After all the negative commentary on the squalid state of the real estate market, I thought it was time to share some positive news. After all, we are coming up to the holiday season.
While we were all transfixed with the train wreck that is the residential real estate market, another portion of the market has been moseying along just fine. This would be the commercial real estate market.
Commercial Sales
Anyone driving around Charles Town, Ranson, or Martinsburg would be hard pressed to miss the boom in construction taking place along the high-traffic corridors, Interstate 81, Route 340, and Route 9. This is where the big box stores are taking up residence and hitching their futures to the future that is the Eastern Panhandle.
Why are these big box stores heading our way? The number-crunching execs back in their sky-scraping corporate offices know a good bet when they see one. To them the Panhandle is pure “take it to the bank.” The Panhandle has crazily low unemployment (around 3 percent at the last count), labor costs are relatively inexpensive, and the labor pool is well educated. And we sit close to the major economic hubs of Washington, D.C., and Baltimore. Most of all, the Panhandle, to these martini-toting high flyers, is a tabula rasa, a blank sheet waiting for capitalism’s green-inked calligraphy.
In Ranson alone we are going to see the old favorites Micky D’s, Rite-Aid, and Bob Evans. But also spinning toward Wild and Wonderful are the more ritzy Starbucks, Kohl’s, and California Tortilla Factory. Jefferson County is even going to get its own multiplex in the form of Franks Theatres, opening in 2008.
To glimpse the commercial market, one can take a look at commercial transactions sold through the regional multiple list service, MRIS. While not all commercial sales take place through the MRIS, those that do demonstrate a clear trend of stability while the residential market falters.
Multi-family sales
While we are looking at other parts of the market, how have the multi-family properties done over the past few years?
Take a look at the sales data (Figure 3). It appears that, much like the rest of the residential market, multi-family sales have tanked. Indeed 2007 sales are 50 percent below 2006 sales and 33 percent below those of 2005.
Multi-family properties are typically sold and bought by small- to medium-sized investors. This is yet more evidence that since late 2005, investors have withdrawn from the real estate market.
Change to WV Tax rules for non-residents
Beginning January 1, 2008, nonresidents of West Virginia will have a portion of the proceeds from real estate sales withheld at closing and forwarded to the West Virginia tax office. The legislation was approved by the state legislature in 2007 [code 11-21-71 (b)].
The amount held by the “real estate reporting person” will be either 2.5 percent of the total gross received by the seller or 6.5 percent of the estimated capital gain on the property. The amount withheld will be forwarded within 30 days to tax office.
In practice here is how it will likely work. Most sellers will opt for the 2.5 percent withholding on their total income at closing becuase they will not have calculated their capital gain. The settlement attorney (the traditional “real estate reporting person”) then will put the withholding amount on the HUD-1 statement, have the seller sign an affidavit (similar to the IRS capital gains tax statement currently used at closings), and send the money to the tax office. To obtain a rebate, a seller would have to file a nonresident tax return to the tax office.
