by Paula C. Squires
Virginia Business
One of the country’s biggest players in real estate investment brokerage is increasing its Virginia presence. Marcus & Millichap Real Estate Investment Services opened an office in Williamsburg this spring to be within easy reach of the population centers stretching from Richmond to Virginia Beach.
“It’s a great area,” says Gary Lucas, a managing director and senior vice president for the Encino, Calif.-based company. “Growth has been strong. There’s a lot of nice retail that has been built over the two to three years.”
Lucas acknowledges that business isn’t booming during an economic downturn, but says the private company is getting into new, smaller markets to build relationships and opportunities for investors. “We figure it’s just a cycle, and we’re working through it.”
Marcus & Millichap already has 78 offices in major cities across the country, including one in Washington, D.C., and a smaller, satellite office in Reston. The company says that it closed investment deals worth more than $20.7 billion last year for private and institutional clients, figure just slightly higher than its business volume in 2006. In Virginia, it’s currently listing more than $150 million worth of inventory ranging from hotels to industrial, office and multifamily projects.
So, are people investing in commercial real estate after the collapse of the residential real estate market? In a word, yes. High-net-worth individuals are on the lookout for good deals, says Jay Sloan, a broker in the Williamsburg office. “As prices go down and banks tighten up reins on lending, people with real money come out,” he says. “It gives them a chance to maximize their opportunity, to buy in a down cycle and sell in the next up cycle. The margin of profit is much greater for them.”
Pushed out of the market are buyers in need of financial leveraging. At a time when banks have tightened up on lending, it’s not easy for investors to raise equity or meet requirements for debt financing, with Sloan seeing some banks requiring as much as 40 percent down.
According to him, Marcus & Millichap has done many deals recently in Virginia, including the sale of Beaufont Mall in Chesterfield County. County records show that the 46-acre community shopping center, assessed at $16.4 million in 2008, sold for $17 million in February to a private owner. Apparently, it’s being redeveloped into a sustainable
retail/office project, according to Timmons Group in Richmond, which has been retained to provide civil engineering services. Sloan says he recently got a sales contract on the Days Inn Hotel at the Norfolk Airport.
A majority of the firm’s transactions involve private investors, including individuals, partnerships, family trusts and developers. With overall transactional volume down across all commercial real estate sectors, Sloan is noticing increased interest in apartments and storage centers. Those trends track the economy. As fallout from the subprime
mortgage crisis leads to more foreclosures on single-family homes, some people are moving into apartments and may need extra space to store goods.
Besides Williamsburg, Lucas says the company plans to open several other new offices in Portland, Maine, Pittsburgh and Jackson, Miss.
In theory it’s a good time to buy, he notes, with some distressed properties offering price reductions. Yet, Lucas sees resistance from some sellers. “They’re hanging on.” Since many commercial properties are income-producing, “tenants are still paying the rent. So instead of selling at some bottom price, they’re holding so there’s a reduction in
transactions.”
Plus, some buyers might be spooked by foreclosures. While delinquency rates on commercial mortgages remain low, residential real estate is seeing many defaults. A few commercial projects in Virginia have ended up in trouble. For instance, construction stopped earlier this year on the Marquis Shopping Center in Williamsburg after contractors filed liens against developer Premier Properties. Premier defaulted on its loan, and the primary lender foreclosed on the property in late July. That same lender, CIT, later purchased the Marquis during a foreclosure sale, paying a reported $20 million for a 240-acre property assessed at more than twice that amount. CIT plans to find another developer to finish
the project so that liens can be paid and the shopping center — with some stores already open — can generate revenues to repay $32.8 million in community development bonds.
I didn’t know that a company of this stature was in our area. It’s good to see that we now have a large reputable firm specializing in only investment brokerage.
--Investor of Virginia Beach, VA.
Sep. 3, 2008 at 12:42 PM
Nice to see that while business may not be booming at the moment, <a href=“
http://www.savoystewart.co.uk/“>commercial property</a> is still growing in some areas.
Joechi of London, England
Oct. 20, 2008 at 05:06 PM
Now me be the best time to start scouting for deals in real estate, particular in Virginia. I imagine those persons with alot of money are buying up as much property as they can as real estate prices continue to drop due to the economy still being in a slump. I wrote an article on my <a href=“http://unscripted.com/“>blog</a> about this situation, I think I may delve into it a little further in the future.
--Ray of Hollywood, Florida
Feb. 12, 2009 at 03:06 AM
I believe this is the right time to invest in commercial real estate for investors setting on cash and not in need for financing. Some people worry about the inevitable increase of interest rates in the future and its impact on commercial real estate. I believe the impact will be minimal since the currently low interest rates are not benefiting to the commercial real estate market anyway because the lack of financing.
--Business Broker of Toronto
May. 2, 2010 at 01:32 AM
Portland has seen a huge wave of Commercial Foreclosures and Bank Owned. I bet the trend is nation wide and worth taking a look at.
Cheers!
Aaron Majors
Portland Broker
Portland Real Estate of Portland, OR
May. 31, 2010 at 12:54 PM
It would be interesting to see how the commercial property investments in Virginia are going now (getting on to two years since this article was written). The economy has bounced around like a yo-yo in the last 18 months, and I know that as a business owner I’ve had the opportunity to secure some fantastic bargain priced office space leases in that time. The competition has been fierce to rent premium space for that last 12 months in particular and a lot of commercial property owners, particularly inner city office space lessors are virtually giving space away for the next 12 months to get people in.
--customer review proform treadmill of U.S.A.
Jun. 14, 2010 at 03:27 AM