Office Condo Market Now a Buyers Market

Continued low interest rates and the prospect of appreciation are strong motivating factors influencing potential buyers of commercial real estate. Although market conditions vary throughout the state, there are signs that the market is shifting from developers in favor of buyers using the 504 program.

CB Richard Ellis, a leading commercial real estate services firm, reports that the number of planned or completed office condo projects in South Florida dropped to 56 in the third quarter of 2006, down from 60. According to the firm, there are even cases where projects are no longer being marketed as office condos and have reverted to leasing because of sub-par sales activity. Additionally, a trend that continues to see results are “mixed-use” projects that include both residential and commercial components. These projects ensure an across-the-board attraction level, thus benefiting the project as a whole.

In most cases lenders will benefit from their participation in the 504 program by assuring that the values of their secured assets are well protected by the 50% loan to value ratios afforded by the program. “The first lien position provides security in all assets thereby, making this a practically risk-free transaction for the bank and very appealing to lenders looking to maintain strong portfolios” says Todd Kocourek, President and C.E.O. of Florida First capital Finance.

Most office condos appeal to small service or professional businesses that don’t need an entire office building. Attorneys, CPAs and medical practices are ideal for this type of transaction.

.