For the second year in a row the commercial real estate market in Traverse City has beat expectations and finished the year with strong gains. The average sales price of commercial property was up 16% from 2011 in Grand Traverse County and up 12% for the whole TAAR MLS area. There were fewer properties listed in 2012 than the previous year and despite this fact, there were more properties sold. The average sales prices were closer to list price as sellers priced their properties more realistically and buyers became more available.
Analysts expected values to increase only a few percentage points in 2012, but a number of factors contributed to the larger than expected increase. The biggest aid was the Fed’s decision for a third round of quantitative easing that pushed interest rates to new record lows. Low interest rates equate to lower payments for buyers and make owning real estate more attractive than leasing. Home loan rates dropped to the low 3%s on 30 year fixed mortgages and commercial loans dropped as low as 4-4.5% for well qualified buyers. Banks were actively looking to make loans last year and this also helped push prices higher as more buyers were able to fund their purchases.
Leasing activity continued to remain strong with a small uptick in the number of completed lease transactions. There was a large increase in leases in 2011 from the previous year and 2012 continued this trend. There were fewer spaces listed for lease in 2012, so the percent leased compared to the number of properties available also increased.
A Happy, Healthy & Prosperous New Year to all!
-Dan Stiebel, CCIM