Commercial Property Tips
Here is a Commercial Property tip for those of you in commercial development and looking to buy land right now.
Finding commercial property in today’s market is challenging. Land bankers feel their land is worth 2008 prices, $800k – $1M per acre, but a project does not pencil at those rates. In our business, we call that a Land Banker, someone sucking out the first years of profit for a center.
To clarify, when buying a piece of land at the $800k-$1M range you would need a rental rate of $3.25-3.50 to stabilize the center for permanent financing, and your forecast would take 2-3 years to realize those rental rates to tenants.
So, for all of you commercial land buyers that are looking, if you buy the Land, they are taking your profit spread from your lender for the first several years until you reach a rate that permanent financing reaches a stabilized debt service.
Just take caution and be smart when finding land for your next commercial property.