California has decided to sell office buildings owned by the state to help close the budget gap. The sale of these buildings is included in AB 4x 22, the bill that put the Orange County Fairgrounds up for sale. The claim is these buildings are too valuable for the state to keep in their portfolio so the plan is to sell them and then lease them back from the new owners.
That's right - these are office buildings in use every single day by state employees. These are not empty buildings that have not been used for years. These are not buildings in poor condition that need to be torn down. These are quality office space that the state owns that would cost a small fortune to rent back.
And the state wants to sell off these buildings, many of them in prime locations, at the bottom of the real estate market. The state will then lease back the space they use every single day.
This is a major gift to the real estate industry. There is no other way to describe it. Major commercial real estate companies will be able to buy these prime properties at the bottom of the commercial real estate market, fully leased. When the market turns (and it eventually will) rents can be raised when the leases are due. Having a long term lease does not mean you will never see a major rent increase, it just means the increase is put off for a long as possible.
Selling these buildings is bad for the taxpayers, who will be at the mercy of commercial real estate landlords.
Comments