Hey there everybody. This is Ryan here. I'm here with Nick Jergens,
he is a commercial realtor. Nick why don't you tell us a little bit about yourself.
Thank you Ryan. Well my name is Nick Jergens with Madison Commercial
Properties. I'm the managing broker at Madison Commercial.
I've been in real estate since basically I came out of my mother,
commercial real estate going on five - six, at this point it's going on
maybe seven years. And so at Madison Commercial we do
buying, selling, landlord rep, tenant rep, development across all different types
of commercial properties. You know and we also work
out of state too. So it doesn't have to be just locally in Colorado, we can work
with clients all across the United States as well.
Right on, thanks Nick. And Nick's going to tell us a little bit
about what's going on in the market during this COVID time. So Nick, what's
what's the general state of the commercial market right now?
Well Ryan, thanks for asking that question. I mean really what it comes
down to is that it's been a shakeup right? And
there's a lot of unknowns right now but what we're seeing is that the
commercial market is generally on a decline. It's not as attractive as it
was pre-COVID. And if we compare it to let's just say
the residential market, you've probably been hearing about
a bunch of residential real estate agents that have been saying that things
are going crazy, things are popping. A lot of that is
because of fiscal policy but that fiscal policy really hasn't
transitioned in the commercial sector just yet. From the standpoint of people
actually still wanting to buy, sell, lease, rent because you know the
demand for, at the end of the day, that
investment rate of return in commercial real estate
is just so unknown because the consumer confidence is not there. So
you know, what we've seen and this is a statistic from CoStar,
is about a 24% reduction of transactions year over year.
I don't have the exact month in front of me but that was I think June or July,
it was first quarter, it was after first quarter.
And so you know, we're seeing a significant reduction in transactions.
We're also seeing a significant reduction in square footage needed for
different sectors, but overall it's been not as
attractive. And you know, it's going down. Yeah, I would
imagine like many stores are shut down, retail stores
are shut down, and lots of offices working from home at the
moment and all that crap going on. So yeah that makes sense. So how is each
sector performing and what is the outlook? Yeah well I mean
thanks for asking that because that's actually the most important, because when
you look at the general thing, the general outlook of the market, I mean,
it's you know, going down a little bit here and it's hitting this road bump.
But really retail's the one that's been the most painful. I mean, everyone
knows it, you couldn't go to your restaurant, you can't go to your gym.
24-hour fitness I think filed bankruptcy and you know they're closing
a lot of stores even here, or locations here in
Colorado. But I mean retail's in the most pain right
now and we're trying to figure out how that is going to change. Is the store
going to need more square footage, is it all going to be going to online,
are you going to have six feet between every clothing rack? We've seen a
rebound right? I mean it's not where it was in April but we've
seen a rebound. But it's not the rebound that we're hoping for with that v-shape
recovery. I mean it's it's going up and we're kind of coming
to another crest here and we feel that it's
kind of going to slide a little bit farther down
because there was a lot of pent-up demand. So retail is really in the most
pain. Industrial, which is actually my
specialty, is actually the most surviving this, it's weathering this storm.
So I mean where everyone used to be going into the store
to buy their necessities, their groceries, whatever, now they're going to
online. And where does that stuff need to be? That needs to be in a
warehouse, in distribution. You know those spaces are doing totally
fine. I have, I've seen maybe just like a speed bump and then it just keeps on going
on. I haven't seen really any price reductions, any fire sales, anything in
the industrial sector. I've still seen a lot of activity in
that and then, as well actually, cold storage which is a sector
of industrial it is going to be bullish and very, very
sought after when you see the grocery store chains have to go to that
cold storage to deliver to the homes. And then office is actually this weird
in between because we're seeing firms that are going totally out of office
space, going 100% virtual, and then there's still
firms that need people in the office and they're actually expanding space.
Because they need to have more space for each employee because
of the six foot requirement and you know social distancing. So
office seems to be a little bit of a seesaw, which way it's going to go?
Retail is definitely not something I would want to place my money in right
now. But you can definitely, if you're risk adverse you could
pick up some things really cheap in retail.
Industrial is a very strong sector right now and isn't having
as much pain as retail. Multi-family is an interesting one actually to hit on
because a lot of rent deferments and
eviction stop orders are starting to be lifted. And so we've been seeing
very little, very little negative statistics when it
comes to rent collections. I mean it's only 0.5%
down from last year and this is June 2020 versus June 2019.
But what will be interesting to see is the next few months when
all of these things that are put in place by the government to help these
renters stop. And I know, I believe you just had a
video on that $600 check was it, or the unemployment?
Unemployment yeah. The unemployment, I mean that helps, that
goes directly to the rent generally. So what happens with that
well you know I've seen some projections with as much as an 8% vacancy
across the board for multi-family, which would not be
great. But that one's also a little bit unknown, but we do expect it's going
to be dipping down a little bit in rent collections and increasing some
vacancy in multi-family. Gotcha. Wow yeah, it sounds like there's
a wide range of how this has affected people
and you know just hopefully it bounces back sooner than later.
So what are your general thoughts on what's to come?
Well, I mean what's happening right now is we have a really interesting
discrepancy in pricing and expectations. So you know,
if you think of a market equilibrium, buyers and seller meet
at that middle and there's a transaction right? But
sellers still are holding on to pre-COVID19,
and they believe the market is xyz but then
buyers are saying they don't want to have as much risk and buy at a certain price
point. And that goes back to my 24% reduction in
sales year over year because we're having this extreme discrepancy.
And you know, someone's offering 20%, 25% below list price,
they're not going to get a response. But, at the same time, if that seller is
needing to sell, they're going to have to move off that
price. And we just haven't seen enough transactions to figure out where we're
really heading. But we do expect again, there's going to be some price
reductions. Where it's going to land, we don't know.
But right now, buyers are holding strong because there's a lot of stimulus,
or sorry, sellers are holding strong because there's a lot of stimulus in a
sense with the PPP to be able to pay those
mortgages, rents, etc.. But when you know, things hit the fan,
will these sellers be willing to kind of meet at those buyers expectations?
That's what I'm waiting to see. So, that's one of the final thoughts on the
market is just, when are we going to hit this middle
again from where the buyers want to buy and where the sellers want to actually
sell? And that's going to be the new pricing after COVID.
Gotcha alright man. Well one last thing I did want to say,
just a shout out to the SBA loans. I know you probably talked about this, if you
are looking at buying or selling, actually more importantly buying. Having
a new SBA loan, if you close by September 27th,
you will get 6 months of principal and interest paid for on your SBA loan.
Just as a little shout out for that, so that's not a deferment.
Oh that's, that's good information. That's good to know for sure.
Well yeah, thanks for your time today Nick. I really appreciate it. Do you
have any final thoughts? Not at all, but I really appreciate
you having me Ryan. We'll have his, we'll have Nick's contact
info down in the description below if you
need any help, or you're interested in looking into real estate,
commercial real estate specifically, you can reach out to him.
Alright, thanks so much. And we love education too, so any kind of questions, we
just want to help out and get the best education possible.