Quote:
Originally Posted by Waye Mason
It was explained to me again this week that commercial is renting for 18-21 psf in the existing buildings, which is low, and running at a 10% vacancy, which is ok for churn.
But, new commercial needs to be up around 26 psf to pay for the build. So, we have a gap. You need 40% leased at $26psf (or more) to be able to secure financing.
More I talk to real estate and developer guys about downtown, the more it becomes clear, the issue is demand. More supply can't be built unless there is more higher value demand.
The economy went in the crapper in 2008, the promise of insurance from Bermuda and banks and stuff went away, and the economy is just starting to heat up, maybe.
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I thought i'd take the time to give you some statistics.
The average rate for downtown Class A properties is $18.43 per square foot NET. This does not include operating costs or taxes, which for A class avearge mid $14.00 per foot. (total rent $33.00)
New construction will require NET rents in the $22-$25 range.
For financing the project will require 70% preleasing to qualify, of which the 70% needs to be longer term leases (10 years). There are other ways to build without this requirement, but those are usually extremely risky and only done in a stronger rental market then we are currently experiencing.
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