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To Buy or
Not to Buy
That is the Question...
By Steve Bergsman
With the value of office and industrial buildings declining
by 30 percent, 40 percent sometimes 50 percent in certain
areas, should tenants consider buying instead of leasing?
The answer is: maybe.
There are no quick and easy answers because of numerous ancillary influences, including the health of local companies, the direction the regional economy is heading, and
how active the financial institutions are in that particular sector of the country.
“I’m not sure everyone could get money,” says John
Skoglin, SIOR, a vice president with CB Richard Ellis Group
Inc. in Baltimore. “Financing is not available to everyone.
The lending institutions want you to be able to back up a
loan with collateral other than the building. It could be a
reach for some smaller companies.”
Add to the mix the personal biases of certain brokers and
even captains of industry.
“I personally favor leasing over buying,” asserts Greg
Gunn, SIOR, a senior vice president of Coldwell Banker
Real Estate Corp. in Salt Lake City.
While some brokers like Gunn suggest leasing is still a
better option, others recommend outright purchases to their
clients. Again, however, the availability of financing is a
Appreciation of Capital
“One of the impediments to a recovering economy is that
banks are slow to loan money,” Gunn observes.
This assertion is backed up by Andrew Jaffe, SIOR, vice
president of sales and leasing at Commercial Properties Inc.
in Tempe, Arizona. “You continue to hear bankers preach
that they’re willing to give money, but the underwriters and
everyone above of them are scrutinizing every line item on
every return that is provided. The banking industry is so
strangled, they can’t figure out who is on first base.”
That maybe the case in economically hard-hit Arizona,
but elsewhere things are better, at least according to John
Barker, SIOR, senior vice president of development in the
Charlotte, North Carolina, office of Red Rock Developments,
who comments, “I would say money is more prevalent west
of Mississippi. If you are in California or Texas, you are see-
ing more forgiving situations for borrowing money than you
are in the East.”
If one peels away sections of the Southeast from the rest
of the eastern seaboard, the banks seemingly are backing
away from their stingy programs of the last four years.