Starboard Commercial Real Estate

Hans Hansson | June 7, 2011

The San Francisco commercial real estate market is hot. With the expansion of social networking, gaming and mobile application firms San Francisco is seeing a rebound in its economy that has not been seen since the boom and bust years of the dot-com market in the late 1990's.

If you are a commercial building owner then the last three years have been tough. If you have faced vacancies, tenants who could no longer pay rent, new governmental zoning and regulations that drove you further into despair, cheer up. Your time to enjoy a turn around and cash in is now. Over the course of the last year new REIT'S and partnerships have been formed to take advantage of the purchase of distressed properties. San Francisco is certainly not a distressed market but it is a market that Wall Street has identified as one of the top commercial real estate markets to invest in.

So if the market is only going to get better why sell? I have been in this business now for over 25 years. In 1984 when I first entered this business I saw Class A office space rents in the fifties. Over the course of my career I have seen rates as low as the high teens for similar space. San Francisco is known for its low and high real estate cycles. Historically, the high part of cycle lasts no more than two or three years. The low cycle can last as long as five to six years. A successful sale occurs when a building sells for a nice profit while also leaving a dream of an upside to the future buyer. Rental rates will continue to rise and cap rates will fall, which means that today's owners have a chance to enjoy a high sales price for their properties.

The markets that are triggering our growth are suspect markets at best. Social networking and mobile applications in particular are still untested markets with uncertain futures. Today, venture capital companies are throwing big money at these sectors hoping to cash in; not on profitable companies but on firms that they feel will see the largest IPO opportunities. This will lead to some successful firms but also a number of firms that will never be profitable and will eventually fail, thus, leading to our next down turn.

Successful long-term commercial building owners know when to buy low and sell high. They also know when their pain and suffering needs to be rewarded with a nice profitable sale of their building. That time is now.

Posted 8 years, 3 months ago on June 7, 2011
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