Lynchburg Business

“Market Value:” The State of Real Estate in Region 2000

Issue: April 2010 by Jennifer Koech in Inside The Magazine, Real Estate

Determining the state of real estate in Region 2000 is much like putting together a puzzle—after examining how several factors or “puzzle pieces” fit together, a complete picture emerges.

The first piece of this puzzle is commercial real estate, which has seen many changes in Region 2000. Commercial real estate operates on two levels: rentals and sales. Chris Gentry, commercial real estate broker with Gentry Commercial Real Estate, provides some context for the roller coaster ride that commercial rentals have been on.

“In August 2008, it was almost as if someone flipped a switch in the commercial real estate market,” said Gentry. “When lending requirements tightened up, businesses went back to focusing on leasing. Companies were taking a step back and looking to lease to have more flexibility. Sales started to taper off during that time and leasing came back.”

As for how the rental market is doing now, Gentry says it’s still a great time to strike a deal.

“From a tenant’s perspective they’re probably in the best position as anyone. In certain areas, there is a variety of space available, so there are good deals to be had.”

Quite a few businesses are taking advantage of getting a larger or nicer space or an improved location for a better price. While this environment is profitable for tenants, it is putting the squeeze on property owners, many of whom are just trying to make deals and cover their expenses until things turn around.

“When you look at the overall market you see, yes, there is a lot of vacancy,” Gentry said. “It’s going to take some time to fill those spaces back up.  But it’s not all bad. We owe a lot of that to our diverse economy. And you can’t discount the growth of some of the employers in the area.”

With the rise of leasing, commercial sales have tumbled. New, rigid financing and lending requirements also restrict those who may want to buy. In addition, owners are unloading assets which is driving down prices. Yet Lynchburg still has active investors who are looking for a certain kind of property—like apartment complexes or buildings that have long-term leases.

“Some of these properties lease or sell before they’ve even posted a sign. There are not a lot of these properties available,” Gentry said.

As an investor, Ron Blackwood, co-founder of Northstar Commercial Property, which deals primarily in larger commercial, industrial and manufacturing buildings, believes that, “As a whole, I think the Lynchburg area properties are doing well.”

However, he also suggests a way to improve current conditions is by encouraging investors and local government to bring new business to the area, while retaining existing businesses.

“Lynchburg and Region 2000 has a lot to offer,” said Blackwood.

The residential real estate market is the next significant piece in the overall puzzle. The City of Lynchburg currently has an excess number of properties on the market, creating an inventory problem that is now translating to somewhat lower prices and a longer time on the market. Karl Miller, Realtor with REMAX 1st Olympic, has followed statistics for Lynchburg city and found that residential single family homes, condo and townhome units sold in 2009 were, “down 17.5 percent from 2008, almost 37 percent from 2007 and a whopping 47 percent from 2005.”

This tumble in sales means that in Region 2000, there were over 1,500 houses for sale in March, though, surprisingly, this number is seen as positive by Miller.

“This is good news as this data indicates about 11 months of supply in housing inventory,” Miller said. “This is down from about 14 months of inventory last summer.”

And though residential home sales have clearly slowed down, Miller says, “there is a pent up demand, and it’s going to unleash.”

Contrasting with the City of Lynchburg, a shortage of inventory exists within some markets in the counties around Region 2000.

“Houses between $100,000 and $130,000 are almost acting like a shortage market in the counties—that market is in great shape,” Wendy Reddy, President/Broker of Reddy Real Estate said.

Other factors are helping the real estate market in the counties as well, Reddy said. According to her, people are interested in “anything over the county line. Taxes are lower, and they do not have to come up with a 2 to 3 percent down payment. The counties are in a little better shape than Lynchburg.”

With inventory up in many areas and sales down, how has the average sale price been affected in Lynchburg?  Miller also follows statistics on housing prices and found that, though sales have dropped significantly, prices have not. The 2009 average sales price in Lynchburg dropped 5.6 percent to nearly $150,000—the first year with a decline in average sales price since 2004. According to Reddy, sales price has become a major factor for buyers.

“When a house is priced aggressively it could sell in 14 or 21 days,” said Reddy. “The higher the price, the longer on the market. It correlates. The buyer is very price conscious. They’re not in a hurry and they’re sitting, waiting for the best deal.”

All the pieces of Region 2000’s real estate puzzle have been laid out, but what is the final picture? There are both positive pieces and pieces that show the market still needs improvement. And while time will be the ultimate interpreter of these pieces, Blackwood, for one, is hopeful.

“You can’t really predict trends in this area; these are just unstable times,” he said. “I don’t want to paint a picture of gloom and doom—if everybody works together, we can accomplish a lot.”