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Crash Course – Commercial Real Estate 101

atlanta market

 

“What is commercial real estate?”

 

Commercial real estate is an industry that is not necessarily widely known and promoted.  Because of that, when some people hear the term real estate, they automatically think of a residential property.  Most likely, the reason for this is because much of the population has either directly or indirectly experienced facets of the home-buying experience.  On the surface, they may seem similar, but there are many, many differences between commercial real estate and residential real estate.  Let’s talk about some of them.  Welcome to your crash course – Commercial Real Estate 101.

 

“The main difference is…”

A property that provides a living space is considered residential real estate.  On the flip side, a property that is exclusively used for business-related purposes with the intention of generating income, is considered commercial real estate.  Commercial real estate is segmented into different niches to include retail, industrial, land, multi-family, mixed-use developments, and office.  The performance of commercial property, including sales prices and new building rates, are often used as a measure for business activity in a given market or submarket. 

 

 

“What is retail real estate?”

Retail properties are used to market and sell consumer goods and services. They range from shopping centers to individual stores and pop-up shops to big box stores like Saks Fifth Avenue and JCPenney.

 

 

“What is industrial real estate?”

An industrial property is a property that is used for the actual manufacturing of something.  It can either be considered a factory or plant.  These building types are usually zoned for light, medium, or heavy industrial.  This includes uses such as warehouses, garages, and distribution centers.

 

“What is land real estate?”

Land is real estate property, less buildings and equipment, which is designated by fixed, spatial boundaries.  Land ownership might offer the titleholder the right to any natural resources that exist within the boundaries of their land. 

 

 

“What is multi-family real estate?”

A multi-family property is any residential property that contains more than one housing unit to include duplexes, townhomes, apartment buildings, and condominiums.  These are some of the most common examples. 

 

“What is mixed-use real estate?”

Mixed-use properties or developments combine residential and non-residential buildings.  They can be a single building, multiple buildings, or an entire neighborhood.  Mixed-use developments provide ample access to community amenities and foster community involvement.  

 

 

“What is office real estate?”

Lastly, we have office real estate, which is what I focus on.  Office properties are occupied for a variety of different purposes.  Office users can engage in retail enterprises, services businesses, non-profit organizations, technology firms, etc.  Office can refer to entire buildings, a floor, parts of a floor, or office parks such as Concourse Office Park in Atlanta, GA featuring the King and Queen towers.  Office buildings are categorized by their height.

 

“How is a building defined by its height?”

An office building has less than 7 stories above ground level is classified as a low-rise building.  An office building that has between 7 and 25 stories above ground level, is classified as a low-rise building.  An office building that has more than 25 stories ground-level building, is classified as a high-rise building.  Office buildings are further categorized by class.

 

 

“What is building class?”

 

Class A – Building classes range from A to C and are determined based upon the physical and locational aspects of building.  Class A properties tend to accommodate users who need high-quality finishes and materials to attract a specific employee or customer.  The building is normally located close to amenities and prestigious areas.

Class B – With class B properties, they tend to be more functional and probably will be highly efficient.  They will be nice but cost-effect and sometimes building age considered when classifying a building.  If the building has high-quality finishes but the design is kind of dated, the building could be considered a Class B.

Class C – Class C Properties have physical, functional, and economic obsolescence.  They tend to be in less desirable areas they may not look very pretty, however, they normally have lower risk and can accommodate start-ups that need lower occupancy costs. 

 

 

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FOR SALE: The Heart of Downtown Atlanta

cnn center downtown atlanta georgia

Downtown Atlanta is shaking some trees

I heard about the sale of the CNN Center last night and I cannot stop thinking about it!  The CNN Center, located in Atlanta, Georgia, is the headquarters for CNN and other WarnerMedia companies around the world. WarnerMedia, deeply rooted in the Atlanta culture, made the bold decision to sell the CNN Center and relocate operations to its newly renovated Techwood center. The change will not be immediate, and employees will remain at their present location for quite some time. This makes sense considering WarnerMedia unveiled a commissioned mural portrait of Turner at the building park late last year.

WarnerMedia plans to sell and lease back the CNN Center for at least five years in an effort to raise capital.  Desroches has been working for some time to determine the highest and best use of the CNN Center and, he and his team, have ultimately decided the best course of action is to sell.  Furthermore, many of CNN’s most popular, have moved to New York City.

 

Only time will tell…

Opened as the Omni Complex in 1976, the CNN Center has been a tourist attraction for decades, providing behind-the-scenes tours that allow an inside look at how live broadcasts are created and transmitted globally. CNN has occupied this building since 1987, when Ted Turner moved the network from the original Techwood campus. The center featured the Omni Hotel and a large food court and gift shop.  On May 29th, protests over George Floyd’s death at the hands of police turned violent, resulting in damage to the exterior of the building and some part of the interior. The famous CNN sign, located at one of the main entrances, was damaged too but was fixed the next day.

It may seem that the protests sparked the decision to sell, and although the announcement was made only one month after the initial damage, that’s not the case. The decision to sell the property was made to cut costs has been in the works for years.  The plan was set in motion after AT&T purchased Time Warner. Perhaps rioting and disruptions were unpleasant catalysts setting the plans into immediate action, or it was initially been projected for this time frame. Pascal Desroches, CFO of WarnerMedia, suggests that the existing CNN Center could be repurposed from an office building to have more emphasis on retail and mixed-use.  That could be an amazing addition to the downtown submarket.

Over its 30+ year presence in Atlanta, the CNN Center has had a major impact on the city.  Just a few years ago, in honor of the founder, the road that runs in front of the building was renamed “Ted Turner”. While they aren’t turning their back on the city, the move will displace a significant number of WarnerMedia’s 6,000 Atlanta personnel.  Because of the ongoing pandemic, we probably won’t see the effects of the relocation for quite a while. Who knows?  The move may very well be for Atlanta’s benefit.  Only time will tell.

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Video tour

The Consumer Financial Protection Bureau announced on Wednesday a proposal to delay the effective date of the TILA-RESPA Integrated Disclosure rule until Oct. 1.

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