Friday, April 29, 2022
Spring Abounds!
Friday, April 22, 2022
Industrial Real Estate Logistics - Challenges and Opportunities
Schenker - “We don’t see the tide turn in 2022, infrastructure problems, labor constraints, high demand and reduced capacity will continue to trouble the market. Stakeholders in the industry don't see much relief coming for shippers anytime soon. It will not get better and 2023 will be worse.”
Friday, April 15, 2022
When Will We Experience a Slowdown?
Friday, April 8, 2022
Unsolicited Offers Abound
With the unprecedented shortage of industrial buildings to buy, cheap abundant capital available, and a steady drumbeat of increased demand from investors and occupants - we find ourselves in an acute seller’s market.
Many of our clients have received unsolicited offers at eye popping figures! By unsolicited, I mean this - no listing, no marketing, no real thought about selling but the offer arrives in your inbox. Frankly, these numbers are so appealing - it’s caused many to pause and consider accepting the windfall.
You still need the building to operate your business. A wise decision was made some time ago to house your business in owned commercial real estate. Through the years, the operation has paid you rent, mortgage balances have been retired, tax benefits achieved, and appreciation has occurred. But the fact remains, so long as your enterprise requires an address - continuing to own and occupy the building is generally the best alternative. Sure, you could structure a leaseback, stay put and take advantage of the lofty offer. Just make sure your operation can withstand the likely bump to market rent your buyer requires. Or, you could relocate the business to a cheaper market. Problem is, this “cheaper market” would likely be in a different state. And the same imbalance of supply and demand likely exists. Finally, many approaching retirement years believe this is a great time to sell the company and the real estate and retire.
What will you do with the money? In most ownership structures, the sale of a capital asset triggers a significant tax obligation. Yep. Uncle Sam wants a taste of your proceeds. First off, the gain - difference between your net purchase price and basis will be federally taxed at 20%. Next, any depreciation taken through the years will be recaptured at 25%. California will tack on 13.3% and finally a cut by the Affordable Care Act of 3.8%. All in - your looking at close to 40% of your gain paid in taxes. Some simply believe the best way to go is to pay the levy and be done. With the crazy numbers being offered today - there is still a lot remaining. If the thought of a 40% hit is too much, you can certainly defer the tax through several means - a tax deferred exchange, a partial exchange, a Delaware Statutory Trust, or an allocated LLC. All of these deferral strategies require specialized advice through your CPA and real estate counsel.
Certainly, none of us can predict how long these unprecedented prices will continue. Will world events such as the war in Ukraine, rising interest rates, another pandemic, or something unforeseen crater our market with uncertainty? Normally, a vacancy factor of around 5-6% provides a good platform for buyers and sellers to transact. By that I mean 94-95% of our industrial stock is occupied. Leaving the balance in play. Today, depending upon the location in SoCal - we’re talking 1% or less. Skewed is the market. A catastrophe indeed would precede any return to normalcy.
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
Friday, April 30, 2021
How to Become a Commercial Real Estate Legend? Simple! R.I.P. Bill Lee
The Commercial Real Estate Industry lost a lion this week. Bill Lee passed away peacefully on April 5, 2021 surrounded by family. We are deeply saddened by our loss but grateful that Bill suffers no more and is with the Lord. Many of you knew Bill, transacted deals with him, and had great respect for his prowess. In honor of the life Bill led and the impact he had on our business - I revived a column I wrote in 2019 in his honor. Rest well my friend!
Friday, July 24, 2020
What Can Loss Teach us about Commercial Real Estate?

Rumored is a re-shoring of manufacturing. Our economy’s dependence on cheap stuff may shift. Less reliance on low cost production will cause prices to rise but quality and reliability will as well.