CCIM SWFL Retail Market Vacancy Decreases 6.6%

Market update from the 16th Annual SWFL CCIM District Commercial Real Estate Outlook Conference a few weeks ago. Great information for our retail clients!

U.S. Metropolitan ECONOMIC OUTLOOK from CCIM Quarterly Market Trends (Q4 2015)

The leading market index uses an array of factors to assess the relative health of an individual market. The factors include job creation, unemployment claims, bankruptcy filings, and permits for construction. The first two factors provide an indication of potential business expansion/contraction as well as of labor market health and a leading indicator of multifamily rental growth. Bankruptcy filings allude to the health of the business environment, while the permits data point to business plans and have an indirect impact on inventories.

The leading indicator is weighted based on both the current measure as well as its recent trend or lagged measures. These weighted measures are then added to create a score. This score is then ranked relative to a fixed scale where a measure of 85 or better indicates a robust market, 75 to 85 a strong market, 65 to 75 an average market, and a score below 65 coincides with a weak market. 

(Click on above picture to enlarge)

What is a COI and who should be on it?

Answer: The Certificate of Insurance (COI) is used to verify the existence of insurance coverage under specific conditions granted to individuals listed on the document. More specifically, it lists effective date of the policy, the type of insurance coverage purchased, and the types and dollar amount of applicable liability. 

What is a CAP Rate?

Answer: The definition of a Capitalization Rate (CAP) is the rate of return on a real estate investment property based on the expected income generated by the property. CAP rate is used to estimate the investor's potential return on his/her investment. This is calculated by dividing the income the property will generate (after fixed costs and variable costs) by the total value of the property.

Capitalization Rate = Yearly Income/Total Value

What is a Letter of Intent (LOI)?

Answer:  A Letter of Intent is a non-binding agreement between two or more parties who look to enter into a real estate transaction such as a lease or sale. It provides an outline of the proposed transaction, which can be negotiated before going to contract. If either party isn’t satisfied with the terms, a counteroffer can be proposed. If accepted, the LOI is revised and reviewed again by both sides. Either party can reject the deal before the final sale contract or lease is signed.

Who pays the broker's commission on a commercial lease?

Answer:  Commissions are paid in the lease transaction based on the representation of both parties:

1. After a lease is signed, the landlord and/or owner of the property usually pays a commission to the Listing Agent (or Landlord Rep) and the Tenant Rep.

2. Commission ranges may vary and can depend on the value of the transaction.

3. In terms of tenant rep situations, a tenant doesn't typically pay a commission to their rep - it is paid by the owner at the time the lease is executed unless otherwise negotiated.

Is there sales tax on commercial real estate?

FYI from Crandall Commercial Group!

Answer:  (from dor.myflorida.com) "The total amount of rent paid for the right to use or occupy commercial real property is subject to sales tax and applicable discretionary sales surtax, unless the rent is specifically exempt. If the tenant makes payments such as mortgage, ad valorem taxes, or insurance on behalf of the landlord, those payments are included in the total amount of rent paid and are subject to sales tax and surtax. The $5,000 limitation of surtax for tangible personal property does not apply to the lease, rental, or license to use commercial real property. Payments for separately stated services that are required under the lease or license are part of the total amount of rent paid.

Examples of commercial real property rentals:

• Office or retail space

• Warehouses

• Convention and meeting rooms

• Mini-warehouses

Rentals, leases, and licenses to use or occupy commercial real property by related persons, as defined in section (s.) 212.02(12), Florida Statutes (F.S.), are also subject to sales tax and surtax. For example, the lease of commercial real property by a parent corporation to one of its subsidiaries, or by a shareholder to a corporation, is subject to sales tax and surtax."