Most of us have driven by a strip center, or condo development and thought to ourselves, “that doesn’t make sense?”

Odds are it didn’t.

The issues with speculative development in commercial real estate (CRE) are painfully documented and fairly obvious.  Ride down a major thoroughfare and you may question the dynamics or rewards of owning commercial real estate as an investment.  As small businesses struggle as never before, the celebrity f/k/a the highly leveraged investor or developer has been taken to the woodshed.  Decimated rental rates, sketchy lenders and creeping cap rates have contributed to the demise of many realty investors.

The issues in CRE are numerous and the well publicized market risks cause even the most seasoned, educated investors to wonder “is it worth it?”

It is.

For months, shrewd investors have been quietly snapping up good quality properties.  If you have an interest in acquiring investment real estate, or are considering adding to an existing portfolio, this is an exciting time to take a look around.  If you do so, remember that investing cycles come and go.  Please also remember that at every opportunity stage of those cycles, 3 pillars in investing will point you toward a smart decision.

First pillar, love the real estate in every way.  There are too many opportunities out there for an investor to settle for anything less than true love.  Gauge the basics such as location, the structure’s condition (inside and out), and the ease of access to the property.  Consider whether the space is functional enough to appeal to the highest number of good quality tenants?  If the answer is no, move on.  Quickly.

Second, spend extra diligence in quantifying all risk factors to their proper degree of relevance.  It will be some time before our region climbs out of the default and foreclosure abyss.  Ensure income projections are ultra conservative.  Seek reasonable yields and modest ROIs within an appropriate hold period.  Consider forecasting an extended hold period, just in case.  Taking the extra measures upfront to research today’s market risk is vital in the decision process.

Finally, utilize experts.  In investment real estate as in the medical profession, experience, technology and key relationships increase the odds of success.  For any commercial real estate transaction, consider using a Certified Commercial Investment Member (CCIM).  CCIM’s are highly trained in the financial analysis of development, lease vs. purchase decisions, tax implications and all measures of return dynamics involved in a complex purchase or sell decision.  CCIMs are involved in financing, brokerage, and management spanning the entire spectrum of income producing property.  Additionally, CCIMs regularly prove to be the most up-to-date and knowledgeable experts in their perspective markets.  CCIM’s will always be the best connected professionals in their market and are committed to utilizing the latest technology so that time used wisely and the best investment options are singled out efficiently.  Borrow the experience of a CCIM, and you guarantee that all forecast modeling and projections will be based in reality.

I invite you to survey and interview the many ultra-talented CCIM’s located in Central Florida by visiting:

www.CCIM-CF.com/members

In the end, you may elect to sit on he sidelines for a while longer.  However, for those with an interest, and the discipline to stick to the pillars, opportunity is out there.

Scott Lloyd CCIM, RPA has closed hundreds of lease and sale transactions on behalf of the Adler Group and third party clients and currently focuses on tenant representation in the buying and leasing of office, industrial and retail properties.  Scott is a court-appointed receiver of commercial property and the President of the Central District of the Florida Chapter CCIM.  He is a long-standing member of the International Council of Shopping Centers (ICSC) and has been or is currently active in the Central Florida Commercial Association of Realtors (CFCAR) the Metro Orlando Economic Development Commission, the Osceola/Kissimmee Chamber of Commerce and BOMA.

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