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Question
With property foreclosures on the rise and home prices either declining or at a stand still in most areas, what are your thoughts on the Real Estate market over the next year?
B:
I get this question constantly now. The answer of course will be highly subjective depending upon who you ask, and needs to be broken down geographically, by product type, etc.
Earlier today I sent correspondence suggesting that we have not come close yet to discovery of how deep down the subprime mortgage market failures are going to take the financial markets. All huge portion of American homeowners have been living over the last 5 to 6 years off artificially created equity created by fees earned without enough scrutiny and motivating every professional group involved in the residential industry and financial markets to keep telling the public that home values, like trees, will keep growing to the sky.
Now that many of the credit markets are shutting down, many hidden problems with US economic fundamentals are coming home too roost. Since the War has kept industry active and profitable through deficit spending, and other nations are having financial problems, this may be the perfect financial storm.
Real estate markets are in big trouble. Residential is in the act of sinking now, and the commercial real estate industry knows - but no one will say - the wave is delayed by about 6-8 months, but will engulf them too.
The problem is that no one recognized the magnitude of the sub-prime market problem. Normally industry knows that problems are on there way and begins to taper naturally. If the credit markets complete their collapse at the recent pace, many aspects of the economy will collapse with it. This has occurred so fast that even the astute financial advisors have not had the minimum time to liquidate assets and have the cash to be in position to benefit from the storm, so they too will be immersed in devaluation.
This was a bad day to ask me this question. I had a significant transaction evaporate today because funds have dried up in the credit market. One party involved is one of the largest investment funds in the world. Although the big players are greatly insulated from this type of decline, they have become extremely cautious in just the last week. Two weeks ago the transaction was considered routine.
What do you think? In the end, our collective confidence in the economy will be what determines the depth of this financial problem.
-Jim
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Answers by Expert:
Jim Avancena, CPM
Expertise
Best qualified to answer questions that involve commercial leases, that is, basic issues as well as the often unexpected effects of the complexities and inter-relationships of the provisions a lease may contain, explain how seemingly innocuous text in your lease can have a major impact on a Tenant or Landlord and their business operations, and the common practices utilized in the industry. I can untangle most matters that may come up from the time a tenant begins searching for a office or store space and the lease acquisition process, concerns related to remodeling/improving the leased premises, moving-in, subletting or assigning the leased space, and a long list of problems that may come up during the lease term and even after a tenant moves out. I have practical experience with most property management issues and resolving landlord and tenant disputes - especially those involving what may appear to be overcharges assessed for additional lease charges like CAM costs, operating expense reimbursement, real estate taxes, utilities, construction improvements etc. Note that I am not an attorney and cannot provide legal advice.
Experience
Thirty years active experience in the commercial real estate industry as a licensed real estate broker in the Washington DC Metro area (DC, Northern Virginia & Maryland). I have been admitted (approved) by the Maryland and DC courts to testify as an expert witness on the subjects of Commercial Leasing and Property Management in the area of standard industry practices. I have had a business for the last 14 years advising virtually every form of business entity from large national corporations to the smallest ma & pa new businesses regarding a wide range of commercial real estate matters in addition to property management and commercial leasing.
Organizations
Currently my three children keep me so busy that it is difficult to participate in organizations with continuing and specific time requirements.
Publications
I publish a local commercial real estate newsletter titled: "Tenants First". My firm was the subject of a high profile Washington Post business section cover page (2.25 full pages) feature story on January 13, 1993; titled "Overcharging Overhead".
Education/Credentials
BA in Political Science from Memphis University, and five years of study in the real estate development summer program at MIT. I was certified as a commercial property manager (CPM-IREM), and currently hold a brokers license in Maryland and the District of Columbia.
Awards and Honors
The same plaques and honors that most others in my industry have earned. I have none that I consider especially meaningful.
Past/Present Clients
Past clients include: The World Bank, George Washington University, National Association of Criminal Defense Attorneys, US Department of Commerce, The American Benefits Council, K-Mart Development, many law firms, a national union, other major organizations, and many, many small business firms and retail operators that I am most honored to serve. I estimate more than 1,500 firms/organizations.
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