We’ve seen hundreds of billions of dollars go to banks and Wall Street and so far not much stimulation has occured. We hear that much more money is need to be a proper stimulant and maybe thats true.  In fact most of America is staking their financial future on the premise that the government’s Stimulus Package will work.

In the meantime property owners are often being put in a position of having to offer their own Stimulus Plan in the form of rent concessions.  Many times tenants feel that the property owner has no cost of doing business and what ever money comes in goes to the bottom line.  That is borne out but the size of the rent concession tenants often request or even demand.

As a property manager and owner we are getting more and more requests from tenants to reduce the rent. However, many seem to think that the property owner is going to have to cave in to these requests or will lose the tenant.  The request can be a 50% rent reduction as though there is no hardship attached to the landlord taking such a cut in income.

There is little thought given to the fact that if income is reduced so drastically the landlord may be in jeopardy of losing the property to the lender.  There is also little thought often given by tenants that perhaps they should speak to their own bank to see if they can get a break on their loan payments or do a total loan modification, perhaps in combination with some sort of rent concession so that everyone can get by these tough time.

I advise business people to prepare a thoughtful business plan that may include a reasonable rent concession.  This plan should show the businesses ability to survive during hard time with all creditors involved in keeping it afloat.  If the tenant waits until they are already in serious default on the rent it becomes problematic to solve their problem either with the landlord or their banker.  Waiting until hope is gone is not a good way to keep one’s business functioning. 

Lets hope that the government Stimulus Plan will achieve it’s purpose and bail America out of its financial doldrums.  In the meantime business and professional people in need of rent relief will hopefully look at the entire picture for relief and not put all their eggs in the landlord’s basket. 

Now when we are faced with $5.00/gallon gasoline the entire population has gone into a tiz.  Truck and SUV sales are down preciptiously, fewer cars are on the road, airplanes charge for everything and just for good measure they don’t even feed you anymore.  People are even passing up their gourmet Latte in the morning.

As though that isn’t enough, experts are now talking about $7,00/gallon prices on gas as soon as the end of 2008.  Who knows what other draconian cut backs the American population is going to come up with.  One commentator suggested that we could stop visiting friends and family that don’t live within a short hike from us.  In other words, get to know your neighbors better and ditch those old friends of yours  that you only trade visits with once or twice a year. Who needs them anyway?  In fact is you can throw out a relative or 2, so much the better.

How will all this affect the real estate market?  Well location location location will once again become a serious mantra for buyers.  This time around a good location will be one in a village type setting where one can walk or ride their bike to work, shop and go out to dinner.  Mixed use projects may well have come unto their own.

Failing being able to walk to work, those commercial properties that are at least close to substantial housing will  become much more valuable.  Those industrial buildings close to the actual workers instead of the boss will be very much sought after.  Retailers that have websites that allow online ordering that can be delivered may be the next wave of successful operators.

Southern California freeways may actually unclog.  Unfortunately we have quite limited rail capacity at this time but maybe our political leaders will focus on moving people between cities and within cities at the times they need to move not just perceived peak travel times.

The times are really changing quickly.  It’s still too early to say exactly where we are going in real estate. But is seem likely very desirable locations such as Orange County will be become even more desirable and costly.  Before you dump the family and old friends you may want to see where all this will shake out. 

Actually there is a little bit of a twist to that statement.   The bigger you are, the tougher it is to get money.  That is, if you buy a billion dollar project, or several projects to make up that billion, you probably will have a heck of a time getting the financing to complete the purchase.

Why you ask?  Why is because nobody seems to know how to evaluate the safety of a loan.  All of a sudden the major lenders in the United States, especially Wall Street, no longer believe that they actually can tell a good loan from a can of beans.  This is a strange world we live in when the supposedly best and brightest don’t have any faith in their own reasoning abilities.

Now the real twist comes.  Remember those people who needed a loan but the banks looked down on them?   Well, suddenly they are the only ones who can get financing.  If you need to borrow $250 mil. for a project on main and main with solid gold tenants you can’t.  However, if you need to borrow $2.5million for a nice little shopping center in some suburban setting loaded with mom an pop tenants, you can.

Strange as it may seem, the smaller investor, the guy next door, can actually buy real estate more readily than that major institutional investor.  The catch is, and there is usually a catch, this borrower, who is now the apple of many a banks eye, is very often afraid to buy because it may be the wrong time in the market.  If this investor does not wake up he may miss some pretty terrific interest rates on loans that will ensure cash flow for many a year to come. 

Local bankers are waiting with outstretched arms for the missing investor.