beware-the-crocodilesThis January, I golfed at the Cozumel Country Club golf course. When golfing that course you are warned at least a dozen times, “Do not go near the water or the woods.” Why? Because you could inadvertently get to close to a crocodile—and he will win any fight.

During my 18 holes, I saw two crocodiles the same size as the one in the picture. That isn’t me in the photo – I’m not daring enough to get that close to a croc. The Starter told us the crocs can run 35 miles per hour. The average human can run 20 miles per hour. I did the math, and decided not to take any risks. Later, I did learn from Google that crocs can only run approximately 20 miles per hour (but I’m still not too keen on testing out those odds).

As I was golfing, I noticed the effect the crocodiles had on the various exotic ducks and birds around the many ponds on the golf course.  If a pond had a croc, there were no ducks on the pond and the birds would walk on the edge of the pond, dart in for food, and run back to shore. They displayed a sort of hesitancy, only jumping in when absolutely necessary.

I have been seeing examples of this same hesitancy in the real estate market for some time now, an economic hesitancy:

  • Housing Developers do not want to buy a five-year supply of land. In fact, they are even nervous about purchasing a two-year supply of land, knowing that if we have another housing crash, their two-year supply could become a 10-year supply overnight.
  • Commercial Developers are holding back on building unless they are 90 percent preleased or have the cash to build without financing. Most banks are not comfortable financing executive developments unless the developer has the cash to carry the building for a few years (apartment buildings are often the main exception to this hesitancy).

Even with many others driving a “wait and see” undercurrent, there are two commercial developers in the Northeast submarket that are developing speculative buildings. The first is the completed Red Fox Business Center facility in Arden Hills totaling 93,000 square feet. The second, Blaine Preserve Business Park Building 2, is planned for construction this spring and will add 99,000 square feet in Blaine. These developers are reacting to the demand in the NE sector where the market is showing a need for this type of space, especially office warehouse spaces of 4,000 to 12,000 square feet.

If you are thinking about getting your feet wet as a speculative building owner, and want advice on how to best take advantage of the current market and positioning yourself for success in the future market, please give me a call. I have land opportunities available, can walk you through the process, and I will always do my best to veer you away from any possible crocodiles.

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