4d • Development
Lease Comps
Question for the group.
Can you turn a Small Bay Flex condo sale into a defensible lease comp?
Here’s the problem:
In many markets, there are virtually no leasable flex units under 2,000 square feet.
Not because there’s no demand.
Because the product barely exists.
Yet those same markets may have individually condoed flex units selling to owner-users.
Can those sale prices be reverse-engineered into a credible market lease rate?
For example, if 1,500-square-foot units are consistently selling for $300 per square foot, can you use prevailing financing costs, ownership expenses and a reasonable return on equity to determine what a tenant should be willing to pay?
Or does owner-user pricing reflect tax benefits, control and scarcity that make the comparison unreliable?
I’d especially like to hear from developers, brokers, appraisers and lenders who have dealt with this in the real world:
How are you establishing lease rates when there are no true sub-2,000-square-foot lease comps?
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Lease Comps
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