Outlook bright for commercial construction

If you are a business owner who wants to own a building instead of leasing space, there are many new ownership options that can make your dream a reality. Remember, your goal is to personally own a building and lease it to your company. Your company, through lease payments, will pay off the building over time, with pre-tax dollars, so that you will have a wonderful retirement asset.

Despite all the doom and gloom surrounding the housing industry, owner occupied commercial construction is stronger than ever. The problem is, land is in very short supply, and suitably sized parcels to accommodate buildings less than 10,000 square feet in size are in even shorter supply. In addition, the increased complexities of taking a piece of land through the approval process have made it nearly impossible for small business owners to navigate this process without lots of help.

This “perfect storm” of market conditions has been brewing for a few years and at my company has meant working quietly behind the scenes to provide choices and selection to our clients. It has required investing in land and taking it through the development process, dividing the land into smaller parcels, constructing the buildings, and then offering various ownership options.

Everyone has heard about multiple business owners sharing one larger building in a limited liability company. Another ownership option is through a tenant in common arrangement. In my opinion, the problem with these approaches is that they require several business owners (and their spouses) to sign loan documents and be joined together with some fairly complex legal agreements.

Often the business owners haven’t known each other long enough to build strong friendships and trust. Couple that with the fact that the various businesses may be at different stages of their life cycle, and owners may want or need to sell their portion of the project at some point in the future. This requires a very complicated buy-sell agreement to protect the remaining partners. All in all, this is doable, but not without some challenges.  

Another ownership option is the commercial condominium. Through this approach, each owner has title to their own enclosed space. The land and site improvements are owned in a condominium “association” that is managed by the condominium owners. Commercial condominiums are much like a residential condominium concept, just simpler. Each business owner can buy and sell their space at will. In fact, each business owner can have a separate lender if they so choose. Other than the maintenance of the building shell, land and site work, there are no legal agreements linking all the owners together.

Just as one example, we are completing final ownership and management agreements involving an 18,000-square-foot retail building in which one client is purchasing approximately 6,000 square feet and the developer is retaining ownership of the remaining space. The purchaser had been looking for a suitable Vancouver location for several years to no avail. By connecting the two clients, we helped them each realize their ownership goals.  

We are also involved in commercial condominium projects in the Hazel Dell, Orchards and Westfield Shoppingtown areas. Each project has required a major investment of our time and money to be brought to fruition. Our company has been involved in some capacity as an investor participant, in addition to acting as the project developer and the general contractor.

In my opinion, this is a necessary role in today’s marketplace. It means having the chance to evolve our business approach to keep pace with market conditions and, most importantly, with the needs of our clients. So, what might have resulted in the “perfect storm” becomes the perfect opportunity for business owners to step up to the plate and realize their dreams of owning their own business space while creating good, living-wage jobs for the community.  

 

Ron Frederiksen is president of RSV Construction Services Inc. and chairman of the 2007 Columbia River Economic Development Council board of directors. He can be reached at 360-693-8830.

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