Marketing to a Recovering Commercial Sector

 

 

 

 

 

 

 

By Stephanie Sievers


The Illinois commercial market is steadily rebounding and as the economy improves, sectors of the market such as retail and development land that had been lagging in some areas are finally beginning to gain ground.

Illinois commercial REALTORS® and brokers share what is happening in their local markets and what agents can do to market themselves and their properties to take advantage of these opportunities.

Some of the commercial property types that were sluggish during the downturn are now attracting more interest from investors, says REALTOR® Alex Ruggieri, CCIM, SEC, MBA, GRI, a senior investment advisor with Sperry Van Ness/Ramshaw Real Estate in Champaign and host of NAR’s Commercial Connections podcast.

One area seeing particular improvement is the retail sector, which in some markets lagged behind apartment, multi-family, industrial and other sectors because financing, particularly for multi-family was more available due to incoming cash flow. Ruggieri points to a resurgence in investor interest in smaller, shopping center properties that had been lingering on the market, but not attracting much interest until now.

Retail and development land is starting to come back and overall, the financing picture for the commercial market in general is improving, he said.

“The economy is doing better, banks are through the crisis and looking for opportunities to lend,” Ruggieri said. “It’s still not as fluid as it used to be but there are more banks looking to lend than in the past.”

Commercial REALTOR® Denise Weinmann, CCIM, SIOR, with RVG Commercial in St. Charles and DeKalb, sees a commercial market that is still in recovery mode. While still not where it once was, the commercial market is improving along with consumer and investor confidence.

She expects 2014 to be better than 2013, but foresees 2015 and 2016 being substantially stronger as commercial development and construction increases to meet inventory demands. Right now the commercial market is still working through the supply of existing properties which were discounted during the economic downturn rather than moving ahead with new building.

“You can still buy existing for far less than you could build new,” she said. “There are still a lot of bank-owned properties that are slowly but steadily being absorbed.”

In her market which primarily includes DeKalb County and parts of Kane and Ogle counties, the industrial sector is picking up and undeveloped land, particularly agricultural parcels, continues to hold steady. She’s also getting more calls regarding smaller retail properties, which have been slower to rebound, particularly in traditional downtown markets farther away from high traffic areas.

To effectively market today’s commercial properties, REALTORS® can’t just think nationally or regionally but must also identify and target the local niche markets, Weinmann said.

One marketing tool that she recommends is earning a commercial real estate designation. Her involvement with the Certified Commercial Investment Member Institute (CCIM) and Society of Industrial and Office REALTORS® (SIOR) has been invaluable, connecting her with other commercial agents and transactions.

Marketing your properties to the right clients

Commercial REALTOR® Paul Martis, TRC, CNC, SRES with Coldwell Banker Residential Brokerage in Oak Brook, says that one of the new tools in his marketing arsenal is Realtors Property Resource® (RPR), an exclusive REALTOR® benefit now available nationwide.

Martis estimates that the majority of commercial real estate brokers in his suburban Chicago market are not REALTORS® and therefore don’t have access to RPR. He sees the online service as a marketing opportunity that sets him apart.

“It’s like having a quiver full of arrows and RPR is one of those arrows,” he said.

“REALTORS® need to be aware of the advantage of having those tools. It will allow them to differentiate themselves from other brokers who are not REALTORS® and also on how it can benefit their clients. It’s not just about making the agent look good, it’s also providing another level of insight to clients so they can make educated decisions,” Martis said.

In his Chicago-area market, multi-family properties continue to be the strongest sector. With vacancies down, it is definitely a landlord-favored market, but new apartment complexes are being built. The industrial sector is active but most new construction growth is largely limited to companies building sites for themselves, not spec buildings. One retail trend is the repurposing of old properties, such as a strip mall converted into a day care center.

Overall, Martis said most of the commercial activity he is seeing is on the leasing side.

“There are not a lot of investors buying these days. When they do, they want a property that’s highly stable. I don’t see them taking a lot of risks,” he said.

One impact of the commercial slowdown is that it opened up new opportunities for other companies to grow, particularly in retail, said Mike Mallon, CCIM, CRX, senior vice president of the Chicago real estate firm DK Mallon. Before, high retail rents in the Chicago area priced some companies out of the market. But as rents have come down, it has opened the door for new players to come into the market and now that sector is seeing a resurgence, he said. 

 


What’s Ahead for the Commercial Market

Expect the slow but steady economic growth to continue with improving conditions in various sectors of the U.S. commercial market, according to the report, “Expectations and Market Realities in Real Estate 2014: The Future Unfolds,” a joint research venture by Real Estate Research Corporation, Deloitte and the National Association of REALTORS®.

Some highlights and sector outlooks from the report:

  • Office - There is cautious optimism about this sector and an expectation that demand for office space will grow. Office vacancy rates are expected to decline to 16.5 percent by the end of the year, while rents could rise 2.8 percent.
  • Industrial - As the economy improves so does demand for industrial space. Industrial vacancies are expected to drop 7.6 percent, while warehouse rents are forecast to increase 3.0 percent.
  • Retail - Absorption is expected to outpace supply, driving down vacancy rates. Retail rents are expected to rise 2-3 percent over the next few years. Transaction activity is expected to continue, particularly in secondary and tertiary markets.
  • Apartment - This sector can expect another year of solid growth. Rents are expected to climb early in 2014 but then start to decline. On the other hand, the vacancy rate could drop to 4.6 percent this year and then rise 5.8 percent due to new apartment supply.

Read the full report, “Expectations and Market Realities in Real Estate 2014: The Future Unfolds” at www.realtor.org/reports/expectations-and-market-realities-in-real-estate-2014

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April 2014


3 tips for marketing your commercial properties in this emerging market

Tap into the power of commercial real estate designations or affiliations. Earning your Certified Commercial Investment Member (CCIM), Society of Industrial and Office REALTORS® (SIOR), Counselors of Real Estate (CRE), REALTORS® Land Institute (RLI) or other designation not only gives you access to marketing ideas and industry information, you’ll be networking and connecting with agents and that is where many commercial transactions are made.

Begin using Realtors Property Resource®. Don’t overlook this exclusive REALTOR® benefit that can help you differentiate yourself from other brokers in the market. It’s a one-stop shop that brings comprehensive market information to your fingertips.

Don’t just pitch your property, get inside the minds of your clients and sell them on how the property they are looking to buy or lease will add value to their business. If you are working with a retail property, think like a retailer not just a REALTOR®. Research your client’s market competition, site selection process and priorities so that you can better market to, and ultimately, match their needs.


Stand out from the crowd with RPR

Commercial REALTORS® have a powerful marketing tool that isn’t available to their non-REALTOR® counterparts - Realtors Property Resource® (RPR).

Similar to RPR for the residential market, RPR Commercial gives you access to an extensive database of property information including public records, mortgage and tax information, neighborhood demographics and more through one centralized source. Use RPR’s market analysis tools to find the right customers and locations for your properties. Create customized reports and maps that you can share with your clients.

RPR is a benefit only available to members of the National Association of REALTORS®. Learn more about how you can use RPR Commercial at http://blog.narrpr.com/commercial/.