by Bob Sattler of Lee & Associates Orange
You may not know of, depending on your age, the 1963 movie name that is the title of this blog, but it doesn’t really matter because this is about our crazy mad commercial real estate market.
How is it that a good functional industrial building, with no specialized improvements, goes on the market at the highest price in Anaheim, California just higher than two recent comps, and my client loses out after offering $6 over that price?
What exactly is going on here and how long can this last?
I’ve worked with a client for the past 6 months who must vacate his existing location because the landlord will be tearing down the building. He prefers to purchase because he will have to put substantial tenant improvements into whatever building he moves to.
The client is somewhat hamstrung by a franchise agreement and thus only 6 cities work for him. He needs a good size yard, the ability to store some chemicals in two outside storage containers, and other than that doesn’t have any particular needs. The building doesn’t need to be high profile, have street frontage, be near a freeway, have a lot of office, dock high trucking, high power, or high clearance. In other words, we’re easy other than the yard.
Of course, in this Southern California market, there isn’t much available and we’ve looked at both lease and purchase product. To date only two buildings came close to working, the last being the one I’m talking about.
But to dig deeper, what is going on when values in the size product we are looking to purchase, about 10,000 to 12,000 square feet, are seemingly increasing daily and have jumped approximately 18% in the last year.
Is it Supply/Demand, Panic, Interest Rate Changes, the Economy?
I don’t believe it’s the economy. It may be good but not that good.
Fear of interest rate increases? They aren’t going up that fast.
Panic? Possibly. Although wouldn’t you rather wait until values stabilize or drop.
Supply/Demand? Bingo! If you absolutely need the space, in a certain area, in a certain size and there is nothing else out there what do you do? Offer more than the rest of the market thinks it’s worth.
So, for right now, this is a unique market. One that I haven’t seen in my almost 40 years in the business. It’s tougher than ever to find clients space and for right now it’s not going to get any easier.
It’s a mad, mad, mad, mad, world!
About Bob Sattler – Bob is the President of the Orange office of Lee & Associates and has over 35 years of experience in providing commercial real estate services to property owners and users. Experience ranges from developing small industrial buildings for sale and multi-tenant parks for lease, to being a broker, leasing and selling office and industrial properties in the North Orange County market. Bob can be reached at (714) 564-7166 or firstname.lastname@example.org.