You heard it here first. In a number of submarkets we have officially reached the peak of commercial real estate pricing and we may begin to see the beginnings of softer prices, plateauing per square foot sales prices, and higher cap rates. As one senior investment broker told me this morning, “It can’t get any better than this!”
For the past few years the Federal Accounting Standards Board (FASB) has been working on developing accounting rules for lease transactions and equipment leases. These rules have still to be set, could occur later this year or in 2016, and may be retroactive. This will create a huge need for accounting and lease administration. All leases, both capital and operating, will be on the balance sheet. According to Bob O’Brien, a partner at consulting firm Deloitte, “The vast majority of tenants are going to focus on the economics of the lease rather than the accounting for it when coming to conclusions on what they want to do.” (National Real Estate Investor, November 2014)
Food for office employees near the top of the list… “In a survey of IT workers conducted in 2014 by Forbes, “Good Eats” was voted second in a list of favorite employer-provided amenities, right behind “Game Rooms” and ahead of “Physical Health.” Food is a new workplace perk and not just in the tech world. Clients across all industries are building amenity spaces that provide food or support of café and cafeteria spaces. It is a great way for companies to leverage their real estate. (National Real Estate Investor” December 2014)
Three key tenant complaints when their office building gets totally full of tenants:
1) If on-site parking, it can get more difficult to find a space and you begin to notice the compact cars that park in the full-size spaces
2) Landlords usually start jacking up rental rates
3) There may be longer waits for the restrooms.
National Real Estate Investor 1st Quarter 2015 cites a Reis report showing an overall national office vacancy of around 16.75%.