THE NEW EDIFICE OF
VACANT PROPERTY
How to Protect the Value of Vacant and Idle Properties as
Commercial Real Estate Slowly Recovers
By John W. De Witt
Vacant property takes on a new
look in 2011’s battered commercial real estate (CRE) market.
Forget your old notions of vacant
property – weedy overgrown lots,
hazardous tumbledown buildings,
polluted brownfields, even under-performing “grayfields” with a few
remaining tenants fending off the
vandals. Instead, picture high-quality structures equipped with
state-of-the-art fire control systems
and supervised daily by security
patrols – even brand-new buildings
built on spec whose developers
find it difficult to attract buyers.
Today, vacant property increasingly means valuable, even prime real
estate assets that need protection
until new or replacement tenants
are found.
Softer Market, Harder Challenges
Consider that commercial office
and industrial vacancy rates still
exceed 20% in some metropolitan
areas, according to the National
Association of Realtors’ May 2011
“Commercial Real Estate Outlook.”
(And more than 14 million homes
remain vacant in the U.S. as of
March 2011, according to the
U.S. Census Bureau.) True, the CRE
market has shown signs of life this
year – sales rose 30% in Q1 2011
vs. Q1 2010, as historically low
interest rates and minimal construc-
tion starts presented good buys
for investors with cash. But despite
some bright spots, overall CRE
market fundamentals remain dis-
couraging – and are expected to
remain so for some time to come.
High unemployment and modest
economic growth persist, while
businesses continue to consolidate
office space and hold investment
dollars close the vest.
‘Vacant’ vs. ‘Idle’ and Other Risk
Management Considerations
Just as vacant property often sports
a newer, shinier edifice, so have
approaches to vacant property risk
