2014 Commercial Real Estate Recap for Grand Traverse County
I began the year by proclaiming that real estate investors had become optimistic in 2013, and our sales through 2014 showed that this continued throughout the year, although at a more tepid pace. We just completed our 5th consecutive year of continued strength in the commercial real estate market in Traverse City and the surrounding area, although the price increases that we’ve seen in the previous 4 years were not as pronounced. The median price of commercial properties in Grand Traverse County increased 6% in 2014 although the average price dropped about 2%. There were a number of larger sales where the price was not disclosed, so the median is probably a better indicator of price direction. The increase was slower than the past few years, but was in line with predictions. Overall, we did see a drop in the number of transactions, with the number of sales down 7% and signed leases down 15%. Part of this is due to the fact there was such a flurry of activity at the end of 2013 when everyone was anticipating interest rates would start rising quickly.
Interest rates increased slightly in the middle of the year and then came back down to record lows towards the end of the year. We continue to have many local financial institutes competing for a small number of loans and that has been a big benefit for borrowers. The Fed continues to wind down its quantitative easing strategy and we expect that rates will begin to rise again in the next 6 months. However, it seems there was more of a sense of urgency to complete deals in 2013. This past year people have accepted that the market and financing will remain fairly steady and only see slight increases.
I have noticed that the local commercial market tends to follow the residential market with a 1 or 2 year lag. Based on the boom in residential the past two years, and the absorption of many of the bank owned properties that were previously on the market, I think we are poised to see some stronger sale price increases in 2015. There are certain sectors, such as industrial properties, that are very difficult to find for sale or lease right now. Many companies need more space as the economy improves and their only option is to build new buildings. As new buildings are built, it puts upward pressure on prices of existing buildings that have been selling well below the cost of replacement value these past few years.
I’m pleased to report that I completed a record number of sales last year. My total sales included 20 properties which was a 43% increase over the previous year. Out of the 120 commercial properties reported as sold and leased in Grand Traverse County by TAAR, I was involved with 46 of the buyers, sellers, tenants & landlords. This represented a 38% share of the listings reported as sold last year. I am extremely pleased to have increased my market share in a year when total sales were down and I am very appreciative of all of the great referrals that I received, that helped get me there!
Dan Stiebel, CCIM