Karbank Blog

Beware of unscrupulous environmental testing companies that reflexively recommend expensive Phase II testing of properties under contract.  Frequently such recommendations are made even before the results are in from the Phase I report and without any apparent problems.    

Another scheme is for such companies to write Phase I reports that create just enough ambiguity by indicating a property might have an environmental problem (which can only be determined by expensive Phase II testing) without identifying anything specific.  In such cases buyers and lenders, rightfully risk averse and nervous about the report, insist that the seller order and pay for the Phase II.  The sellers are dismayed because they are unaware of any environmental problems and don’t think they should have to pay to find something that isn’t there.   

When environmental problems exist, they should be dealt with.  When they don’t, environmental testing companies shouldn’t unnecessarily raise red flags to generate work.  The best solution is to hire a reputable environmental testing company (and there are many) for real estate transactions.

Olen Monsees, Steve Karbank, and Jack Allen recently attended our commercial real estate network conference with CORFAC International Real Estate Alliance in Phoenix, Arizona.  The conference was attended by CORFAC brokers from about 50 major cities around the United States as well as representatives of our affiliate King Sturge, Inc. which has offices in the major cities throughout Europe.  The consensus from the conference was that real estate transactions are still significantly slower than previous years.  The office market continues to lag with a slight uptick seen in industrial real estate.  Investment sales are very limited because of difficulty in financing and above market price levels still being asked by owners.  The Kansas City market is somewhat better than the national market with office vacancies in the 16-17% range and industrial vacancies in the 7-8% range.  The consensus appeared to be that all markets would tend to pick up slightly later this year and continue to improve throughout next year.

Olen Monsees

Since the 1950’s, Kansas City’s commercial, industrial and office real estate market cycles, and the local economy in general, have been akin to low-amplitude waves: both growth periods and recessions tend to be moderate.  Property values and rental rates usually increase gradually in growth periods and decline only slightly in recessionary periods. 

By contrast, “go-go” real estate markets, such as Phoenix, Las Vegas and parts of Florida, California, Texas and Georgia, tend to have precipitous booms and devastating busts in high-amplitude waves or cycles.  Property values and rental rates in go-go markets tend to increase quickly in growth periods and plummet in recessionary periods. 

Low-amplitude wave markets are “cashflow” markets.  Real estate investments need to provide current income (cashflow) because appreciation, if does occur, will likely do so slowly over an extended period of time.  Patience and long-term orientation are virtues in low-amplitude wave, cashflow markets like Kansas City.

High-amplitude wave markets are appreciation oriented because investors rely on properties rapidly increasing in value.   When investors catch the big wave and values appreciate quickly, a lot of money can be made.  When the market wave turns down, investors can get wiped out just as quickly. 

Low-amplitude wave real estate markets are tortoises, high-amplitude real estate markets are hares.   

Steven Karbank

Today, March 1, 2010, is Karbank Real Estate Company’s 60^th Anniversary.  We thank our thousands of clients over the past 60 years for their confidence in us.  They (you!) are the reason for our success.

Read a brief history of our company's founding and the story of Karbank's first development project.

Steven Karbank