chris1515 said:

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I think the fact that so much office space is locked up in multi-year leases that haven't come up for renewal yet since the covid-work from home shift became an issue has postponed the day of reckoning for office space.

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Yes. This is looming out there.

Will companies that work from home renew.

How bad will the damage be?

Spaceship said:

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YouBet said:

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chris1515 said:

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I'm all of the opinion that there is a huge problem coming up with commercial office space. Every day I go into my office building that used to house 1,200 every day, and now it's maybe 100 people on-site (rest remote).
As long as we are locked into a lease, it doesn't matter that much. But I feel like there is a lot of office space about to be vacant, and that's going to put pressure on the owners of those spaces…do they have exposure to residential also? Will that matter?

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I've been wondering about this as well. This topic was breathlessly covered during COVID that we would have a massive commercial RE failure coming out of it, but I have seen nothing on this topic in months. It might just be that our Texas bubble has protected us?

I drive around north Texas and all I see is more and more development underway.

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Average office leases are 10 year terms (some exceptions of course). That means only approximately 10% roll each year. Of that, most companies are renewing or possibly downsizing, but some are growing too. And the demise of the office is way overstated, especially as COVID starts to fade from our day-to-day, so when you think of it in those terms, it's not surprising that we haven't seen much effect.

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Yeah, I don't think an average lease term is 10 yrs. More like 5 or less. Some larger companies, anchor tenants and freestanding buildings like a corner bank surely are much longer, but no way avg is approaching 10 from my perspective.

My company usually does 5 years with options to renew for another 5. That's on large corp HQ type offices.

Scientific said:

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I love everything about NC. I've told anyone who will listen, it will be the next "Texas" after we hit our ceiling with everyone moving here.

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Agreed. The research triangle area is my favorite place outside Texas and Charlotte burbs are underrated. NC economy is booming

Tampa up 34% in housing in March
Phoenix
Miami

top three real estate price increases in March

Yeah in my experience 3 - 5 is more average.

Dallas is fourth on that list.

Casey TableTennis said:

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Spaceship said:

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YouBet said:

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chris1515 said:

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I'm all of the opinion that there is a huge problem coming up with commercial office space. Every day I go into my office building that used to house 1,200 every day, and now it's maybe 100 people on-site (rest remote).
As long as we are locked into a lease, it doesn't matter that much. But I feel like there is a lot of office space about to be vacant, and that's going to put pressure on the owners of those spaces…do they have exposure to residential also? Will that matter?

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I've been wondering about this as well. This topic was breathlessly covered during COVID that we would have a massive commercial RE failure coming out of it, but I have seen nothing on this topic in months. It might just be that our Texas bubble has protected us?

I drive around north Texas and all I see is more and more development underway.

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Average office leases are 10 year terms (some exceptions of course). That means only approximately 10% roll each year. Of that, most companies are renewing or possibly downsizing, but some are growing too. And the demise of the office is way overstated, especially as COVID starts to fade from our day-to-day, so when you think of it in those terms, it's not surprising that we haven't seen much effect.

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Yeah, I don't think an average lease term is 10 yrs. More like 5 or less. Some larger companies, anchor tenants and freestanding buildings like a corner bank surely are much longer, but no way avg is approaching 10 from my perspective.

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Our lease is up in October, so we are currently negotiating with a couple of buildings in the North Dallas area in case our current building is not competitive in rates for a renewal. The rates don't make much sense to us. They are significantly higher than 7-8 years ago when we signed our current lease, even though we know that many companies are not using as much commercial space as they used to (and may do away with it altogether). Just from an eyeball perspective, I would guess that it's under 50% of the amount of people in our current building who come into the office compared to pre-Covid, although it has seemed to pick up some in the past month or two.

The prices don't make much sense. It seems like the rates should be lower than they have been in years. Are these buildings just holding tight on their rates and not lowering them because they figure that people who need space will end up paying these rates and that companies who don't want or need space won't change their mind over lower rates? All of the leasing agents are telling us that they are getting a lot of action and interest and don't have a ton of space available (of course they are going to say that). If that is true, then that has to change once more of the current leases are up, right?

I wish we had another year or two on our current lease because I agree that it seems like rates should plummet at some point.

A lot of buildings are essentially required to keep posted rates up. PE money, lending covenants, etc… can dictate that.

So, right now TI is very favorable, so are months free at start of lease, other perks and smaller leasing factors too. All of these factored together make those irrational lease rates much more palatable than they seem on the surface, as nonsensical as it is.

Yea TI and free rent months do seem to be up a little. But even factoring those in the rates are nowhere near as low as what it seems they should be.

Man…reminds me of getting 14 months free rent and a bad ass buildout in downtown Houston in 2004ish. It was awesome but we were young and dumb and had WAY more space than we needed. I've had a smaller and smaller office ever since.

I hear you from being recently on the tenant side of lease negotiations that resulted in a move. On the other hand, I'm an investor in a Commerical building and would rather the group run at breakeven at 50% occupancy than set leases that may be unattractive in 2-5 years.

Reality is Dallas/DFW is still facing a massive influx of jobs. Also, Covid and the materials shortage have slowed development of nee space, keeping rates stronger locally relative to national, I believe.

Further, there has been a massive influx of capital in CRE and many value-add improvements accelerated when folks were home during Covid, bolstering rates incrementally.

I'm sure others are closer to it than me, but IMO, the economics justify rates staying higher than a surface level inspection would suggest.

https://wolfstreet.com/2022/05/31/the-most-splendid-housing-bubbles-in-america-may-update-mania-at-the-eve-of-holy-moly-mortgage-rates/

Ghost of Bizbee said:

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Scientific said:

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I love everything about NC. I've told anyone who will listen, it will be the next "Texas" after we hit our ceiling with everyone moving here.

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Agreed. The research triangle area is my favorite place outside Texas and Charlotte burbs are underrated. NC economy is booming

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Everything except that bbq. But you can take your shirt off and put it over your head just like a helicopter, and no one will question you.

i'm surprised 3-5 year lease is average. my company has a 10 year lease in Dallas. I always thought that was the norm.

AggieMainland said:

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i'm surprised 3-5 year lease is average. my company has a 10 year lease in Dallas. I always thought that was the norm.

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10 year is more the norm for sure. The 3-5 year leases are going to be the smaller leases in less desirable buildings/sub markets with lower tenant improvement costs

Scientific said:

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I love everything about NC. I've told anyone who will listen, it will be the next "Texas" after we hit our ceiling with everyone moving here.

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I think you misspelled California. NC is new California. I love most things about NC as well, but the people moving here are not building a new Texas.


And for OP, if you want to move to NC, the best time to buy is yesterday. Nothing is getting cheaper here unless it's near an emerging superfund site.

cisgenderedAggie said:

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Scientific said:

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I love everything about NC. I've told anyone who will listen, it will be the next "Texas" after we hit our ceiling with everyone moving here.

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I think you misspelled California. NC is new California. I love most things about NC as well, but the people moving here are not building a new Texas.


And for OP, if you want to move to NC, the best time to buy is yesterday. Nothing is getting cheaper here unless it's near an emerging superfund site.

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Sadly all of the above is true about TX and the people moving here...

Spaceship said:

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AggieMainland said:

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i'm surprised 3-5 year lease is average. my company has a 10 year lease in Dallas. I always thought that was the norm.

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10 year is more the norm for sure. The 3-5 year leases are going to be the smaller leases in less desirable buildings/sub markets with lower tenant improvement costs

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The below data is stale, but suggests it is materially less:

https://www.cbre-ea.com/public-home/deconstructing-cre/2017/02/27/how-does-the-economic-cycle-influence-the-length-of-office-leases

Further, read an article recently (can't find it) that said the 10 yr leases from 2010+ that are in renewal have increasingly been with shorter terms, essentially many large companies are kicking the can down the road 1-5 years, which would bring the average down a bit temporarily, like following other recent recesssions.

Admittedly I'm not in CRE, but I follow closely and try to stay abreast. Interested in hearing how the average for office leases is ~10 years from your view (or data). It certainly happens, even often, but weighted and average seems unlikely to me.

Casey TableTennis said:

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Spaceship said:

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AggieMainland said:

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i'm surprised 3-5 year lease is average. my company has a 10 year lease in Dallas. I always thought that was the norm.

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10 year is more the norm for sure. The 3-5 year leases are going to be the smaller leases in less desirable buildings/sub markets with lower tenant improvement costs

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The below data is stale, but suggests it is materially less:

https://www.cbre-ea.com/public-home/deconstructing-cre/2017/02/27/how-does-the-economic-cycle-influence-the-length-of-office-leases

Further, read an article recently (can't find it) that said the 10 yr leases from 2010+ that are in renewal have increasingly been with shorter terms, essentially many large companies are kicking the can down the road 1-5 years, which would bring the average down a bit temporarily, like following other recent recesssions.

Admittedly I'm not in CRE, but I follow closely and try to stay abreast. Interested in hearing how the average for office leases is ~10 years from your view (or data). It certainly happens, even often, but weighted and average seems unlikely to me.

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10 year leases happen all the time on the larger deals. It's a pain in the ass to pack up and move 25,000+ sf worth of employees. Biggers foot prints are looking for a home.

I haven't looked at leasing data is a little while, but I would bet that the average term across Dallas is something like 5-7 years. Much less than 5, and you're really getting into "as is" territory.

I hear you, I know yesterday was the better day to buy... That is the nature of real estate.

Since I sold high, it's not the end of the world if we pay a higher figure for a great house (I do home reno so not scared off by any condition or era of decor...).

As far as the political climate, I have heard that so many from NJ/NJ/Conn are moving there, bringing their belief system. Similar to what is happening with Tx receiving so many wayward Californians. That is not a huge factor for me, just looking for a bit of land, 3000 sq ft. or so home...wife wants nearer to beach, maybe down below Wilmington? Southport was one place she has earmarked.

Anyone know that area?

Don't know Southport that much, but I like the area south of Wilmington. Almost anywhere on the outer banks is nicer, but more expensive and probably riskier with storms.

I've stayed at Oak Island a few times. It's very nice and not quite as expensive yet.

Federal government subsidizing conversion of commercial to residential.

That not going to be nearly enough once Reno gets underway and they find legacy issues. Office conversions ALWAYS take more time and money than initially predicted. Huge PITA headaches.

Stat Monitor Repairman said:

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Federal government subsidizing conversion of commercial to residential.

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So they are going to fill cities with highly dense Section 8 housing? Those are going to be wonderful places to visit.

YouBet said:

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Stat Monitor Repairman said:

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Federal government subsidizing conversion of commercial to residential.

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So they are going to fill cities with highly dense Section 8 housing? Those are going to be wonderful places to visit.

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Right where they want everyone. Good little socialist voters.

What do you think of the current mortgage rates? Is anyone going for a mortgage this year?

damynair said:

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What do you think of the current mortgage rates? Is anyone going for a mortgage this year?

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I purchased an investment property in late December. Rates for investment properties already start a bit higher, but mine was at 6.6% which is pretty good all things considered.

Right now, rates are around 7%, so I imagine investment properties would be closer to 7.5%. Which is tough to pencil if you don't get a good purchase price or have lots of cash to throw down.

I think rates are going to hold around this area until we get some rate cuts maybe towards the summer time or 2nd half of the year.

damynair said:

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What do you think of the current mortgage rates? Is anyone going for a mortgage this year?

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We are about to start building a house and the loan was approved a couple months back and I think it was at a bit over 8%. It will only be in existence for 5 or 6 months and paid off when we close so I didn't worry too much about the rate.

Is that for construction or the take out mortgage?

Red Pear Luke (BCS) said:

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damynair said:

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What do you think of the current mortgage rates? Is anyone going for a mortgage this year?

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I purchased an investment property in late December. Rates for investment properties already start a bit higher, but mine was at 6.6% which is pretty good all things considered.

Right now, rates are around 7%, so I imagine investment properties would be closer to 7.5%. Which is tough to pencil if you don't get a good purchase price or have lots of cash to throw down.

I think rates are going to hold around this area until we get some rate cuts maybe towards the summer time or 2nd half of the year.

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Rates are going to hold until we get rate cuts? you don't say

Mumbo Jimbo said:

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Red Pear Luke (BCS) said:

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damynair said:

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What do you think of the current mortgage rates? Is anyone going for a mortgage this year?

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I purchased an investment property in late December. Rates for investment properties already start a bit higher, but mine was at 6.6% which is pretty good all things considered.

Right now, rates are around 7%, so I imagine investment properties would be closer to 7.5%. Which is tough to pencil if you don't get a good purchase price or have lots of cash to throw down.

I think rates are going to hold around this area until we get some rate cuts maybe towards the summer time or 2nd half of the year.

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Rates are going to hold until we get rate cuts? you don't say

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Thanks for stating the obvious.

But I guess I'll expand further on what I meant - The treasuries dropped from their peaks last fall as we turned towards into November & December as the market started building in expectations of up to 6 rate cuts over the next course of this year. This culminated into a 3.80% 10YR UST in late December from a high around 4.9% in October. That is over a 1.10% variance in interest rates over the course of 2-3 months.

Then the economic data showed a stronger economy. Blowing the estimated job report figures out of the water and beating expectations. Which cast a ton of doubt that the Fed would start cutting rates.

So what happened then? That same 3.80% 10YR UST jumped to the 4.15% range by mid January, which pushed interest rates up another 0.35%.

So what's my point? It's that rates have been volatile and bouncing solely because of the treasuries movement. Really hard to pin an interest rates down because instead of small movements, you're still getting a large movement in rates that drastically affects monthly debt service payments. So you're mortgage guy quotes you a 6.75% interest rate when you make an offer on a property and then it gets accepted a week later and you go to lock the rate and it's actually a 7.10% interest rate. That sucks a lot.

jja79 said:

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Is that for construction or the take out mortgage?

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Construction loan. We will up front an amount for the builder to draw on, around a third of the cost of the home. Once that is used, we will either advance more money or draw on the construction loan. It looks like we will not draw on the construction loan at all, we just put it in place in case we have some issues with timing.

It seems to be a good idea.
I should say, I'm glad to know that despite all world issues, there are still ways to get money and pay it off, and there are opportunities for people who want to build a house.
I've recently talked to a guy from the realtybid customer service and was surprised by the conditions under which people can buy properties via the auctions.