ombine that favorable outlook with the forthcoming vanquishing of operating leases from the ledger, and with the very low prices currently on display, and it's no wonder corporations are looking anew at outright ownership of their office and industrial space.
Recent examples include Electronic Arts' purchase of its headquarters in
"We just signed another contract with a user on an industrial-type warehouse property in
That's the conclusion being reached by firms from Scottrade to Walgreens to Wal-Mart, many of which can obtain financing via banking lines at a time when developers face a much steeper financing climb and landlords can't afford to fund improvements, notes Nahas. BPG's analysis for a possible sale of a vacant office building in
Time to Prioritize
Nahas says there are no firm statistics, but he has the sense that a significant majority of users want to buy new vacant buildings outside of the space they're in right now, in part because of the opportunity to upgrade in quality in the current market. Landlords simply can't compete with an amortized purchase. At the relatively new
Asked if the value of such moves is sufficient to be instigating headquarters or other relocation moves that otherwise might not be considered, Nahas says, "If it isn't, it should be. CFOs and other strategic thinkers ought to be sitting back and asking why they're not. If I were responsible for space decisions for my company, I'd be knocking on banks' doors today, because most of the distress in real estate in the country today is held by banks, either in the form of a loan not performing, or properties already taken back. There are properties built but never leased, or the tenants went out and it's virtually empty. That's where the opportunities are."
Among his lead examples is the 1-million-sq.-ft. (92,900-sq.-m.) former BASF headquarters in
Nahas notes that the longer vacant properties sit, the more of a problem they become.
"Time is the enemy," says Nahas. "Without any cash flow, they can't service the debt. Second, the problem becomes taxes, because lenders get nervous about owners not paying their taxes. They're going to keep them heated and so forth, but over time, landlords/owners will say to themselves, 'Do I want to spend money on that?' The longer it goes on, buildings become more problematic. But if you're a buyer, that's an even greater opportunity."
He says such conditions ought to also motivate another sector: municipalities themselves, which are feeling the budget pinch from lower tax payments. Many cities are retrenching, in terms of further limiting incentive programs that might appear to be a giveaway.
"If anything, they should he incenting users to buy buildings," Nahas says.