Frequently Asked Questions
if you have additional questions, feel free to contact us.
The value of any small business is in the employees. I consider the needs of our team to be a priority during this exceptional business transition. In addition to taking steps to keep our team safe and healthy, we have tried to make all necessary accommodations including relocating company equipment and supplies to the home offices. Additionally, I realize that working from home is often less efficient that working at the office, so keeping expectations at a reasonable level seems to be appreciated. First and foremost, I want our staff to stay safe and healthy. We will weather the storm of the COVID-19 pandemic and, like our community, we will be stronger in the end.
The short answer is that we do not yet know the effect of the COVID-19 pandemic on local commercial real estate values. The long answer is generally that improved commercial property values are driven by both the income produced by the property and the sales of comparable properties. The market has not yet had time to adjust to any pricing changes, but it bears watching to see if future sale prices are impacted. Many commercial tenants are currently struggling to make rent, but this may be offset by future benefits of programs administered through the US Small Business-Administration. Stay tuned as we continue to monitor changes in the local real estate market.
The short answer is that the assessed value of real estate in the State of Nebraska was established as of January 1, 2020, and I doubt any of us could have accurately predicted the changes in our lives since January 1. The long answer is that market participants should closely watch the market for the remainder of 2020, as we will want the assessed value as of January 1, 2021, to reflect the market conditions present on that date.
The short answer is that real estate market values do not typically react immediately to changes in the short-term income stream. So no, the value does not decrease yet. The long answer is that prolonged loss of income will begin to erode the value of an income-producing property. If a tenant eventually makes up any past-due amounts that are missed during the pandemic, then the effect on the annual income stream may be nominal. If missed rental payments are extended or not brought current by the tenant, a change in annual income to a property may indicate additional analysis is appropriate to determine the effect on the market value of a property.
The short answer is that real estate market values do not typically react immediately to changes in the short-term income steam. So no, the value does not decrease yet. The long answer is that prolonged vacancy results in reduced income to a property and the
reduced income will begin to erode the value of an income-producing property. If a vacant property can be leased to a new tenant within a reasonable amount of time, the vacancy may be considered part of the normal business cycle for a property. If a vacant unit remains vacant for an extended amount of time, the reduced occupancy not only reduces the income to the property, but the owner may be required to pay additional expenses normally paid by the tenant of an occupied unit. Both the potential reduced income and increased expenses to a property owner reduce the net income to the property owner. The change in annual income to a property may indicate additional analysis is appropriate to determine the effect on the market value of a property.
Like most people, appraisers have an increased awareness of germs as well as the health of people we encounter. Commercial appraisers generally have only limited contact with people during property inspections. But when we do have contact, we are utilizing social distancing, having discussions outside, as well as appropriate handwashing before and after inspections. One client recently shared that some local residential appraisers have moved to exterior inspections only. This may be appropriate in some situations, but it makes an appraiser’s job more difficult if the inspection is limited. As always, the reliability of an appraisal is reduced when inspections are limited for any reason.