Flea market valuation

[Howard Klahr]

Ken,

Not all, but most, executive suites are leaseholds representing part of a larger property and include ancillary services (phone, copying, receptionist, conference space, etc) which represent the business component of this type of operation. As I noted before, the flea market is more like a regional mall whereby individual spaces are rented out under a common space allowing the tenants to benefit from co-location.

 

[Stephen J. Vertin MAI]

It seems to me the asset would be over valued using flee market booth rents. I am assuming they are higher then general commercial rents is that correct?

 

[PL1957]

It seems to me the asset would be over valued using flee market booth rents. I am assuming they are higher then general commercial rents is that correct?

It would only be overvalued if the appraiser didn't appropriately estimate vacancy, expenses and the required cap rate for an extremely speculative income.

 

[Ken B]

It seems to me the asset would be over valued using flee market booth rents. I am assuming they are higher then general commercial rents is that correct?

Yes...


qwerty

 

[Ken B]

Ken,

Not all, but most, executive suites are leaseholds representing part of a larger property and include ancillary services (phone, copying, receptionist, conference space, etc) which represent the business component of this type of operation. As I noted before, the flea market is more like a regional mall whereby individual spaces are rented out under a common space allowing the tenants to benefit from co-location.

I hear you Howard...

I am also hearing from very experienced brokers locally and appraisers well above my pay grade nationally (not necessarily limited to this forum).

 

[Ken B]

Ken,

Not all, but most, executive suites are leaseholds representing part of a larger property and include ancillary services (phone, copying, receptionist, conference space, etc) which represent the business component of this type of operation. As I noted before, the flea market is more like a regional mall whereby individual spaces are rented out under a common space allowing the tenants to benefit from co-location.

Perhaps there are services, perhaps there are not. Naturally, there would be expenses associated with the services. Commonalities between a flea market and an executive office suite are short term rental, management intensity, higher rents PSF even when adjusted from usable area to NLA, higher turnover due to transient local tenants, relatively small leased spaces compared to more traditional tenants. Another similarity is a master lease to the business (executive office space or flea market) operator who then subleases to office users or vendors. In the case of the subject and at least one other executive office suite operation I have valued, the master lease is to an entity affliiated with the property owner. However, it is not unusual for the master lease to be to an entity not related to the owner who is, again, operating an executive office space or flea market operation. If the master lease were truly an arm's length contract, it would be more appropriate to value the income stream from that contract than it would be to value the income stream from the subleasing of executive office space or flea market booths when estimating the market value of the real property.


Good talk.

 

[Pittsburgh Pete]

I hear you Howard...

I am also hearing from very experienced brokers locally and appraisers well above my pay grade nationally (not necessarily limited to this forum).

And that would be somewhat limiting, would it not?

Good luck with that flea market--never had any experience with that specific class of headache. I do, however, know the owner of this area's largest flea market. Much of it is outside areas with vendors erecting their own little booths--seasonal operation.

Not sure how I'd approach it--better you than me! I'd be tempted to look at big boxes that went dark--most probable use.

 

[stedios]

What's the HBU of the building? Would someone buy it for continued flea market use (see paragrpah below), or an "alternate big box" use (i.e., is it comparable to a former Wal Mart or Kohls purchased for a Hobby Lobby or other low-end, bargain outlet?).

There is a property locally that was a former big box retailer which went dark (adjacent to superior mall/numerous shopping centers), and the entire building is leased for something like $1 per sqft. The tenant subleases the building for (essentially) a flea market use. Therefore, I think you need to answer the question: which is the appropriate income to the real estate for a continued flea market use? The $1 psf rent on the entire building, or the various subleases? I think getting all the vendors together and running the building as a 'flea market" is starting to sound like business value. I would think that the difference between the value ofthe $1 psf rent on the building and the value of the vendor rent is attributed (at least in part) to some type of business value. Can someone else just as easily walk in and keep it going as a flea market, successfully?

I don't think I know the right answer to the question, but it is an interesting debate!

I would lean towards sales and/or rents of so-called "dark" big box stores that were purchased for speculative investment (purchased low enough some return could be made in the long term), in relatiely low-demand areas.

 

[Stephen J. Vertin MAI]

It would only be overvalued if the appraiser didn't appropriately estimate vacancy, expenses and the required cap rate for an extremely speculative income.

Maybe. The question is it necessary still looms for me.

What's the HBU of the building? Would someone buy it for continued flea market use (see paragrpah below), or an "alternate big box" use (i.e., is it comparable to a former Wal Mart or Kohls purchased for a Hobby Lobby or other low-end, bargain outlet?).

Thank you. That is where I was going. If substantial over rents and high demand for flea market space exist the next question is how long? They come and go in the west suburbs. If it was a supermarket gone flea-market it probably has general commercial space potential and nothing more. In my mind flea markets are similar to Halloween stores. Simply a temporary use. How is this property different? It was not designed as a flea market.

 

[J Grant]

The Carnival Flea Market in Delray Beach is a long time neighborhood fixture and is indoors, all vendors are set in kind of a mini mall, inside a large building. It is on Atlantic Ave , a major through road.

http://www.carnivalfleamarket.com/about-carnival-flea-market.html

Above link is corny website, even has a video (with music) ...but hey, they are always busy, the parking lot is full, as other businesses come and go, they are still there and flourishing.