Rapidly Appreciating Market Creates Challenge in Assigning Values
Central Ohio’s rapidly appreciating commercial real estate market is leaving some 经纪人 and buyers trying to figure out how to get the deal done.
As buyers are pursuing some sectors of the commercial real estate market with vigor, prices are climbing at a pace that is making it difficult for 评估师s to keep up with the market.
去年, the 工业 sector saw record growth due to the 电子商务 boom, and 租金 growth stemming from the pandemic. In Central Ohio, the 工业 sector saw the price per square foot increase by a remarkable 15.8% in 2021 over the previous year, according to CoStar data. 写字楼市场, despite being arguably the hardest hit by the pandemic, still saw the average sale price increase by 6.去年1%.
“We as 评估师s do nothing more than use historical information to try and predict the future and therein lies the difficulty of what we do. When you have a market that is going up as rapidly as the one we are in right now, 这是非常, very hard to stay ahead,萨姆·昆说, a Central Ohio commercial real estate 评估师 and owner of 官山姆 & 的同事.
Historical information is typically analyzed by 评估师s using the three approaches to value: the sales comparison approach, the income approach, and the replacement cost approach. Appraisers commonly use the sales comp approach combined with another approach, depending on the property type and use. But in some scenarios, the historical information doesn’t seem to be telling the whole story.
“What seems to be problematic, and even misunderstood in some 评估, is that increased demand paired with rising 建设成本 for building new are driving up the offer price on existing buildings. 然而, lease rates are not increasing at the same pace, and the income approach is not supporting the price. It leaves buyers with few alternatives,” explained 马特·格雷戈里, senior vice president of NAI Ohio股票.
The sales comparison approach may also cause a problem in supporting cur租金 values due to the length of time commercial 交易 can take to close.
“In commercial real estate, 它可以取平均值, 3-4个月结束, and possibly even longer,格雷戈里解释道, “which means that sometimes the sales comps used to determine a value are already dated and not an accurate reflection of the market.”
正因为如此, more buyers are encountering what is known as an appraisal gap, the difference between the fair 市场价值 determined by the 评估师, and the offer made by the buyer – and it can be a deal-breaker, specifically for owner-occupants who are seeking financing.
In order for buyers to circumvent this, Central Ohio commercial real estate 评估师 and attorney 弗兰克·亨, advises providing as much information as possible upfront.
Providing information such as sales in-contract, 或者其他机会, 能帮助鉴定人吗, 官说.
另外, it’s helpful if 经纪人 meet the 评估师 during the inspection, and make themselves available for any follow-up questions, 他补充说.
What buyers need to understand is that an appraisal needs to pass lending requirements, and they need to provide enough information to the 评估师 to help bridge that gap, 亨克尔解释.
Brokers can advocate for their clients by developing relationships with banks and 评估师s in an effort to share information about what is happening cur租金ly in the market and connecting their clients to lenders who may have more aggressive lending strategies, 官说.
“It’s all about being able to defend the appraisal,” said Hinkle.
