afford the haircut. Those of us in other markets watched our IRAs and 401(k)’s plummet knowing there was nothing we could do about it, and it's now water under the bridge. We took our haircut. But the real estate market typically lags behind every other market because investors don't want to believe, and keep hoping things will come back before they become desperate. So, they'll keep trying to scrape up the monthly payment while they go on hoping. As I said, ten years out and they'll be back even, but then that's the case with all of us. Real estate investors just get to be in denial longer, because it's a slower moving train wreck.
But it may be that the rail cars are beginning to pile up in that wreck. Typically it takes a long time for Landlords to understand why no one is knocking on the door wanting in. They always want more proof of slower times before they start talking price reduction. Yesterday I took a ride down Motor City Drive. More Landlords should do that; it's stark evidence of the contraction in business activity. Without an up-tick in business activity, I suspect that there won't be many prospective Tenants or Purchasers out there. And, until the banks can be stimulated to unlock the loan process, there's not enough money out there to either stimulate business or prop up purchase of real estate. If I was in the real estate industry, I would be a huge supporter of the Obama stimulus, because it's the only plan out there to prop up the markets and put bread on my table.”
I’d offer that in 2 separate meetings last week, I was affirmed that the lending crisis is still a crisis for most borrowers that are hoping their lenders won’t force them to come-to-the table with additional equity. The drill’s pretty simple. Regulators tell the banks to mark-down property values to “mark-to-market” and since all values are depressed, when that happens, the borrowers normally have to show-up with their life savings or default. Most borrowers either don’t have the cash; the bank forecloses and sells the asset at a further discount further depressing the market. Talk about a vicious cycle!
Someone once said we live in a crazy world. I guess it keeps us light on our feet and sharp in our minds.
Have a great week!
Sincerely,
TJL
Tim Leigh
719-337-9551
Tim@HoffLeigh.com
To view our Office Matrix List please click below
http://hoffleigh.com/OfficeInsider.aspx
To view our Industrial Matrix List please click below
http://hoffleigh.com/IndustrialInsider.aspx
