By Jim Moore
Last year my father retired. Since then I have wondered how much easier his retirement would have been if he’d purchased either a business condo or a freestand- ing building for his dental practice. Most small and
medium business owners also apply to this financial situation.
If they own the property when they sell their business, they can
lease the existing facility to the new owners, a different tenant,
or sell it.
The same concept that applied to my father’s scenario holds
true today, yet there are major changes on the horizon.
I believe we’re living in the inaugural years of what I con-
sider to be, “The Perfect Storm.” As I’m sure you’re aware, our
Federal Reserve Chairman, Ben Bernanke, and his colleagues
have infused trillions of freshly printed dollars into our economic
system three times over the last few years via “Quantitative
Easing.” The latest referred to as “QE- 3.”
Simple economics has shown over many years that when our
federal government starts injecting money into our economic
system, inflation is not far behind. The main reason inflation
hasn’t reared its head in a more aggressive fashion is because
"When an SIOR brings me a
client, I know it’s a real deal with
a proven buyer/tenant."
there hasn’t been any velocity of the funds placed into the system. Because of the uncertain economic times we’re in, people
and corporations are holding onto their money. Normally during
a stimulus people start spending and investing funds into leisure
items and capital goods. That hasn’t happened. They’re too afraid
to spend it, therefore money is being saved, not spent. Only now
is this uncertainty just starting to clear, and in my 35-plus years in
the business of Commercial Real Estate Development, I’ve never
been as busy as I am now!
Now for the good news; interest rates are very low, the lowest in my lifetime. Lenders are ready, willing, and able to lend
funds for owner-occupied buildings, at great rates. It’s one of
the best loans they can make. Inflation hasn’t had a major effect
on the costs of commercial real estate…yet… but it’s going too,
and sooner than you might think. When people and businesses
gain confidence in the economy, and/or they start to see inflation
looming on the horizon, they’ll start spending and spending big
on capital goods and hard assets.
Commercial income producing properties are one of, if not
the best assets to hold during inflationary periods. It has long
been said that “inflation is commercial real estate’s best friend.”
Just check the figures from the 1970s, the increases in inflation
were enormous. One significant difference was that interest rates
weren’t that low when that inflationary period started, but they
zoomed much higher as the inflation took hold. That’s exactly