"Prevailing uncertainty will mean a conservative tone for the real estate markets during 1988. Risk aversion will mean an even harder look at the details of proposed deals, a consequently slower response time to offerings and a lower ratio of closings to disposition proposals."
Sound familiar? It should, as much as it reflects Oklahoma and the energy belt states. But the authors of this statement, Landauer Associates Inc., were referring to the entire country.
Landauer, the Madison Ave.-based international real estate consulting firm, has published its sixth annual Real Estate Market Forecast, a 40-page summary of prevailing economic conditions that influence the investment and development markets throughout the nation.
"Corporations," it says, "hold a strong hand when compared with other property market participants. Real estate assets should be scrutinized for their potential contribution to both the balance sheet and the earnings statement.
"The corporate (financial officer) will...be interested in the company's owned or leased property. The corporate real estate audit is, if anything, more vital than ever.
"The opportunity to structure an equity lease should not be overlooked," the report says. "Sale-leasebacks, consolidations, relocations, financings and numerous other options can be employed from a position of strength as corporations confront 1988."
As the prevailing theory holds, real estate prices in the energy producing states are tied to the price of oil. Thus, that bit of advice from Landauer pertains more to inflated markets on the East and West Coast than it does to the local real estate market. But tax revisions pertain to one and all.
And because of this state's depressed market, it might be a good idea from the investment standpoint for companies to consider purchasing, instead of leasing, a building, said Mike Sanders, tax principal with the Oklahoma City office of Arthur Young & Co., an international accounting firm.
"If it is true that the real estate market has bottomed out, it can't go anywhere but up," he said, "and the potential is that (a company) could get a great return on their assets, not so much from the tax advantage, since depreciation lives have been lengthened, but from the potential of an increase in the value (of property)."
Jim Austin, manager of the Oklahoma City office of Coldwell Banker Commercial Real Estate Services, placed a caveat on the assumption that the potential of real estate values make purchasing a commercial building a good investment for a business that wants to occupy it.
Advantages must be weighed against the lease rates …