CORONAVIRUS

For commercial properties, businesses are considering buying rather than leasing

Low interest rates provide an incentive

Scott Olson

Skogman Commercial
Scott Olson Skogman Commercial
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With interest rates on loans lower than they have been in many years, commercial and industrial businesses owners are giving serious thought to buying rather than leasing land and buildings.

“This all began before the start of the coronavirus,” said Scott Olson, commercial real estate broker at Skogman Commercial in Cedar Rapids. “I started adding sale pricing to several of the lease listings in the middle of last year and it is continuing through the virus.

“The low interest rates are providing businesses with the capability of eventually owning something as an investment with lower payments. Pricing has actually gone up, and I have several clients who have actually raised their prices because they don’t have any place to put their money if they sell.

“They will either have capital gains or the need to replace that revenue if they sell.”

Olson, also a Cedar Rapids City Council member, said the owners of newer “flex space” buildings for lease are not getting any calls.

“I talked with a couple of their agents when I toured the buildings and their prospects are all buyers,” Olson said. ”There are a lot of strip malls being built and they are getting zero calls.

“Most retailers are shut down and local people are not expanding. They won’t have the business until this thing turns around.

“I think we are going to see that trend for quite a stretch.”

Dave Drown, principal and founding member of GLD Commercial in Cedar Rapids, said, ”We are getting inquiries and requests for tours from people with immediate needs, but things have slowed down a little bit in the last few weeks. We are seeing this in manufacturing and some in warehouse distribution as well.

“There are very rarely any warehouse or distribution facilities for sale. The people who own them want to retain them for long-term investment purposes.”

The buildings that housed former big-box retailers such as Kmart, Sears, Toys “R” Us and Younkers are attracting buyers that convert them into storage facilities.

Amerco Real Estate, a division of U-Haul, bought the 100,000-square-foot former Younkers department store at 2800 Edgewood Rd. SW, in Westdale Town Center, for $3.8 million in May 2019. Amerco Real Estate invested about $450,000 to remodel 52,319 square feet of the building for 489 storage lockers and 16 accessible storage lockers.

U-Haul of Eastern Iowa, which operates the Westdale facility, also filed plans in November 2019 with the city for a possible conversion of the former 140,000-square-foot Sears store at Lindale Mall.

The building is owned by Seritage Growth Properties of New York, which has indicated in regulatory filings it plans to lease its former Sears properties to growing national retailers.

Phoenix, Ariz.-based U-Haul renovates and reuses existing buildings nationwide through its Adaptive Reuse program.

There are circumstances in which companies that want to purchase land in Cedar Rapids encounter obstacles.

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By way of example, Ron Corbett, business retention and expansion strategist with the Cedar Rapids Metro Economic Alliance, pointed out that, Eastern Iowa Airport cannot sell land in its Cedar Rapids Land and Air Super Park.

“It can only do land leases, so it hasn’t really had any takers since it put the Super Park together,” he said.

“On the other hand, Alliant Energy is willing to sell land for prospective development in its 1,391-acre Big Cedar Industrial Center (at 76th Avenue and Edgewood Road SW). They have been seeing a lot more interest, so I think there is something to be said about ownership.”

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