Deals are happening… but the snow isn’t helping. The season has been reminiscent of a Memorial Day/Labor Day holiday week during a New England Summer. The storm has taken people off the grid and has not allowed those “summer vacationers” to get back on track. The volume of snow is showing its effects in a myriad of ways- With five “snow outs” in New England in the last 45 days, it has been tough to gain any kind of real momentum in finalizing deals. Red Sox manager Terry Francona had a great quote when speaking about getting out of the snow and heading down south to Spring Training: “It’s a bit much,’’ Francona said. “The drivers here don’t do good with all four lanes. When it’s down to two, they’re really nasty.’’ It’s been challenging- canceled meetings, more conference calls, casual business attire, stiff backs, working from home- towns are out of money, and there is nowhere to push the snow.
In the last 90 days, the volume of commercial deals we have looked at has dramatically increased. Sellers considering the Accelerated sales model have fallen in the office, industrial and land sectors. Sellers seeing strong demand in selling their assets are the well located, good quality tenanted retail and 10+ multi-unit apartment buildings. Apartment sales are slowly returning to 07’ cap rate levels. Industrial and class B/C office product in secondary and tertiary markets seem to be working their way through the system as they are the toughest to price with the least amount of absorption.
It should be interesting to see how commercial landlords deal with the snow causing abnormalities in their multi-tenant office product. With the excess snow removal expenses and the “base years” for operating expenses expected to be significantly higher than in years past, property owners are going to have a tough time realizing any CAM overages in the remaining years of these recently signed leases.
With a number of proposals sitting on their desks, stay tuned to see if the above mentioned secondary and tertiary commercial property owners are willing to accept the recalibration of value caused by the recent economic downturn and “plow” through the current market conditions.