We are noticing that some building owners, faced with a pending vacancy, are looking to sell rather than experience the lengthy and costly process of finding a new tenant.
What’s selling motivation, you may be wondering.
We’ve not experienced much since the middle of 2022 when the Federal Reserve mounted its stair climber and hiked interest rates several times over the next 18 months.
Most of the selling motivation from the start of 2021 was fueled by crazy high prices investors were willing to pay paired with cheap money. Some who never considered selling their property cashed in during this run-up.
We even saw the occupant premium disappear for a few months. An occupant premium refers to a higher price the user of a building is willing to pay versus that of an investor. You see, occupants consider the utility a piece of real estate has to offer its operation whereas an investor is interested in the income generated.
Generally, that means they’ll pay more. Once the easy money evaporated and investor buyers were relegated to the sidelines – selling motivation ebbed. I believe in 2024, we’ll experience a different kind of selling motivation – more forced selling. Bear with me as I review five situations that could render me prescient.
Transitions can predict a sale and the most common ones that owners face are divorce, death, disposition, distress, disputes and dissolution.
When a marriage ends and the combatants must reconcile the assets, sometimes a sale occurs. Death creates an interesting tax treatment known as a “step-up in basis” which makes selling more attractive. Sometimes business owners decide it’s time to sell their companies.
