Frozen credit provides opportunities in commercial real estate.

• Author: Weiss, Michael J.
• Position: QUICK STUDY

Rather than focus on the negative of the dismal global economy and its impact on businesses and consumers, here's a suggestion: Consider finding a silver lining--and specifically focus on creating the most advantageous occupancy solutions for users of commercial real estate.

The current market--while frozen as a result of the lack of available credit--has created a number of commercial real-estate opportunities, some obvious, while others overlooked.

The most talked-about opportunities are in leasing. Growing vacancies and declining rentals across the country have provided the impetus for companies to either restructure their leases to lower their effective rents with reduced rates and increased concessions or consider relocating to upgraded space.

A less talked-about option--but also a viable one to control or even lower long-term occupancy costs--is to purchase a commercial building or acquire an equity position in one rather than continue to lease space as a tenant.

The rapidly growing inventory of buildings, a reduction in pricing, and diminished competition from investors and speculators either waiting to see how the market shakes out or who no longer have the ability to buy real estate, have created opportunities for business--the ultimate end users of space--to own their own buildings.

To Lease or Buy?

Such a strategy offers companies the opportunity to both build equity and contain occupancy costs. Businesses have always acquired buildings; they even did so in the past several years when prices were grossly inflated.

However, such a strategy may be wiser today for some to consider owning rather than committing significant dollars to another long-term lease that lines a landlord's pockets with years of rental income.

Consider Seller Financing

With conventional lending virtually frozen, how can these building sales come to fruition? The lack of institutions extending real-estate financing has prompted the use of purchase money mortgages, better known as "seller financing."

While this can be an effective financing option for both the seller and the buyer in all types of real estate markets, it's a particularly essential one in these challenging times to get transactions completed.

It enables the buyer to purchase the property and the seller to sell it more quickly without the red tape and costs associated with using a third-party financial institution, as well as potentially obtaining more favorable terms.

It may also be particularly...