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Long Beach Business & Commercial Law Blog

Changes made by the AIA to its forms

In the California construction industry, it is not uncommon for disputes to arise. It is important for stakeholders to be aware of changes that the American Institute of Architects has issued to the A201 general conditions document that is used in the industry for dispute resolution procedures.

The AIA issues revisions once every decade to its documents. In section 15.1.1 of the A201 document, contract time change requests are now included under claims. This means that they are subject to the same timing and notice requirements of other types of claims.

Second quarter summary paints picture of robust CRE market

Commercial real estate markets in California and around the country should continue to provide investors with solid and steady returns in the months ahead according to figures released by NAI Global. The New Jersey-based brokerage firm came to this conclusion after studying vacancy and rent trends in 21 major U.S. markets. According to the company's second quarter assessment, vacancy rates in the industrial, office and retail sectors are hovering near or at lows not seen in years, and rents continue to increase in most markets even in the much-maligned retail segment.

Office rents bucked the trend by falling slightly in the second quarter, but the NAI Global report reveals that this was caused by noticeable declines in Chicago and New York. Rents in all of the other 19 markets studied increased during the period. Office vacancy rates were unchanged at 9.6 percent, and absorption in the industrial sector actually increased along with rents despite falling in 12 markets.

Negotiating time for due diligence on a real estate purchase

A buyer considering a purchase of commercial real estate in California will have many details to consider before committing to a deal. In general, a seller should grant the potential buyer a period of time to conduct due diligence. This investigative period allows the buyer to weigh the asking price against factors that influence value and liability. Essential issues to check include the status of the title, zoning, compliance with environmental regulations, cash flow and lease agreements.

Due diligence does not have to wait for the signing of a purchase agreement to begin. The two parties could create a letter of intent to make an offer that specifies a period for property research. During this period, a seller could provide important documentation about the building, and the buyer could research other issues. When due diligence occurs prior to the signing of a purchase agreement, that final agreement will likely grant less time for continued investigation because the buyer's contingencies should be resolved at that point.

Solid economic growth good news for commercial market

According to forecasts from the National Association of Realtors, commercial real estate vacancies are expected to fall about 1.1 percent to 11.9 percent. The industrial sector is also set to experience a 1.1 percent fall in vacancies to 7.8 percent over the coming year. Vacancy rates are also expected to fall in the retail and multifamily sectors of the commercial real estate market as well.

The chief economist for the NAR suggests that the decrease in vacancy rates is related to increasing economic health. Consumer confidence and increased spending are likely to keep demand strong for commercial real estate space. However, it is also likely that prices are not going to increase much in the near future. Hurricane Harvey may also cause a temporary slowdown in the market with the apartment sector taking the hardest hit in the short-term.

Investment property considerations

It's not unusual for people living in California to consider the purchase of an investment property. Many people appreciate the security of owning real estate rather than worrying about ever-fluctuating stock prices. While real estate can be a good investment, it also has its pitfalls, particularly for novice property owners.

Prospective real estate investors may be able to protect themselves by carefully studying average rents in the area where they plan to buy. A long-standing rule in rental property investment circles is that one should only buy a building if the monthly rental income will be at least 1 percent of the purchase price.

Using technology to differentiate commercial property

Commercial property owners in California might be able to optimize their properties by implementing smart building technologies. These technologies may help by connecting the various processes within buildings to improve energy efficiency while providing visualizations of how the various systems are working.

Smart building technologies are available because of the development of the internet of things. This technological advance helps by connecting such systems as the HVAC, physical security and lighting systems so that they can be monitored from anywhere through wearables and mobile devices. Having these types of systems installed may allow commercial property owners to differentiate their buildings from others that are available in the marketplace.

Real estate investing in the age of Trump

The election of United States President Donald Trump in 2016 has left California investors wondering about the future of commercial real estate. There were many reasons to be optimistic; after all, the Trump fortune was largely built on his real estate development acumen, and thus it would stand to reason that this sector may flourish under his administration. After more than six months of Trump in the White House, however, the bullish sentiment on commercial real estate has subsided to some extent. Nevertheless, there is still plenty of action in this economic sector.

According to the recent NREI/Marcus & Millichap Investor Sentiment Survey, the initial enthusiasm of having a major developer as commander-in-chief has been replaced with a certain level of uncertainty. Commercial real estate closings are still taking place, but not as much as they did before the election. Survey respondents believe that the economic recovery that started in the Obama administration will continue under Trump, but investors are also expecting to see the sector soften over the next two years.

CRE market strong during the first half of August

California residents who are involved in the commercial real estate market likely know that August is normally the slowest month of the year for transactions. This year has been different, however, and brokers across the nation have reported brisk business thus far during the first part of the month.

Bisnow surveyed brokers from coast to coast about the commercial real estate markets in their respective areas. Almost unanimously, the brokers responded with reports that the summer so far has been very busy. In the San Francisco Bay Area, for example, brokers report that 2.4 million square feet of offices have been leased by companies during the last three months. By comparison, just 700,000 square feet of offices were rented during the first quarter of the year. Colliers International reports a similar story for New York commercial real estate. In July, sales were up by 10 percent year-over-year from 2016 and by 2.2 percent over the prior month.

2028 Olympics could be a boon for the Los Angeles CRE market

California residents may be aware that the International Olympic Committee has announced that the 2028 Summer Olympic Games will be held in Los Angeles. This will mark the third time that the city has hosted the quadrennial games, and area real estate developers are hoping that the event will help Los Angeles to cement its reputation as a global commercial hub. In addition to attracting large numbers of tourists from around the world, hosting the games could prompt city planners to approve a number of mass transit and infrastructure projects that have been delayed for years.

Los Angeles lies just outside the top 10 world commerce centers according to the Global Power City Index, but industry analysts believe that the economic impetus of hosting the Olympic Games could influence these rankings in the years ahead. World cities are judged based on factors such as livability, business innovation and trade, and they tend to attract companies in growing or emerging areas such as technology and health care.

Experts warn of looming California housing crisis

California's economy grew at a rate of 3.2 percent in 2016, and the Golden State's gross domestic product has now reached $2.5 trillion according to the Legislative Analyst's Office. This kind of growth creates jobs and stimulates residential real estate markets, but getting even small-scale housing projects off the ground can be challenging for developers. Many developments are fiercely opposed by organized groups of local residents, and some leading media outlets have described the developing situation as a full-scale housing crisis.

Prices soar when supplies dwindle, and commercial real estate developers around the country have been moving away from retail and office space in recent years and concentrating more on residential and mixed-use projects. Abandoned shopping malls and vacant big-box retail stores are becoming familiar sights even in areas with thriving economies, and a corporate downsizing trend has lowered demand for office space in recent years.

Creative Solutions for Complex Legal Issues

Contact Henry B. LaTorraca

400 Oceangate
Suite 700
Long Beach, CA 90802-4306

Phone: 562-216-2942
Fax: 562-216-2943
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