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San Diego market experiencing 'owner/user' frenzy

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Last year saw numerous transactions involving owner/users in San Diego County. Understanding successful transactions and motivations provides the basis for evaluating your opportunities. Business owners, along with their real estate advisor, should establish a strategic game plan with respect to their real estate and business needs. Ownership may prove to be a viable option.

Zachary Jacobs

Leasing space makes good strategic sense for many companies. However, owner/users enjoy many benefits if they can afford to purchase their own building.

Following is a list of some of the most common reasons for purchasing your own building:

1) Pride of ownership

2) Effective cost to occupy is less than the cost to lease

3) Control of the building (no landlord)

4) Consistent payments (no landlord to raise rents)

5) Building improvements can be expensed and controlled

6) Security - you will not be forced to move

7) Flexibility to grow within the building

8) Deprecation and other expense tax deductions

9) Historically low cost financing (SBA or conventional) 10) Business sale enhancement

11) Retirement investment

12) Building appreciation

13) Financing mechanism for later needs (sale leaseback)

Historically low financing is one of the primary drivers behind the current demand. Financing can be sought through traditional commercial real estate loans or more highly leveraged SBA guaranteed financing. Commercial banks offer SBA Guaranteed 7(a) or 504 loans with as little as a 10 percent down payment.

Liz Schaper, vice president at Banco Popular, San Diego, said that California has seen the number of SBA transaction increase by over 200 percent over the same period last year. Keeping the payments low enables an owner/user to maintain a low and consistent cost of occupancy.

According to Butch Dorian, district sales manager for Wells Fargo SBA Lending Division, working with a preferred SBA lender such as Wells Fargo, which offers both the SBA 504 and 7 (a) programs, the process has become much more streamlined, enabling a borrower to receive quick approval and financing for a commercial real estate transaction.

Finding and purchasing a building can be a very long process. Use a CCIM to help evaluate lease vs. own scenarios as well as develop a strategic plan for your real estate needs. If you are considering a purchase, it is paramount that you start looking early, use a broker to constantly keep you informed of available buildings and be absolutely ready to purchase.


Submitted by Zachary F. Jacobs, CCIM for GVA IPC Commercial Real Estate.

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