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Long Beach Business & Commercial Law Blog

Commercial property prices stabilize as supply meets demand

Many commercial properties in California come with high price tags, but prices have begun to stabilize after years of growth. Price tracking at one online real estate marketplace indicated a small 0.2 percent rise in the August 2018 price index. Looking back at a full year, the marketplace calculated year-over-year growth at a modest 0.4 percent.

Price tracking from Real Capital Analytics produced a 7 percent increase in prices from July 2017 to July 2018, but the majority of that growth appeared in the early months of the 12-month period. By comparison, this level of growth represents only 50 percent of the price increases experienced across commercial real estate sectors in early 2015.

What to consider before acquiring commercial property

As California companies get bigger, they generally need more space to function in an efficient manner. In some cases, this means buying a warehouse or a larger manufacturing space. In others, it could mean buying a larger office to accommodate more workers joining the company. When purchasing commercial real estate, it is important to consider how it helps the business both today and in the long-term.

Buyers should determine if the space will still be useful several months or years into the future. It's also important to consider whether the space could be rented or sold once it's no longer useful to the company. Business owners should also calculate the cost of owning a commercial space as opposed to renting it. Furthermore, those who want to own a space should contemplate whether it makes more sense to buy an existing property as opposed to new construction.

Using technology to maximize revenue

Investors in commercial real estate projects in Los Angeles may be curious about how the technological developments that are constantly taking place can be used to maximize their return and promote their projects. Technology specifically for real estate development is a growing market, especially as tenants of a building can generate significant data that can help investors, developers and others make decisions about what features are important and how they can attract high-value tenants. By learning more about the needs and wants of building tenants, managers of these properties can determine new ways to generate revenue.

Commercial real estate as an industry historically focused on property itself. However, it is now focusing increasingly on the needs and personalized demands of tenants. In order to retain existing tenants and grow with future reliable tenants, real estate developers have to provide significant amenities that appeal to their customers. By examining how much these amenities are used, property owners can understand more about which options are the most valuable for the types of tenants they wish to attract.

Rap artists are sued over startup business

In a commercial contract case sure to generate interest in the Los Angeles, California area, two famous rap artists are being sued for breach of contract related to a startup company. The case presents an example of why contracts should be in writing.

According to the lawsuit, the two rappers formed a business to distribute cannabis. The three plaintiffs are alleged investors in the company. According to the three, they each invested approximately $5 million based on the understanding that the company had a value of $50 million. They claim that the agreement gave them a 14.5 percent ownership of the business.

Commercial real estate looks toward youth market

The commercial real estate market in California is increasingly looking toward the future, and for many developers, that means tailoring work to the interests of Generation Z. Developers have noted that young people are interested in eco-friendly construction as well as spaces designed for higher levels of socialization. Generation Z is defined as anyone born after 1996, the generation following millennials. As older members of the generation graduate from university and move into the business world, their purchasing power and influence is on the rise.

Some brand strategists advise that a greater understanding of youth culture is important when thinking about real estate developments as well as other commercial projects. For example, multifamily apartment buildings may put a strong focus on technology and connectivity as well as eco-friendly construction. Young people have shown consistent interest in the type of developments that encourage walkable, mixed-use space with community functions, restaurants and retail on site. With the rise of online shopping, retail itself is also changing. Restaurants, with their social atmosphere and unique product, remain a primary part of retail development. However, food delivery is also on the rise, especially as many "gig economy" services promote different delivery systems.

Due diligence in a real estate transaction

People in California who are interested in entering the thriving commercial real estate market may want to ensure that they pay sufficient attention to the due diligence process. A buyer looking to invest in a real estate project wants to avoid being mired in a problematic site with ongoing issues or legal concerns. This means investigating the integrity of the building itself, checking for zoning compliance and adherence to environmental regulations, reviewing the title to the land and studying the records of the developer or seller.

In particular, potential real estate investors may want to check that the developer actually has the cash flow projected and assess their responsibility for liabilities on the property. By thoroughly reviewing the property for sale or investment, buyers can make an informed decision about where to put their money. In addition, during this period of time, the interested buyer can also line up financing for his or her purchase. When the due diligence process's results are more negative than expected, but the buyer remains interested, it may be an occasion to reopen negotiations about price. Without reaching a new agreement, the potential deal may be canceled.

Partial Prop 13 repeal would raise commercial real estate taxes

Since California voters passed Proposition 13 in 1978, residential and commercial real estate property taxes in the Golden State have been limited. Upward reassessment of property values cannot exceed 2 percent every year, and the law caps property taxes at 1 percent of assessed value at the time of acquisition. A new initiative scheduled for the 2020 ballot would partially repeal these tax limits and expose commercial real estate to higher property taxes.

Proponents want higher assessments on commercial properties to increase state and local tax collections. The estimated gains could reach over $11 billion a year. Schools could expect an additional $4.5 billion if the initiative passes.

Clear contracting can help avoid construction disputes

When people and businesses in California enter into a contract for a construction project, it is critical that the text be complete and accurate. By ensuring that contracts, insurance policies and other key documents spell out necessary details, investors and contractors can help to avoid costly, lengthy disputes and claims. In order to get a project started on the right foot, it is important that all parties read and understand the contract and related documents. All of the provisions, from the scope of the project to the expected timetable, should be accurate, consistent and comprehensive.

While construction attorneys often advise careful attention to the contracts involved in a project, many contractors and investors fail to take heed of this wisdom. As a result, conflicts can begin to develop from the earliest days of a project. For example, many documents are included by reference rather than physically reprinted in the contract, such as drawings, regulations and safety policies. When people involved in the project are not familiar with these documents, misunderstandings can arise quickly. Many people may not realize that these documents, once incorporated by reference, are just as binding as the contract text.

California movie producer sued over producer's credit

California is at the center of the American entertainment industry, and disputes involving studios, executives and performers are not uncommon. One such dispute involves the Beverly Hills-based production company Good Universe and Japanese producer Taka Ichise. Ischise produced the highly successful "Ju-on" series of horror films in Japan and also received a producer's credit when Ghost House Pictures released "The Grudge" in 2004, which was based on the "Ju-on" series.

Good Universe plans to release a remake of "The Grudge", called simply "Grudge", starring Demian Bichir and Andrea Riseborough on Aug. 16, but those plans may need to be changed in light of a breach of contract lawsuit filed by Ischise. In the lawsuit, which was filed on July 30 in Los Angeles, Ischise claims that Good Universe was only able to acquire the rights to remake "The Grudge" after promising him a producer's credit. The producer says that he decided to take legal action after learning that he would not be receiving one.

Marilyn Monroe photographs subject of copyright litigation

Marilyn Monroe fans in California may be interested in learning about ongoing litigation over the copyrights held for a series of famous photographs of the star. The pictures, which are called the "Last Sitting" collection, were taken by photographer Bert Stern in 1962, and they are among the most iconic photographs that were taken of the star.

Stern's widow filed a lawsuit against two sisters who were Stern's assistants, alleging that they violated the copyrights to the photographs by selling prints of them on the internet as well as modified images of the pictures. The sisters argued that the copyrights were owned by Condé Nast. Some of the photographs had previously been published in Vogue, and Stern had reportedly had a business relationship with the magazine.

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