Is This the Bottom of the Daytona Beach Commercial Market?

Posted by admin on April 9, 2009 under Good Info - Read It, by Tim Davis | Be the First to Comment

by Tim Davis

Someone asked me today if I thought this was the bottom of the market. The tone in which he asked me reminded me of a story from my youth:

Once a regular customer of my father’s building supply store posed him the question, “Hey, what can you sell me here real cheap that I could take to the flea market on the weekend to sell and make some money on?”

I was no more than 10-12 years old, but I instantly realized the idiocracy of this question. And the same can be said for the question of “is this the bottom?” Who knows… I could spout back some answer loaded with industry lingo – cap rates absorbtion rates, vacancy rates, total inventory of product, blah, blah, blah. But took a new route, and told the person that I had no idea if this was the bottom of the market, and if I had some kind of superior empirical evidence that it was in fact the bottom, I would be selling off my baseball cards, stamp collection, beanie babies, and anything else that would raise two dollars so that I could buy the property myself.

But here is the reality:

• Material costs can only go so low
• People can only work so cheap.
• Material cost and labor are the major cost factors in new construction
• The cost of new construction dictates lease rates of new space
• Lease rates of new space dictates the lease rate of old space
• The value of commercial property is determined by how much revenue it can produce for its owners

So if material costs are at all time lows, and the supply of labor is increasing readily – following the above list of conditions should lead to a stabilization of commercial property values.

Now where are those baseball cards….
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