Commercial real estate still a smart investment, expert says
'I don't see any signs that demand for commercial/ industrial properties by business owners is declining.' - Roc Caldarone Wells Fargo senior vice president
By Bill Robe Special to the Acorn

While collateral damage reports mount due to the subprime mortgage debacle, there is good news for small business owners involved with owneroccupied commercial real estate. The credit crunch affecting homeowners isn't veering into commercial real estate loans.

"The residential lending downturn has had no impact on SBA commercial real estate financing," said Chris Pettersen, vice president of U.S. Bank, SBA division.

In fact, commercial real estate can be a solid investment for small business owners, especially given that the area is experiencing low commercial vacancy rates and low interest rates. The Southern California inventory rate for commercial property is less than 2 percent, said Pettersen.

"The Small Business AdministrationLos Angeles district office, which includes Ventura and Santa Barbara counties, provided more than $350 million in small business financing in fiscal year 2007, most of which was owner-occupied real estate loans," said Roc Caldarone, Wells Fargo senior vice president and regional business banking manager. "Interest rates are still at historic lows, thus favoring the small business borrower."

Commercial real estate has long been strong in Ventura County, either going up or holding its value since 1996, according to Pettersen. One reason demand for commercial loans remains high is due to the healthy business economy and local business owners growing and expanding their businesses. Unlike the residential lending market, there has been no need for commercial real estate lenders to change their credit parameters.

To take advantage of being in this "sweet spot," small business owners can leverage their investments by purchasing their company headquarters. Investing in the growing trend of real estate business condominiums enables small businesses to purchase facilities that meet their business needs. These facilities offer office or industrial spaces for purchase.

Larry Nathanson, a certified public accountant who has been in private practice for 23 years, noted that business condos can be a very attractive long-term investment for small business owners, assuming a modest inflation rate and square footage is equal to a rental facility. "A business condo enables businesses to avoid the pitfalls of renting, provides the stability of one location and can be a business asset that is integrated into an exit strategy for retirement," said Nathanson.

While Ventura County residents and business people cannot control the changes in the housing industry, at least they have good news when it comes to housing their business's headquarters, now and in the foreseeable future.

As such, the U.S. Small Business Administration recorded the largest number of loans and volume it guaranteed in fiscal year 2007, which ended Sept. 30. Start-up companies and minority borrowers each received nearly one-third of all loans granted.

"I don't see any signs that demand for commercial/industrial property by business owners is declining," Caldarone said.

Bill Robe is the vice president of TOLD Corporation in Camarillo. For more information, please call (805) 388-4757, ext. 225.