Is Commercial Office a Dead End Street in Real Estate Investing?

[Corey Dutton]

I was driving through Salt Lake City yesterday and couldn’t help but notice so many of the FOR LEASE signs plastered on all of the commercial office buildings lining the main highway. Most of these high-rise office buildings have had these signs on them for over a year and they are still not leasing up.

The recession has hurt small business in the U.S., there’s no doubt. But what about all of the businesses that have gone or are going virtual? Many of you will scoff and say that commercial office will always be in demand. In some major U.S. Cities it will be, but so many office buildings here in Salt Lake have sat vacant for awhile now that it’s beginning to concern me.

As a commercial private money lender, I am starting to wonder about lending on commercial office space, primarily because of the growing trend of less brick and mortar offices and more virtual offices. I guess it depends on the location, but what is your opinion? Are more businesses going virtual and will this eventually drive down rents and thus values of commercial office?

[Karen Margrave]

Bill Gulley Even during the height of the real estate boom, conventional lenders would NOT loan for the construction of a SPEC office building, SPEC office park, etc. However; HML that were very knowledgable of the market would.

There is no shame in using a HML to put a project together. If the profit margins will support the developer being able to build and make a profit, and to pay the HML their points and interest, what's the problem? Also, setting up safeguards to give the investor control over the release of funds, etc. goes a long ways to help their comfort level.

It's great that you have enough money and wealthy friends that you can put together multi million dollar plus deals, I wish we all did. But, this is where people come to learn about putting deals together, and HML is one way of funding deals. This forum is an opportuntiy to discuss a variety of ideas and creative ways to invest in real estate, and hopefully help each other where we can.