The Asking Price Is Just That

The Asking Price Is Just That
By: Nicholas A. Dunlap, CPM

Yesterday I received an email from Loopnet, a commercial Real Estate listing and data service that we subscribe to, that I found to be of interest. The email furnished a statistical run of the 4th Quarter of 2009 and pointed out that while sales activity is in fact down in the Orange and Los Angeles county commercial markets, asking prices are up approximately 3.7% per square foot over last year. Talk about pie in the sky, our economy has deteriorated, rental rates have declined and for some reason, investors should want to pay more for an asset? Explain that one to me.

When you do not sell your property, or you receive offers that you feel are insulting, it is likely due to the fact that you are delusional and need to realize that you are not in tune with today’s market. Due to the overwhelming amount of distressed product in certain sub-markets, prospective buyers are treating every asset as though it is distressed and or should be priced accordingly. With that, I will spare you the statistics and make it easy for you to understand. If you have to sell, you are picking one of the worst times in recent years to do so. If you are not highly-leveraged, you might still be able to reap some financial benefit as there are a plethora of buyers and not a lot of quality product. So you can sell, not for prices of 3 to 5 years ago and certainly not at the attractive price you were hoping for. But, the problem with the latter of course is that you will have difficulty finding a 1031 Exchange scenario that will allow you any sort of pride-of-ownership on the acquisition side.

It is good to see that there are optimists, even in today’s economy. On one hand we have the anxious, cash-in-hand buyers ready to pounce and on the other, we have the quixotic sellers looking for top dollar. In between, we have a large gap.