Economy's Impact on Commercial Real Estate

Prices and availability in commercial space are tied to the strength of the overall economy, and the continuing recovery has put upward pressure on lease rates. But the recent fall in housing prices has caused some analysts to warn that consumers could cut back on spending and cool the economy. That gloomy view is fading in the face of a steady stream of positive economic news. Retail sales were decent in August and inflation was in line with expectations. Oil prices dipped below $63 a barrel, a five-month low. Job growth was also strong and revised upward for the previous two months, while the unemployment rate dipped slightly to 4.7%. Meanwhile manufacturing activity stayed steady and consumer sentiment was up.

Some observers are also pointing out that the slump in home sales may be temporary, since long-term mortgage interest rates have actually gone down slightly. They say that once the surplus of homes on the market is corrected, the overall housing market could pick up again.

What this positive economic news means is that businesses will continue expanding and needing more space, so the outlook is for the commercial landlord's market to continue to gain strength (as this newsletter has been reporting in recent months). While individual markets vary, in most metro areas, vacancies are down and effective lease rates are up for commercial space. Making your best deal now before rates go even higher can be a winning strategy.

Marketing Your Space for Sublease, Part 1

There are many reasons companies choose to market excess space for sublease. However experience shows that it is important to identify potential hurdles, fully understand what you have to sell, and develop a strategy to efficiently complete a sublease transaction.

Over the next two months, we will present 10 key factors to consider when marketing your space for sublease. Here are the first six:

1. Your lease. Review your sublease/assignment provision to determine if (a) you have a right to sublease, (b) sublease conditions, and (c) various landlord rights including right to approve or disapprove, or even the right of recapture.

2. Submarket. Overall health of the particular submarket taking into consideration vacancy rate, lease-up time (time to market the space), rates being charged, and concessions being offered in your building and the surrounding area.

3. Building. Desirability of your building and your space (quality, views, parking, efficiency of floor plates and space plan, location, and availability of furniture and systems, etc.) Make sure it is cleaned and shows well.

4. Landlord. Willingness of your building to work with potential subtenants regarding additional requirements such as an extension of the term, expansion of the suite, signage, additional parking, etc.

5. Parking. Availability, number and cost of employee and visitor parking in your building.

6. Term. Generally, the longer the term, the more marketable the space, unless the term is unusually long. A three to five year sublease term is attractive to most subtenants. In addition, renewal options are an added benefit to the subleasing effort, but often leases call for a cancellation of options if the space is subleased to an unaffiliated party.

Next month we will present four more issues to consider when subleasing your excess space. If you have questions, please contact us.

Connecting the Pen to the Computer

Wouldn't it be great if everything you wrote with a pen could be transferred to your computer? After all, the keyboard isn't ideal for everyone or every purpose. There are forms to be filled out and handwritten notes to keep track of.

Now the technology of the digital pen is bringing this dream to a reality. The pen itself has become smaller, lighter, and wireless, and the special paper needed has come down in price and appears in more forms, from notebooks to blank sheets that can be used in a printer to create forms.

The digital pen includes a tiny camera and memory device, and can store up to 100 pages of notes. A USB cradle then transfers the data to your computer. The special paper is covered with a pattern of tiny gray dots that the pen's camera can see, and which enable it to record the pen strokes and keep track of where information is on a page.

The handwriting recognition technology has also improved, so you aren't limited to just taking a picture of your handwriting, it can be converted into text. This works especially well for forms that need to be filled out.

The digital paper was developed by a Swedish company called Anoto, and an American company markets it as Xpaper. Digital pens include the Logitech io2, the Nokia SU-1B, and the Hitachi Penit. You'll find them at computer stores. The system is still not cheap, but can be worth the price for certain applications.