Real Estate Terminology Tips & Tools: Part 2

Ok, so now that we have a couple of the basic terms down (if not read the last post or you can contact us directly with any questions), where do we go from here?  For the most part, the ideal space isn’t the ideal space until it is the ideal price (I’d be willing to hear a good argument that says differently!) so how is real estate valued?

The actual valuation of a property depends on multiple factors but to keep things simple here, we are going to break it down to the most relevant and easily applicable to a majority of scenarios.

Property Class

This is the easiest way to start searching for properties and to put a price on your existing property.  It is pretty simply broken down in to 3 classes:

•  Class A – Prime location, strong tenants, high quality construction, numerous amenities, professional management
• Class B – Good location, diverse tenants, adequate amenities, minimal functional obsolescence, often times a former Class A property
• Class C – Secondary location, cost conscious tenants, older buildings, few amenities, functional obsolescence

Real Estate Valuation

•  Income Approach – The value of a property is a function of the income it generates
• Sales Comparison Approach – Use recent sales data of similar properties (this is most common)
• Cost Approach – The cost to build the same building today

Key Terms with regard to Valuation

•  Potential Gross Income (PGI) – Rental income based on 100% occupancy
• Miscellaneous Income (MI) – Income other than rent (covered parking, vending etc.)
• Operating Expenses (OE) – Day to day expenses that are required to operate the property
• Capital Expenses (CAPX) – Expenditures that either increase the value of the property or prolong its life.

 

Combining these and other factors can help you to determine if the property you are looking at or listing is competitively priced.  Of course experience and industry knowledge are invaluable to this process and the staff at SL Bade & Associates and SL Bade Residential are always happy to help.  We can run a market comparison search for the area you are interested in, or we can go through the price setting process with you.  Visit us at www.bade-associates.com or www.robinsongroupre.com to learn more.

Real Estate Terminology Tips & Tools — Part One

It’s all fine and good to use this series to give you the insider knowledge of commercial real estate but without the basics it won’t get you very far.  Sure, we throw around terms like “$22/square foot, triple net”, “CAM charges” and “TIs” but do we all really know what it means?

When looking for a new place to do business there are so many things to consider that throwing in a whole other language (it feels that way sometimes) is enough to make the most educated of us feel overwhelmed.  So, this is where we will start:

Lease Types

• Net – Tenant pays a share of the property taxes in addition to rent
• Net-Net (Double Net) – Tenant pays a share of the property taxes & insurance in addition to rent
• Triple Net (this is the most common in our area) – Tenant pays a share of property taxes, insurance and CAM (common area maintenance*)charges
• Gross (Full Service) – Tenant pays rent which already includes the operating expenses of the building

Lease Provisions

• Tenant Improvements (TI) – Interior improvements provided by the landlord
• Usable Square Feet – Area within exclusive control of the tenant
• Rentable Square Feet – Area within exclusive control of the tenant including pro rata share of common areas
• Common Area Maintenance (CAM) – The pro rata share of the maintenance of the common areas (including parking lots, hallways, landscaping etc.)

Condition of Property at Delivery

• As Is – Landlord will make no changes or improvements
• Vanilla Shell – Includes some TIs such as drywall, basic paint and possibly restrooms
• Gray/Dark Shell – No improvements have been done since construction.  Space will usually be open walls with no restrooms

Understanding your lease is an important part of feeling confident in making the decision to move your business.  As always, the staff at SL Bade & Associates is available to you to answer any questions you may have about your specific real estate needs.  Feel free to call or visit us www.bade-associates.com for assistance.

RESIDENTIAL IS GOING SL BADE

We love to think outside of the box and find new ways to better serve our clients and diversify our company.  With the number of foreclosures and short sales in today’s market at an all time high, SL Bade & Associates has taken the step forward and opened a residential real estate division.  In addition to our already diverse list of services we are able to provide to our clients we are now able to offer all residential services as well.  We have two experienced agents, Erich and Jarrod Robinson ready to assist you with all of your residential needs.  Visit them at www.robinsongroupre.com.

Meet Amanda!

Amanda Ring is our Leasing Administrator and Agent. She deals with the market research, solterra, leasing, and administrative duties here at SL Bade. Here are some fun facts about Amanda to help you get to know her a little better:

Family:  Husband, two daughters and one dog

City you Live In:  Peoria

Favorite thing about living in the West Valley:  There are so many options for things to do without needing to travel outside of your neighborhood!

What you/your family do for fun:  Travel, camping, concerts, reading and movies (comedies especially)

Favorite Food:  Pizza or Steak

Favorite Beverage:  Coke (not Pepsi) or Red Wine

Fun Fact:  I grew up in England and had a strong accent until a few years ago (it comes back whenever I go back to visit, or speak to friends or family over there)

Hi, I’m Jackie Winget – SL Bade’s Newest Edition

I have been selected to help create the new internship program for SL Bade & Associates.  To go one step further, SL Bade and Peoria School District are working together to create a program that all small businesses can participate in. Shelley Bade and MaryAnne Berens, Centennial High School’s Internship Coordinator for the Career and Technological Education (CTE) division of PUSD, are joining together to put the program together.

This Small Business Intern Program will open doors for young students, like myself, into the world of owning and operating a small business.  Students like me will learn valuable skills that are simply impossible to teach in a classroom setting.  I have learned so much in just the few short weeks I have been on board the Bade team.

As an Administrative Intern, my duties include: greeting visitors; coordinating maintenance of the office;  copying, scanning and filing; creating and distributing marketing materials; and assisting with the company’s social networking.

The opportunities and business skills SL Bade & Associates has opened up for me has given me much experience and the confidence to grow, whether it be through the workforce or college.  I am very excited to be a part of this wonderful experience, and to clear the pathway for other students and small businesses.

Also excited for the new opportunities, Shelley has just sent out a Press Release this week regarding the Internship Program.  To view the press release, Click Here.

What is going on with the Retail Market?

Driving through some areas of Phoenix it’s hard not to miss all of the vacancies in once booming strip centers and growing areas of town.  It’s no surprise that everyone is feeling the pressures of the economy but there seem to be an ever-increasing number of retail locations closing their doors and whole centers “going dark”.  How much more can we expect?  When will we start to see some turn around? 

We are regular viewers of the CoStar (www.costar.com) webinar series that gives quarterly updates of the state of various real estate markets in particular for this entry; Retail.  Below are a few pertinent pieces of information that we thought would help everyone understand where our market is and projections for the future:

• In 2009 Phoenix metro area has seen 2.5 million square feet of negative absorption in the retail market
• Phoenix still has 1 million square feet of new retail construction underway (this only makes up 0.5% of Phoenix’s total commercial construction)
• Phoenix has the highest retail vacancy rate in the country at 11.4% (this is due mainly to the massive growth Phoenix saw in the last few years)

Leasing Market

• Retail vacancies are projected to peak in 2010
• Retail rents should begin to increase in 2011
• Positive NOI is expected by 2012

Sales Market

• Cap rates actually bottomed out in 2006 at 6.1% and are slowly increasing (current average is 7.8%)
• General retail property sales are down 36% but still remain above long term averages
• Phoenix has seen $420 million in retail sales this year

As you can imagine, this is only a portion of the information we were given (we even have information on recent numbers for office and industrial) so stop by or call us sometime if you would like to discuss any of this further (we love an excuse to sit on the veranda for a good chat!).

It’s Shelley!

As the Principal and Designated Broker of SL Bade and Associates, Shelley is probably the most well known part of our team.  Shelley oversees all operations within the company and makes a point to get to know each and every one of our clients.  In addition to her work within the company, you will often see Shelley out in the community supporting the growth and development of the West Valley through various boards, committees, organizations and charities.  So, now that you know what she does, here is a little bit of who she is: 

 

Family:  2 Kids plus a new Husband and 3 more as of 07-08-09

City you live in:  Peoria

Favorite thing about living in the West Valley:  It’s a grass roots effort.  Everyone works hard and works together

What you/your family does for fun:  Travel

Favorite Food:  Crab Cakes

Favorite Beverage:  Root Beer Float

Organizations you belong to:  Too Many to list here (please see our website www.bade-associates.com)

Fun Fact:  I used to stutter until I was 5 years old.  It was because my Mom always made me use my right hand.  When she finally allowed me to be left-handed, I stopped stuttering!

It pays to “Green” your building!

We are constantly hearing about new green buildings being built,  all of the great environmental benefits of green buildings and the various green building awards given to builders and corporations that occupy them but what does it all mean at the end of the day if no one wants to pay for it?  Real Estate search engine CoStar ( www.costar.com) recently presented a webinar on that very question; would a tenant really pay to do business in a “green” building?  The webinar (a greener way to to have a seminar!) was based on the results of studies performed not only on CoStar data (their search engine provides real estate agents the opportunity to search for Energy Star and LEED rated properties) but independent studies by institutions including University of San Diego, University of Arizona and University of California Berkely.  While there was an abundance of information, the results were pretty unmistakable:  YES! Going green pays off!  While we can’t post all of the information from the study, here is the big stuff:

• Rental Rates for Energy Star designated buildings had an increase of $4.73/sqft and LEED buildings had an increase of $9.06/sqft compared to the rental rates of non-energy star/LEED buildings (1st Qtr 2009)
• Even with higher Rental Rates, Occupancy for Energy Star designated buildings were up 2.5%  and LEED buildings saw an increase of 5.4% compared to non-energy star/LEED buildings (1st Qtr 2009)

While these statistics are influenced by supply and demand, the numbers should begin to balance in a few more years as there are currently 8 buildings waiting to be certified “green” for every 1 building that has the certification.  That being said, more and more companies are recognizing that not only do green buildings benefit the environment, there are results showing they make happier, healthier employees (less sick days = more productivity).

As more information comes through rest assured that SL Bade & Associates will be keeping you up to date!  In the mean time, feel free to contact us for more detailed information.  Also, let us know what you think of green buildings and if you have had any experience with building, occupying or marketing them.

Your SL Bade Team

Meet Gary!

Well, SL Bade and Associates is expanding again!  As of September 8, 2009 Gary Claybaugh has joined our team.  With over 30 years  of experience in engineering, land planning, due diligence, entitlement and commercial real estate, he brings with him a wide variety of skills that he is eager to use for our clients’ benefit.  As a designated broker with an MBA in planning and experience running his own engineering/development firm, Gary is another part of our commitment to providing our clients with a “one stop shop” for all of their commercial real estate needs.  So next time you are at the office take the time to stop in and say hi to our newest member!  In the mean time, here are a few things to know about Gary:

Family:  Married with 3 daughters

City you live in:  North Central Phoenix

Favorite thing about living in the Valley of the Sun:  Great Weather and outdoor activities

Favorite thing about working in the West Valley:  Vibrant, ready to expand again, growth area – I’m looking forward to working here

What you and your family do for fun:  Golf, Baja Off-Road Racing, Travel, Beach time and many family events

Favorite Food:  Toss-up between Italian and Chinese

Favorite Beverage:  Iced Tea; or twist my arm, Gin and Tonic

Organizations you belong to:  American Planning Association, Pinal Partnership, and I am looking forward to joining organizations specific to the West Valley

Fun Fact:  Was a left-handed pitcher in lower Minor leagues (many, many years ago)

HOLE LOTTA FUN

GOLF!  It’s one of the most popular pastimes of the Valley of the Sun and we are fortunate to live so closely to some of the best courses in the country.  At SL Bade and Associates, we love golf; Chances are you’ve run in to Shelley at Blackstone or some other golf course around town.  This being said, it would only make sense for SL Bade & Associates to sponsor the upcoming HOLE LOTTA FUN golf tournament for the Peoria Chamber of Commerce (we get to help support a great organization AND have fun!). 

WHO:  ANYONE! (You don’t have to be a Chamber Member to have fun at this event)

WHAT: HOLE LOTTA FUN Golf Tournament (4 person scramble format)

WHEN:  September 18, 2009

                Registration: 6:30am

                Tee Time: 7:30am

WHERE:  The Legend at Arrowhead (21027 N. 67^th Ave., Glendale, AZ  85308)

Contact the Peoria Chamber of Commerce for more details www.peoriachamber.com or call (623) 979-3601…SEE YOU THERE!