Lessons Learned From the First Development

What are the lessons learned from the very first development? What factors to look out for when looking for a land to be developed? What is the state of retail sales and leasing today in a specific market and are prices coming down? Raphael Collazo, Associate Broker at Grisanti Group Commercial Real Estate, shares his insights.What is happening in your area and market?Probably similar to a lot of people around the country, transaction volume is down significantly year over year on the buy and sale side. Leasing activity has been pretty active over the last year or so. The sales side had a slowdown, but on the leasing side, there's been definitely an uptick. I think a lot of it has to do with the fact that although we see some negative signs in the economy, with the unemployment rate ticking up, inflation's still not quite under control as of yet. For whatever reason, the consumer still is spending a lot, which is probably a bad thing long term, but in the short term, it seems to be keeping a lot of these enterprises afloat. On the retail side, it's been a very active last year or so. But, regarding investment real estate, it's been affected. I work with a lot of people who are looking to do development, especially in land acquisition, and ground-up construction, and that's been very slow over the last year or so.Are sellers coming down on price at this point?Some are, and a lot aren't. I think what it comes down to is the staying power. There are a lot of sellers out there that do have bank notes that are coming due. Now, the kicker is that a lot of banks are trying to work it out with the sellers, especially if they see that there's a path towards them ultimately being able to be compliant soon. Banks aren't in the business of owning real estate, so they don't want to have to get foreclosed on the property and then have to go through the whole process of getting it off their books. In most instances, if they see a path toward the seller or the owner being able to perform, they're usually going to be able to work things out with the owner. Now, there are also a lot of sellers out there that own the properties outright, and they're just like, "Hey, we'll wait around and we don't have to sell right now." There's no real urgency and so, do I think that there will be a mountain of distress? No, I don't think so, but very optimistic over the next 12 to 24 months that rates are going to start coming down and transaction volume is going to spike because there's a lot of demand. It's not like people don't want to buy stuff, it's just kind of we're at an impasse. And so, once the gap is bridged, I think we're going to start seeing significant volume.What do you look for? I'm briefly guessing multifamily projects are being built in the area.You look at residents. Rooftops for retail are huge because those are the demographics that are ultimately going to be shopping at the places or eating at the places that are going to be nearby. We look a lot for different city initiatives that are kind of pushing for certain things to happen in areas. I follow closely with different rezoning that are taking place, though, these are all publicly available. By the way, you can go to our metro market, we have the Metro council that votes on rezoning that is taking place. If you just look through a list of the ones that are being heard every two weeks, it's a treasure trove of information.Raphael [email protected] www.linkedin.com/in/raphaelcollazo