“You’ve finally capitulated, haven’t you?” joked my business partner. He and I laugh at the fact that he’s a bear and I’m a bull. It works for us. And when either of us become too negative or positive on the market, we weigh the pros and cons. “Yep.” I said. “Despite the fact that you know that I’m a bull and that I’ve been writing and advising of this correction for some time now, I really feel that I’ve experienced the shift today. There’s no going back now.”A lot of equity’s going to be lost.
I had been on the phone earlier that day with a broker that exclusively represents Bank of America. Many considered BOA to be one of the most desirable and credit worthy tenants. He and I were chatting about the market and how we were seeing retailers looking for rent concessions up to 20% from landlords. He told me, “We’re closing several locations where owners aren’t working with us and we’re also liquidating 173 units this year.”
I had heard and seen of many retailers renegotiating deals, but not Bank of America. Imagine the impact. No one is safe from the loss of equity we’re going to experience. It’s going to be expensive.
Next up will be the office market. It took the retailers about 18 months to get here. Watch for office tenants to begin similar talks from October, 2009 to December, 2010.
About the Author:Jeremy Cyrier, CCIM is a principal with MANSARD Commercial Properties and member of the CCIM Institute faculty. He offers advisory services and brokerage expertise to commercial real estate owners and tenants. You may reach Jeremy at Jeremy@Mansardcre.com.
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