Is age of an office building that important? - Posted by Peter Berens

Posted by Steve on November 11, 2002 at 09:09:39:

I love Rancho Bernardo. I worked at Hewlett-Packard there for 19 years. Unfortunatly, I did not watch commercial values at that time.

Consider yourself lucky that you have an agent that is willing to look at the potential downside. Most will just paint as rosy of a picture as they can to help the sale go through. If this person knows this area, I would weigh the advice carefully. It sounds like you have really looked at comparable rents in the area. Go with your findings if you have done all your homework.

Age does matter in many senses. People will tend to pay more for a nicer looking building, better layout, updated communication wiring, etc… You are in a strong market there and many people are budget minded.

Good luck in your decision.

Is age of an office building that important? - Posted by Peter Berens

Posted by Peter Berens on November 07, 2002 at 20:49:16:

We are buying a 13,000 sf office building that is 22 years old. It is located in a very desirable part of town (Rancho Bernardo in San Diego county), and most of the offices have a view of a spectacular lake in a lushly landscaped park. According to the business rags, rent rates in the area are between $1.85 to $2.50 sf. However, the current tennants are only paying $1.50 to $1.60. At the current rent rates, the CAP rate is only about 6%. If we can get the rates up to $1.85 then we would be at 9%. In my estimation, the building is a B- building that with a little work could be a B. However, our broker is convinced that because of the age of the building it will never be anything but a C. In addition, he is very pesimestic about getting anything close to $1.85 even though there are no other properties in the area that are cheaper than that.

Should I ignore what the broker is saying and use my own gut instict that we can rent the space for more? (It consists mostly of small spaces ± 1000 sf)
Or is the age of the building that important and it will never rent for anything near market?

Are views not that important to small business people?