When investing in commercial real estate (CRE), understanding the different types of leases is critical. Each lease structure offers varying degrees of responsibility and risk, which can affect your returns—especially if you're utilizing a 1031 Exchange to defer capital gains taxes. Below, I’ll walk you through the most common lease types: Absolute NNN, NNN, Modified Gross, and Full-Service Gross—and how each one fits (or doesn’t) into a smart 1031 Exchange strategy.
What Office and Industrial Tenants Need to Know About Foreclosures and The Impact on Your Business.
Recently released Q3 2023 Metro Denver commercial real estate (CRE) data confirms the situation on the ground we’ve been observing. The market is bifurcated. The office market is struggling; the industrial market is still relatively robust. The single-tenant retail market is also strong. CRE activity continues to move from Denver’s downtown core to suburban areas.
For some struggling companies, there may be a lease renegotiation strategy that can help alleviate the financial stress their leased office space is creating. In many cases, these challenged businesses are weighed down with the burden and cost of unused office space, whether it’s because they’ve let people go, they’ve had to accommodate their employees’ desire for hybrid or work-from-home arrangements, or they’ve had employees quit due to a back-to-office mandate. As these business leaders consider their options, they should realize that their landlords also are feeling pain in this economy … and this opens the door to a solution that can help both parties make the best of their respective bad situations.
It seems many major employers are becoming less nervous about implementing adamant, wholesale return-to-the-office mandates.
Over the past 18 months, they’ve steadily progressed from inviting employees to come back, then encouraging/incentivizing them, and then requiring their attendance, albeit with a seeming lack of enforcement. The next step, one that we’re seeing now, is enforcing those requirements that many employees have simply ignored.
Offices are slowly filling up. A recent study documented that during the pandemic, 55% of workers who could do their jobs from home did exactly that. Now, 41% are working hybrid and only 32% are still working full-time from home.
At first glance some of the 2023 Q1 data presented here seems contradictory: increased sales prices accompanied by declines in rent growth; higher vacancy rates alongside higher rent rates.
But if you look deeper into the data and consider the stories behind the numbers (which we’ll lay out below), there’s a logical explanation for the unique dynamics we’re seeing today in the Metro Denver commercial real estate (CRE) market.
