Charles Pope, Certified Commercial Lender
In the new economy, post covid, there will be changes to this market. There will be a short term increase in money spent on tenant improvements (TI), which will be amortized through long term interior finish loans. This will result in an overall increase in NOI. Of course, their will be an accompanying correction to cap rates. How will this work?
For two reasons, there will most certainly be vacancies: 1) Small to medium businesses (SMB’s) will reel in expenses as product demand decreases. As employees are more comfortable working at home, this will become standard for many, allowing many of these small businesses to survive.
2) Medium to large Business’s that need the centralized workforce will have to lease more square footage.
The tenants necessarily will have to abide by the new rules on social distancing and safe work places. Now that there are fewer tenants, but with larger spaces, management fees will be lower on a pro rata basis which, in turn, will increase NOI. Of course, the larger tenants will negotiate lower square foot rates. The outcome of this will simply be, as it always is, supply and demand.
For those of our followers who find themselves in the office space re-do mode, we are excited to offer these loans at a 10 years, or the lease term, whichever is less. Whereas many banks are unable to perform on these requests due to the current default rate and deposit runoff, GPA Capital is here to help – as we always are. Click here for our initial [Application Request].