LVB.com – 2013 a perfect time to be a bull or a bear, but not a pig

Commercial real estate investment is a tricky proposition as we approach 2013 with a newly re-elected President Obama facing a fiscal cliff.

Who you depend on for advice is critical right now – as is when you get that advice.

NuWire Investor used a report from the National Real Estate Investor for an October article, saying 2013 is “a go, especially in apartment complex investments. Demand continues to grow with many potential residential customers not having adequate down money.”

However, in November, after the election, National Real Estate Investor predicted using extreme caution since President Obama will be around for four more years and Obamacare costs and potential tax hikes may cause some to totally back off investing or expanding.

Ryan Dietrick of the Dietrick Group, which operates in Lehigh and Northampton counties, sees positives working in 2013.

“Every colleague I talk to says that business is good, and improving since 2008,” he told Lehigh Valley Business.

“Apartments are really hot right now – they fly off the shelf as fast as they come in. We’re also getting more investors impressed with the area’s location and affordability.

“We’re becoming a major market, not just a spot for spillover from Philadelphia and New York. We don’t need any more office space, though. Existing stock is needed, however, as businesses grow and as start-ups happen.”

Dietrick recently closed a deal on the former Circuit City building on Grape Street in Whitehall Township.

Habitat for Humanity will be opening a “re-store” that offers home improvement-type products that are refurbished. They took 20,000 square feet of the building while an Asian hibachi restaurant will take 10,000.

Jeffrey Hogue of Prudential Landis Services in Berks County isn’t as optimistic as Dietrick.

“No one knows how taxes will play out in 2013 so I see investors making quick sales through the end of the year to take profits before taxes are higher,” he said. “And no one will expand a business for the same reason.”

As Berks County’s historically top commercial sales rep, Hogue was set to start his own brokerage but has put that plan on hold.

“I haven’t had a single commercial sale in 2012. With health care costs and unsure taxes businesses are simply in a holding pattern till the 2013 scenario unfolds,” he noted.

“This fiscal cliff is going to guarantee a recession. With a potential 28 percent capital gains tax it makes sense to liquidate in 2012 and avoid higher taxes. Doing otherwise would be foolish.”

James Balliet, president of KW Commercial-The James Balliet Commercial Group in Allentown, is reserving the right for cautious optimism throughout 2013.

“Although there will be an uptick in new construction of retail and office projects, our economic uncertainty will continue to hold back major corporate deals and corporate relocations,” he said.

“There is clearly a rise in completed lease and sale transactions from the prior past few years but they are mostly of a local and regional stature and not the national corporate tenants that have been keeping the Lehigh Valley ahead of most national vacancy averages.”

Balliet’s group handles the sale and leasing of almost 200 commercial properties throughout the region, including multiple bank-owned (foreclosed) or REO properties.

“Banks are aggressively taking back the commercial properties from owners in mortgage default and selling them at or below appraised value simply to get them off the books,” he said.

“My advice to many landlords over the past few years has been to do shorter term lease deals at discounted rents and allow time for the economy and rental rates to catch back up.

“We all know the saying, ‘Bulls make money, bears make money and pigs get slaughtered’ – 2013 is the perfect time to be a bear or a bull and not a pig.”