Category Archives: Real Estate

Commercial Real Estate

For investors, purchasing a commercial property in an exclusive real estate like in Tampa, Florida is not an easy task. Maybe some have experienced ending up wasting their investments in non-profitable commercial real estates. But in order to avoid this, always remember to follow the easy step-by-step procedure when planning and buying a commercial property.

A lot of rich businessmen are wondering how they can get a good deal on leasing rates for their office or industrial establishments specifically in Tampa commercial real estate. Some think that the place has become one of the most expensive locations for office sites. But think again. In reality, the commercial real estate market in Tampa offers the most affordable commercial lots and properties in the US. Owners of Tampa real estate could even demand on high prices on office rents since all the amenities are included in each of the location where the building was developed but they don’t.

Due to the culture options and the diverse recreational facilities in the area, not to mention the beaches and the sun suitable for golf, Tampa, Florida is the best place to relocate business. The economy is continuously expanding and growing with a lot of corporate centers that have also relocated in the area. The quality and rich life is there for every investor who would like to make a good business deal in Tampa. The real estate features with the display of countless of commercial property options makes Tampa the top choice.

Realtors suggest that the commercial market in Tampa real estate is still a competitive selling market. The buildings are stable and will always be for the next few years. That is because Tampa commercial real estate has the low interest rates and an exceptional market for relocation. It continuous to be strong and new constructions will always be a part of the Tampa commercial real estate life.

Researches say that a number of Class A office establishments has increased in Tampa real estate commercial market. Other people could not just believe that everything is going very well. There are many investment firms who are willing to spend a lot of money just analyzing how much longer the strong commercial real estate market in Tampa will continue.

Only one thing is for sure, with all the developments happening and all the people trying to fit in jus to get a piece of the commercial space in Tampa, it is safe to assume that the commercial market is still booming and will never go slow at least in the near future.

For a new business commercial investor or for even an expert investor, commercial real estates in Tampa, Florida can provide the peace of mind. Owning a good and solid investment like the best condo units, retail, industrial buildings, etc., would allow a lifetime of sweet dreams which is as perfect as a vacation for a lifetime. There will be no worries, just sensible investment.

Real Estate Investor Should Know

The City of Miami is the largest metropolitan area in Miami-Dade County, with a population of 362,470. The composition of Miami’s population is 60% Hispanic, 22.3% African-American, and 11.9% White.

The real estate market in Miami, Florida has experienced, for the last 4 years, an incredible appreciation in values, and is considered as one of the leading property markets in the country. A combination of rapid population growth, low interest rates, and a very desirable semi-tropical location have helped fuel a dramatic rise in real estate development and property values in this warm, sunny city.

Based on 2000 U.S. Census figures, the real estate market comprises around 148,388 housing units, just within the city of Miami. About 35 percent of the City’s residential real estate stock is owner-occupied and 65 percent renter-occupied. The owner occupancy rate of the city is about 24 percent less than Miami-Dade County. Miami’s total residential real estate inventory is nearly divided between single-family units (1 unit detached and attached) and multi-family units (5 units and larger).

Together, these single-family detached (45,523 units) and 20+ multi-family structures (39,636 units) account for 57.3% of the city’s total residential real estate inventory. The city currently has an average median asking price for housing units of $114,000, as compared to the state average of $92,000. The median value of owner-occupied housing units currently stands at $120,000.

It is well-known that the real estate boom in the city of Miami has indeed become one of the best and most sought after pieces of investments in the country, where people coming from all over the world are cashing in on wide array of Miami pre-construction deals. The fast pace of real estate pre-construction deals give people the opportunity to build equity in their chosen properties, while not having to pay the normal inclusive duties such as taxes, maintenance fees or mortgages.

Construction of high-rise residential and commercial buildings and apartment units has risen rapidly throughout the city. As more homes, condominiums and apartments are built and renovated, property market values have since skyrocketed at an unexpectedly quicker pace. Towards the middle part of 1998, the taxable property value for Miami Beach was $6.96 billion, more than double since the early 1980’s. In addition, the total projected value of building activity has remained constant over the last five years, between $150 and $200 million, with over 3,000 permits being issued. This indicates a healthy investment of over $1 billion in residential and commercial building activity in the 1990’s.

The Miami real estate market still continues to grow, despite worries of an overheated property market, and developers are continuing to unveil new high-rise condominium projects that are in record numbers and are unprecedented in size and. An example is the proposed construction of two 1,200-foot tower units on Biscayne Boulevard at Northeast Third Street.

Goa Real Estate Leaps Ahead

Besides an array of residential projects at different stages of construction and planning, Goa real estate is witnessing a host of new commercial real estate projects. The State is going through real estate revolution with multinationals buying large commercial spaces to develop shopping arcades accommodating top-notch brands.

A number of big retailers are coming up with their exclusive showrooms. All this is going top boost up the land prices in Goa in future. Market analysts see the rates for commercial property in Goa to shoot up further in years to come.

With many big-time real estate developers, like DLF, Gera Developers, Parsvnath coming up with their commercial projects to be launched in Goa, the market is eyeing for a quantum leap in property value of both commercial as well as residential properties.

Many big and small developers are exploring the commercial prospects in Goa and launching their ambitious projects in the State. Real estate players, Parsvnath Group and DLF are planning to develop offices cum shopping malls in Goa.

Jai Bhuvan developers are launching Pentagon Arcade, a commercial property having showrooms of size 120 sq. mtr on the ground floor and 200 sq. mtr showrooms on the first floor in Panjim. Plus they are also coming up with a residential cum commercial complex, spread over an area of above one lakh sq. ft, having 1 and 2 bedroom flats and shops (22-40 sq. mtr) on ground floor in Old Goa.

According to Robbin, a Goa Real Estate [http://www.magicbricks.com/property/city/p/p~p!ct~510!/Goa.real-estate] agent, “Since tourists are the main driving force in Goa and lot of investments comes from them, hospitality projects make a flourishing business in the State.” Property developers keep on launching various such projects including holiday homes/villas/apartments, resorts and hotels in Goa keeping in view the contemporary tourists needs and demands.

One such new commercial project is by Sanatan Financers & Real Estates Pvt. Ltd who is developing a resort named, Kohinoor Resort at Sirvoi, Quepem. It offers 114 luxury rooms in several blocks on two floors.

Also in line is a business center by Chowgule Real Estate and Construction Pvt Ltd a fully equipped well furnished office at Miramar. Owing to such large scale commercial developments taking place in Goa, the Goa commercial real estate is going to be as pulsating as the residential sector in the times to come.

Smart Strategies For Real Estate

If you’re deterred by the roller coaster rides of the stock market, then real estate is the best place to invest your hard earned money.

But real estate business is not an easy one. It calls upon concrete strategies to realize your goals and turn your business into a lucrative venture. If you’re an aspiring real estate entrepreneur, then have a look at the five strategies given below that will help you in having a successful real estate investment.

Buy and Hold strategy

Under this strategy, you buy a property and lend it on rent. Hence, this strategy is usually known as rental properties. Buy and hold strategy of real estate investment opens three paths of income for you:

amortization–you lower the amount of debt while paying your mortgage,

appreciation–you increase the value of your property over the years, and tax incentive–as a landlord you’ll get a chance to cover up your investment costs within a few years. Even if the rent doesn’t break even your entire mortgage payment, it’s not disheartening, as you still have a positive cash inflow.

But before entering into a contract with your tenant, you should make yourself aware of your rights and duties to avoid trouble later.

Flipping strategy

Flipping involves buying and selling real estate property without taking its ownership. You sign a contract with the buyer of your property and earn a commission for your services. There are no credit checks or down payments involved in flipping. And the bright side is that you don’t need to go for a mortgage, as you’re not the actual owner of the property that you are selling.

However, there are two conditions for successful flipping of a real estate property: the property should be able to attract buyers within no time and you shouldn’t keep hold of the property for a long time, i.e., not more than 15-20 days. Under this strategy, you simply buy the real estate property, flip it to a buyer, and collect your money as commission.

The strategy of Rehabs

Here, you buy a ramshackle property at a cheap rate with the expectation that your rehabilitation cost estimates will be highly rewarding at the end. This strategy looks good only on paper. The truth is that such kind of real estate investment involves a high amount of risk and usually end up in loss. This happens because you either fail to find a worn-out property that is cheap enough to give you a profit, or worse–the rehabilitation costs end up being higher than the cost of purchase.

Commercial Real Estate Investment strategy

Commercial real estate doesn’t always mean magnificent shopping malls or office complexes. Any building larger than a 4-unit apartment is regarded as a commercial one. The big advantage of commercial real estate investment is that your property value is calculated in terms of the income it generates through rent and not in terms of bidding on residential real estate.

New Construction strategy

This strategy involves selling your new home during its construction phase. Most of the investors find this strategy to be the most affordable and the easiest one. The important thing here is to keep yourself updated with the market trends. However, there’s a limit imposed by the construction companies on the number of homes you can buy.

A smart way to make an optimal use of this strategy is to have one or two homes under construction continuously. But this strategy brings profit only in a sellers’ market. If you find the local real estate market to be highly fluctuating or to be on the buyers’ side, then it’s better to avoid this strategy.

Commercial Real Estate Transactions

Planning to purchase or finance Commercial or Industrial Real Estate? Shopping Center? Office Building? Restaurant/Banquet property? Parking Lot? Storefront? Gas Station? Manufacturing facility? Warehouse? Logistics Terminal? Medical Building? Nursing Home? Hotel/Motel? Pharmacy? Bank facility? Sports and Entertainment Arena? Other?

A KEY to investing in commercial real estate is performing an adequate Due Diligence Investigation to assure you know all material facts to make a wise investment decision and to calculate your expected investment yield.

The following checklists are designed to help you conduct a focused and meaningful Due Diligence Investigation.

Basic Due Diligence Concepts:

Commercial Real Estate transactions are NOT similar to large home purchases.

Caveat Emptor: Let the Buyer beware.

Consumer protection laws applicable to home purchases seldom apply to commercial real estate transactions. The rule that a Buyer must examine, judge, and test for himself, applies to the purchase of commercial real estate.

Due Diligence: “Such a measure of prudence, activity, or assiduity, as is proper to be expected from, and ordinarily exercised by, a reasonable and prudent [person] under the particular circumstances; not measured by any absolute standard, but depending upon the relative facts of the special case.” Black’s Law Dictionary; West Publishing Company.

Contractual representations and warranties are NOT a substitute for Due Diligence.

Breach of representations and warranties = Litigation, time and money.

WHAT DILIGENCE IS DUE?

The scope, intensity and focus of any due diligence investigation of commercial or industrial real estate depends upon the objectives of the party for whom the investigation is conducted. These objectives may vary depending upon whether the investigation is conducted for the benefit of (i) a Strategic Buyer (or long-term lessee); (ii) a Financial Buyer; (iii) a Developer; or (iv) a Lender.

If you are a Seller, understand that to close the transaction your Buyer (and its Lender) must address all issues material to its objective – some of which require information only you, as Owner, can adequately provide.

GENERAL OBJECTIVES:

(i) A “Strategic Buyer” (or long-term lessee) is acquiring the property for its own use and must verify that the property is suitable for that intended use.

(ii) A “Financial Buyer” is acquiring the property for the expected return on investment generated by the property’s income stream, and must determine the amount, velocity and durability of the revenue stream. A sophisticated Financial Buyer will likely calculate its yield based upon discounted cash-flows rather than the must less precise capitalization rate (“cap rate”), and will need adequate financial information to do so.

(iii) A “Developer” is seeking to add value by changing the character or use of the property – usually with a short-term to intermediate-term exit strategy to dispose of the property; although, a Developer might plan to hold the property long term as Financial Buyer after development or redevelopment. The Developer must focus on whether the planned change is character or use can be accomplished in a cost-effective manner. A developer conducting due diligence will focus on issues involving market demand, access, use and finances.

(iv) A “Lender” is seeking to establish two basic lending criteria:

1. “Ability to Repay” – The ability of the property to generate sufficient revenue to repay the loan on a timely basis; and

2. “Sufficiency of Collateral” – The objective disposal value of the collateral in the event of a loan default, to assure adequate funds to repay the loan, carrying costs and costs of collection in the event forced collection becomes necessary.

The amount of diligent inquiry due to be expended (i.e. “Due Diligence”) to investigate any particular commercial or industrial real estate project is the amount of inquiry required to answer each of the following questions to the extent relevant to the objectives of the party conducting the investigation:

I. THE PROPERTY:

1. Exactly what PROPERTY does Purchaser believe it is acquiring?

(a) Land?

(b) Building?

(c) Fixtures?

(d) Other Improvements?

(e) Other Rights?

(f) The entire fee title interest including all air rights and subterranean rights?

(g) All development rights?

2. What is Purchaser’s planned use of the Property?

3. Does the physical condition of the Property permit use as planned?

(a) Commercially adequate access to public streets and ways?

(b) Sufficient parking?

(c) Structural condition of improvements?

(d) Environmental contamination?

(i) Innocent Purchaser defense vs. exemption from liability

(ii) All Appropriate Inquiry

4. Is there any legal restriction to Purchaser’s use of the Property as planned?

(a) Zoning?

(b) Private land use controls?

(c) Americans with Disabilities Act?

(d) Availability of licenses?

(i) Liquor license?

(ii) Entertainment license?

(iii) Outdoor dining license?

(iv) Drive through windows permitted?

(e) Other impediments?

5. How much does Purchaser expect to pay for the property?

6. Is there any condition on or within the Property that is likely to increase Purchaser’s effective cost to acquire or use the Property?

(a) Property owner’s assessments?

(b) Real estate tax in line with value?

(c) Special Assessment?

(d) Required user fees for necessary amenities?

(i) Drainage?

(ii) Access?

(iii) Parking?

(iv) Other?

7. Any encroachments onto the Property, or from the Property onto other lands?

8. Are there any encumbrances on the Property that will not be cleared at Closing?

(a) Easements?

(b) Covenants Running with the Land?

(c) Liens or other financial servitudes?

(d) Leases?

9. Leases?

(a) Security Deposits?

(b) Options to Extend Term?

(c) Options to Purchase?

(d) Rights of First Refusal?

(e) Rights of First Offer?

(f) Maintenance Obligations?

(g) Duty on Landlord to provide utilities?

(h) Real estate tax or CAM escrows?

(i) Delinquent rent?

(j) Pre-Paid rent?

(k) Tenant mix/use controls?

(l) Tenant exclusives?

(m) Tenant parking requirements?

(n) Automatic subordination of Lease to future mortgages?

(o) Other material Lease terms?

10. New Construction?

(a) Availability of construction permits?

(b) Utilities?

(c) NPDES (National Pollutant Discharge Elimination System) Permit?

(i) Phase 2 effective March 2003 – Permit required if earth is disturbed on one acre or more of land.

(ii) If applicable, Storm Water Pollution Prevention Plan (SWPPP) is required.

II. THE SELLER:

1. Who is the Seller?

(a) Individual?

(b) Trust?

(c) Partnership?

(d) Corporation?

(e) Limited Liability Company?

(f) Other legally existing entity?

2. If other than natural person, does Seller validly exist and is Seller in good standing?

3. Does the Seller own the Property?

4. Does Seller have authority to convey the Property?

(a) Board of Director Approvals?

(b) Shareholder or Member approval?

(c) Other consents?

(d) If foreign individual or entity, are any special requirements applicable?

(i) Qualification to do business in jurisdiction of Property?

(ii) Federal Tax Withholding?

(iii) US Patriot Act compliance?

5. Who has authority to bind Seller?

6. Are sale proceeds sufficient to pay off all liens?

III. THE PURCHASER:

1. Who is the Purchaser?

2. What is the Purchaser/Grantee’s exact legal name?

3. If Purchaser/Grantee is an entity, has it been validly created and is it in good standing?

(a) Articles or Incorporation – Articles of Organization

(b) Certificate of Good Standing

4. Is Purchaser/Grantee authorized to own and operate the Property and, if applicable, finance acquisition of the Property?

(a) Board of Director Approvals?

(b) Shareholder or Member approval?

(c) If foreign individual or entity, are any special requirements applicable?

(i) Qualification to do business in jurisdiction of the Property?

(ii) US Patriot Act compliance?

(iii) Bank Secrecy Act/Anti-Money Laundering compliance?

5. Who is authorized to bind the Purchaser/Grantee?

IV. PURCHASER FINANCING:

A. BUSINESS TERMS OF THE LOAN:

What loan terms have the Purchaser, as Borrower, and its Lender agreed to?

(a) What is the amount of the loan?

(b) What is the interest rate?

(c) What are the repayment terms?

(d) What is the collateral?

(i) Commercial real estate only?

(ii) Real estate and personal property together?

(e) First lien? A junior lien?

(f) Is it a single advance loan?

(g) A multiple advance loan?

(h) A construction loan?

(i) If it is a multiple advance loan, can the principal be re-borrowed once repaid prior to maturity of the loan; making it, in effect, a revolving line of credit?

(j) Are there reserve requirements?

(i) Interest reserves?

(ii) Repair reserves?

(iii) Real estate tax reserves?

(iv) Insurance reserves?

(v) Environmental remediation reserves?

(vi) Other reserves?

(k) Are there requirements for Borrower to open business operating accounts with the Lender? If so, is the Borrower obligated to maintain minimum compensating balances?

(l) Is the Borrower required to pledge business accounts as additional collateral?

(m) Are there early repayment fees or yield maintenance requirements (each sometimes referred to as “pre-payment penalties”)?

(n) Are there repayment blackout periods during which Borrower is not permitted to repay the loan?

(o) Is there a Loan Commitment fee or “good faith deposit” due upon Borrower’s acceptance of the Loan Commitment?

(p) Is there a loan funding fee or loan brokerage fee or other loan fee due Lender or a loan broker at closing?

(q) What are the Borrower’s expense reimbursement obligations to Lender? When are they due? What is the Borrower’s obligation to pay Lender’s expenses if the loan does not close?

B. DOCUMENTING THE COMMERCIAL REAL ESTATE LOAN

Does Purchaser have all information necessary to comply with the Lender’s loan closing requirements?

Not all loan documentation requirements may be known at the outset of a transaction, although most commercial real estate loan documentation requirements are fairly typical. Some required information can be obtained only from the Seller. Production of that information to Purchaser for delivery to its lender must be required in the purchase contract.

As guidance to what a commercial real estate lender may require, the following sets forth a typical Closing Checklist for a loan secured by commercial real estate.

Commercial Real Estate Loan Closing Checklist

1. Promissory Note

2. Personal Guaranties (which may be full, partial, secured, unsecured, payment guaranties, collection guaranties or a variety of other types of guarantees as may be required by Lender).

3. Loan Agreement (often incorporated into the Promissory Note and/or Mortgage in lieu of being a separate document)

4. Mortgage [sometimes expanded to be a Mortgage, Security Agreement and Fixture Filing]

5. Assignment of Rents and Leases

6. Security Agreement

7. Financing Statement (sometimes referred to as a “UCC-1”, or “Initial Filing”)

8. Evidence of Borrower’s Existence In Good Standing; including

(a) Certified copy of organizational documents of borrowing entity (including Articles of Incorporation, if Borrower is a corporation; Articles of Organization and written Operating Agreement, if Borrower is a limited liability company; Certified copy of trust agreement with all amendments, if Borrower is a land trust or other trust; etc.)

(b) Certificate of Good Standing (if a corporation or LLC) or Certificate of Existence (if a limited partnership) or Certificate of Qualification to Transact Business (if Borrower is an entity doing business in a State other than its State of formation)

9. Evidence of Borrower’s Authority to Borrow; including

(a) a Borrower’s Certificate;

(b) Certified Resolutions

(c) Incumbency Certificate

10. Satisfactory Commitment for Title Insurance (which will typically require, for analysis by the Lender, copies of all documents of record appearing on Schedule B of the title commitment which are to remain after closing), with required commercial title insurance endorsements, often including:

(a) When available, Affirmative Creditors Rights Endorsement (extending coverage over policy exclusion 7 and policy exclusions 3(a) and 3(d) as they relate to creditor’s rights matters)

(b) ALTA 3.1 Zoning Endorsement modified to include parking

(c) ALTA Comprehensive Endorsement 1

(d) Location Endorsement (street address)

(e) Access Endorsement (vehicular access to public streets and ways)

(f) Contiguity Endorsement (the insured land comprises a single parcel with no gaps or gores)

(g) PIN Endorsement (insuring that the identified real estate tax permanent index numbers are the only applicable PIN numbers affecting the collateral and that they relate solely to the real property comprising the collateral)

(h) Usury Endorsement (insuring that the loan does not violate any prohibitions against excessive interest charges)

(i) other title insurance endorsements applicable to protect the intended use and value of the collateral, as may be determined upon review of the Commitment for Title Insurance and Survey or arising from the existence of special issues pertaining to the transaction or the Borrower.

11. Current ALTA Survey (3 sets), [typically prepared in accordance with 2011 Minimum Standard Detail for ALTA/ACSM Land Title Surveys, certified to the lender, Buyer and the title insurer.

12. Current Rent Roll

13. Certified copy of all Leases (3 sets)

14. Lessee Estoppel Certificates

15. Lessee Subordination, Non-Disturbance and Attornment Agreements [sometimes referred to simply as “SNDAs”].

16. UCC, Judgment, Pending Litigation, Bankruptcy and Tax Lien Search Report

17. Appraisal (must comply with Title XI of FIRREA (Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended)

18. Environmental Site Assessment Report (sometimes referred to as Environmental Phase I and/or Phase 2 Audit Reports)

19. Environmental Indemnity Agreement (signed by Borrower and guarantors)

20. Site Improvements Inspection Report

21. Evidence of Hazard Insurance naming Lender as the Mortgagee/Lender Loss Payee; and Liability Insurance naming Lender as an “additional insured” (sometimes listed as simply “Acord 27 and Acord 25, respectively)

22. Legal Opinion of Borrower’s Attorney

23. Credit Underwriting documents, such as signed tax returns, property operating statements, etc. as may be specified by Lender

24. Compliance Agreement (sometimes also called an Errors and Omissions Agreement), whereby the Borrower agrees to correct, after closing, errors or omissions in loan documentation.

It is useful to become familiar with the Lender’s loan documentation requirements as early in the transaction as practical. The requirements will likely be set forth with some detail in the lender’s Loan Commitment – which is typically much more detailed than most loan commitments issued in residential transactions.

Conducting the Due Diligence Investigation in a commercial real estate transaction can be time consuming and expensive in all events.

If the loan requirements cannot be satisfied, it is better to make that determination during the contractual “due diligence period” – which typically provides for a so-called “free out” – rather than at a later date when the earnest money may be at risk of forfeiture or when other liability for failure to close may attach.

CONCLUSION

Conducting an effective due diligence investigation in a commercial real estate transaction to discover all material facts and conditions affecting the Property and the transaction is of critical importance.

Unlike owner occupied residential real estate, when a house can nearly always be occupied as the purchaser’s home, commercial real estate acquired for business use or for investment is impacted by numerous factors that may affect its use and value.

The existence of these factors and their affect on a Purchaser’s ability to use the Property for its intended use and on the Purchaser’s projected investment yield can only be discovered through diligent investigation and attention to detail.

The circumstances of each transaction will determine what degree of diligence is required. The level of diligence required under the circumstances is the diligence that is due.

Commercial Real Estate

Because the bottom has fallen out of the residential real estate market, real estate investors have now turned to commercial real estate investing. Commercial real estate investing has many different options for the savvy investor. Some of them are as follows:

1. Investing in a retail shopping center as part of a joint venture with several other investors. This enables you to take less of a risk and get some experience in investing in commercial real estate without it costing you a lot of money. Make sure you know plenty about your partners as well as the property that you will be purchasing;

2. New construction. If you have been a project manager or general contractor, you may be able to swing commercial real estate new construction as long as you are aware of the different codes. Commercial real estate new construction is much different than residential new construction. There are different building codes for commercial buildings that vary from different municipalities. You have to be familiar with the codes when building commercial property;

3. Rehabbing or refurbishing older buildings and preparing them for business use. Again, you need to have some knowledge of building codes and requirements;

4. Buying a storefront property or free standing store and leasing it to a business. You need to know about the location, make sure you have a solid lease with a reliable and stable renter and proceed to reap a profit on the rental income while paying off the property at the same time.

Those are just four examples of commercial real estate investing. No matter what you decide to do, remember the three most important aspects of real estate investment:

1. Location;

2. Location;

3. Location.

This is an old and well worn saying, but bears repeating because it is so integral to any type of real estate investment, commercial or residential. If you purchase a storefront in a blighted area it may be cheap, but unless you plan on working in the store all day and every day and worrying about getting robbed or murdered on a daily basis, stay away from blighted areas.

You want to make sure that there is a need for the commercial real estate you plan to develop or in which you wish to invest. Office buildings and complexes are usually always in demand as professionals and others are usually looking for cheap office space.

In older towns and cities, there are areas in which older homes are being turned into office buildings and stores. In “historic districts” in towns, there is an effort to refurbish older homes and increase the value of the property in the area. These are also an ideal option for those who are thinking of commercial real estate investing.

Use any knowledge you have regarding real estate when deciding on commercial real estate investing and make any skills you have work for you. By doing as much as you can with regard to construction, rehabbing or even property management, you can add income to your investment. Always remember to purchase property in a good location or up and coming location so that it will appreciate in value.

The Next Big Crisis in Real Estate

In our hard-hit economy we’ve all seen the results of the housing crisis on neighbourhoods, homes emptied of residents and belongings, yards overgrown, and for sale signs peeking out of the knee high grass. We are reportedly on the verge of recovering from the residential real estate crash now and in the months to come, but the next crisis is apparently about to transpire.

Because of the struggling economy, many businesses are declaring bankruptcy or downsizing their operations. In every city in the country you can see evidence of this occurrence; closed store fronts and empty retail spaces at malls are commonplace pretty much everywhere and the problem is going to increase over the next year it is predicted. Many of the businesses that are having problems and either closing stores or filing for bankruptcy are well known retailers and businesses. Even some malls are reportedly on the verge of closing.

As these companies downsize to save money and close the doors on shops or office locations, there will be as a result an increase in office and store vacancies. Many of the remaining commercial tenants who are renting spaces from building owners have already been negotiating for lower rents as the economy has progressed through this current crisis. Because the public is earning less, they’re also spending less; it is much harder for retailers to make their bottom line and afford the inflated rents that they were able to pay for when the country was still enjoying the boom.

Unfortunately, what this also means is that anyone who took out loans to finance or buy a commercial building will be bringing in less income to pay the loans to their lenders. It is forecasted that over the next year or so some of these business loans are going to be heading to delinquency or defaulting. This in turn may end up causing the banks even more problems than they’re in now.

The big question on the mind of so many people is if this is going to cause even more problems than the residential real estate crash has. Very often the transition back to having construction helps with getting an economy rolling again after a recession, but if there is going to be this much empty commercial and residential space left empty the country is not going to be able to bank on that happening in this case.

Change and Technology In Real Estate

This summary highlights a number of the principal underlying trends and initiatives which are currently shaping the long-term characteristics of the US construction industry. The hypothesis is that such can only be realized through the simultaneous combination of business process change and the complementary implementation of new IT support systems.

The most encouraging aspect of such initiatives is that, for the most part, they are being undertaken on an integrated and cohesive basis and address the same set of underlying criteria.Those taking part and driving such change include leading commercial, consultancy, trade and professional organizations and universities. The funding for such activities is being made available via a variety of sources including US Government research programs, direct commercial sponsorship and the subscription to more generic studies and initiatives by joint industry-academic bodies.

Technology As A Major Change Enabler

(a) The Potential

As demonstrated by the varied (but nevertheless interrelated) objectives identified by studies, there are now several major areas of strategic industry focus currently gathering pace and high level commercial, professional and governmental support within the US.

A common underlying factor in nearly all cases however is the importance and value of information and the implementation of new communication networks such as intranets to support client and project team information management, access, flow and exchange between both remote office based staff and the construction site itself. In addition there is also the increasing potential for the introduction of other leading edge technologies such as PC based video conferencing and electronic whiteboards for group working, 24 hour access to live site based ‘birds eye’ video, 3D virtual reality modelling and augmented reality applications all of which have on-line project oriented capability.

Furthermore, there are emerging portable technologies such as bar coding and the use of portable digital assistants for site based staff use with support for sending and receiving data such as work- in-progress valuations and materials delivery recording. The real added value however is in approaching all such systems strategically and ensuring their interoperability and integration in operation across a common project communication network.

Construction organizations are proving themselves to be increasingly ready, willing and able to invest in proven administrative based, proprietary office systems developed by the major IT hardware and software vendors and which admirably cater for everyday operational tasks such as accounting, sales and marketing presentations. Where it is more difficult for such organizations however, is in relation to more strategic and industry specific applications and especially those which require a fundamental review of predominant and traditional methods and processes and the acquisition of new technical skills at both managerial, consultant and site-level.

The US is particularly well supported by high level university based construction research which have close relationships with the industry and where a good number of leading edge initiatives are being investigated and modeled for commercial application.

In addition, because of the scale of funding and the publicity that tends to be generated as a result, knowledge dissemination of such projects is guaranteed useful profile via the press, conferences and exhibitions etc. In this way, the gospel of strategic industry thinking and trends towards cultural and process related paradigm shifts and the application of new technology, tends to permeate through to all levels of commercial and professional representation with individual organizations and practitioners focusing on specific elements relevant to their own specific areas of operational interest.

But what are the technologies under development and how are they being applied specifically in relation to construction?

(b) Technological Convergence

One of the keywords used in current technology circles is ‘convergence’. Convergence accurately describes the trend towards the integration, interrelationship and blurring of the distinction between computing and communication technologies. Such convergence is simply the result of the ability to convert all kinds of different information into digital format. (E.g: text, sound, video, speech, graphical images and drawings).

This means that particularly when coupled with new dedicated digital based communication infrastructures the diversity of possible new domestic and industry-specific applications and services is now leading to the introduction of such technologies as digital interactive TV, video-on-demand,etc. What we are really talking about of course is Multimedia.

(c) Multimedia Applications

The fact that multimedia technologies are now only beginning to filter through into everyday life actually belies the underlying development that has occurred during the last three years to the point where multimedia technologies and networks are being utilized to support a wide variety of serious commercial applications in all manner of business sectors.

Multimedia technologies have particular potential within the property and construction industry not only in a general business management sense but also in relation to industry specific activities such as surveying, design, project management, information gathering and sales and marketing.

The early multimedia applications proven popular via CD-ROM and first generation Internet/World Wide Web services running over existing copper telephone lines, have helped to identify a strong potential long- term market for multimedia. This has in turn given greater confidence to public and private network providers who, following global telecommunication liberalization and deregulation, are now investing heavily in designing and developing a high hierarchy of different local, regional, national and international networks capable of supporting a variety of combined digital multimedia data and telephony services.

Such networks offer different levels of speed and capacity to suit different end-user needs and utilize a variety of clever compression techniques designed to help achieve an optimum balance between quality, speed and cost.

As a result of the development of such networks, this in turn has stimulated a new round of multimedia application and service development geared to the specific capabilities of different network technologies. These network technologies are aimed at the different needs of demanding, high-end group work based business users such as the construction industry.

By now we had reached the point where multimedia represents the single most important global focus for both the information technology and telecommunication industries. The increasing potential for both business and domestic related multimedia applications and the means by which they can be delivered, received and interacted with means that mass market development is occurring at a point where many of the aspects of using such technology have already been resolved.

In addition, the required level of average user understanding and ability to access and utilize a whole new range of multimedia based applications and services is really no more than is required to cope with the latest generation of TV set.

The marketing and promotion of such multimedia applications and services will therefore focus on their user-friendly functionality and cost-effective benefits rather than the nature of the underlying technologies themselves. The most successful services and applications will be those which are seamless and transparent and ‘just work’.

(d) Multimedia Technologies

Multimedia technologies are now being used to develop all kinds of diverse general and specialist applications and which in relation to the construction industry include, for example, PC video conferencing based group working, 3D virtual reality, on-line construction product and cost data information, survey data gathering using PDA’s (portable digital assistants) and training and education. One of the most important multimedia software applications is the Web browser.

The web browser represents the most potent single source interface to online multimedia communications, products and services and its development has been phenomenal. Web browsers are increasingly being developed as project management interfaces, capable of supporting a variety of integrated and seamless applications such as video conferencing and electronic whiteboards for group working. Web browsers are also able to act as the interface to server push based technologies such as web casting which enable new and highly potent methods for delivering commercial and educational multimedia web-based content automatically to a wide range of industry and specific project based clients and individual consumers.

Delivery systems will include a wide range of cable, digital broadcast, satellite, and intranet based multimedia networks serving both PC and TV. Web casting will even provide the ability to combine conventional TV program content with interactive web page support information which can be supplied as part of the overall broadcast signal and displayed in a separate part of the screen.

Multimedia Networks

• Intranets
The move to using Internet-based protocols on internal networks has given rise to the concept of Intranets which are effectively private multimedia networks.
Intranets provide the means for both the controlled internal access to multimedia information and resources and the control of external access to on-line services such as the WWW. In addition, gateways can be provided which permit intranet interconnection so that a particular company’s intranet can be connected to that of a major client or supplier for example.

• Mobile Multimedia
As part of the online multimedia revolution, no review would be complete without briefly considering current developments in relation to mobile technologies and their supporting networks.

There is recognition of a growing need for more potent mobile capability and the need for a wider range of mobile and handheld devices which have a greater degree of integration and interoperability with fixed desktops and “back at base” networks. This particular area has great potential for use in relation to on-site based real estate, estate management, facilities management and construction applications.

• Broadband Delivery Systems
The latest generation of broadband networks will not only provide the means for more potent access to on-line PC related networked multimedia resources but also introduce more consumer services such as interactive digital TV and video-on-demand.

Real Estate and Construction

Last week’s news on housing and commercial real estate was all bad. On the residential side,

• New home sales fell to an adjusted annual rate of 300,000, a new all-time record.
• The builder confidence index declined sharply in June.
• Existing home sales fell in May.
• 7.3 million mortgages are delinquent.
• 11.2 million homeowners now have negative equity in their homes.

Those facts, coupled with an existing supply of 3.89 million homes for sale and a large shadow inventory of houses sitting on banks’ balance sheets that have been foreclosed on and not yet put back on the market, are strong evidence that the outlook for home prices is bleak, and will probably remain so into 2011 and maybe 2012. This will also be a serious drag on the economy.

On the commercial side, AIA architecture billings declined in May. This index is a leading indicator for commercial real estate construction and investment. There is usually a lag time of approximately nine to twelve months between architecture billings and construction spending. So it is fairly obvious that commercial construction is not going to increase this year and probably not next year either. Then there is the existing supply of empty commercial real estate already on the market and the rising foreclosure rate for commercial mortgages which puts a stress on banks’ balance sheets that have a large number of commercial real estate mortgages on their books, and the greatest exposure to this risk is community banks which is where much of the small business lending is done.

This whole picture of all the components of the real estate and construction industries constitutes a major barrier to any economic recovery, and that barrier is going to be slow to come down because of the stubbornly high unemployment rate. And the rising sentiment in Washington against stimulus and toward deficit reduction could hinder job growth to some extent which would then make it harder still to bring the unemployment rate down. Like it or not, government stimulus has worked in some instances, and the housing market is an excellent example. Before the $8,000 tax credit expired, home sales were doing well. The credit has now expired and the bottom has dropped out of the housing market.

Real Estate Commercial Property

When it comes to buying commercial real estate, the rules are a bit different than when buying residential real estate. Commercial real estate is purchased to be used for the sake of a business. This business needs to make sure the property will fit the needs of the company and that the area is right for their business. The deal can be tough to attain, but well worth it when the business succeeds beyond the dreams of the company.

1. When buying commercial real estate, the buyer must first look at the local clientèle. The customers that will be driven into the business will largely be dependent upon the residents of the area. If the commercial property is in an area that is not thriving and the business is based upon a more affluent crowd, the business may not have the following the business needs to make it successful. A careful look at demographics and median income can tell the buyer a world of information about who will be shopping, or not shopping in their business.

2. After demographics, local area businesses are the next most important factor to weigh when deciding on the purchase of a piece of commercial real estate. If there are 30 coffee shops within a 10 mile radius of the property, opening another coffee shop may not be the most appropriate business decision. A buyer must also look at the local rules and regulations regarding the number of similar businesses allowed within a given area. Many state and local governments impose rules regarding the types of businesses that can be opened within an area.

3. The size and space provided is the third tip for buying commercial real estate. The space, no matter how centrally and perfectly located, will never meet the expectations of the business if it is simply not large enough to hold the business needs. The total overall square footage of the space and the layout of the building will weight heavily on the final decision on whether or not to purchase the commercial real estate. Local regulations regarding certain business types will also need to be researched. Not all area is zoned to accommodate every style of business. The zoning laws can be attained from the local government offices in any given area and will tell the buyer just what type of business the area or property has been zoned to handle.

Commercial real estate is a high dollar purchase and the company needs to take these tips into careful consideration before finalizing the sale. There is nothing worse than finding the perfect spot for that next business venture only to have the space not provide exactly what the business needs. Commercial real estate comes in a wealth of shapes and sizes. From old buildings to new constructions, each offers a different style and shape of space. Carefully looking at all aspects of the space is important to the final decision. If all the arrows point toward a successful piece of commercial real estate, take the plunge and open that new business with hopes of making it big.