Friday, October 3, 2025

What Happens to Your Building When You Sell Your Company?


Many family-owned businesses face this reality at some point: you decide to sell your company. 
 
Congratulations! It’s the culmination of years, maybe decades, of hard work. But if your business occupies real estate, whether owned by a related entity or leased from a third party - there’s another big question: what happens to the building?
 
The answer depends largely on whether your company owns the property through a related entity or simply leases space from an unrelated landlord. Each path requires a different strategy.
 
Scenario One: Owned Real Estate
 
If your operating business occupies a building owned by you or a related entity, several options emerge:
 
Sell the real estate before the business sale. You can sell the building to an owner - occupant and arrange to vacate once the company transaction closes. This separates the real estate deal from the business deal, providing clarity for all parties.
 
Lease the building to the buyer of the business. Instead of selling, you might keep the property and sign a lease with the buyer of your company. This allows you (or your family entity) to continue collecting rental income long after the business changes hands.
 
Formalize a lease before the sale of the business. Another option is to establish a lease between the related entity (property owner) and the operating company before selling. This locks in occupancy terms, giving the buyer certainty and making the business sale potentially more attractive.
 
Scenario Two: Leased Real Estate
 
If your company rents from an unrelated, arm’s-length landlord, the conversation is different. In this case, the business buyer will want to know:
                  How much time is left on the lease?
                  Are there options to renew or expand?
                  Is the rental rate market-competitive?
 
A strong lease can be an asset to the sale, while an expiring or above-market lease can become a liability. In many cases, negotiating an extension or adjustment with the landlord before selling the business can smooth the path for a transaction.
 
Why This Matters
 
Buyers aren’t just purchasing your business operations - they’re buying continuity. If the real estate arrangement is murky, the deal becomes more complicated. By addressing how the building fits into the transaction, you eliminate uncertainty, increase buyer confidence, and often enhance the overall value of the sale.
 
Final Thought
 
Selling a business is one of the biggest financial and emotional decisions a family will ever make. Don’t let the real estate piece become an afterthought. Whether you own or lease, work with advisors who can help you consider all potential directions so you can move on to your next chapter with peace of mind.
 
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
 
 

Friday, September 26, 2025

When a Three-Letter Acronym Can Make or Break Your Property Deal


Imagine buying a property only to discover that hidden underground tanks are leaking fuel into the soil, or that decades ago a dry cleaner left behind chemicals that still linger beneath the surface. Suddenly, your new investment comes with a multi-million-dollar cleanup bill.
 
That’s the risk posed by a little-known acronym: REC, short for Recognized Environmental Condition. And if you’re buying, selling, financing or potentially leasing commercial real estate, it’s something you need to understand.
 
What is a REC?
 
In the commercial real estate world, a REC means there is the presence or likely presence of hazardous substances or petroleum products on a property. These conditions may come from:
                  A past or current release of contaminants into the soil, water, or air.
                  Evidence suggesting a release might have happened, like stained soil or corroded barrels.
                  Circumstances that pose a material threat of a future release.
 
Think of a REC as a red flag during due diligence. Just like a cracked foundation might derail a home purchase, a REC can bring a commercial deal to a grinding halt.
 
Why Lenders and Buyers Care
 
A REC isn’t just an environmental issue, it’s a financial one.
                  Financing: Banks typically require a clean environmental report before approving a loan. If a REC is flagged, the deal may be delayed, restructured, or even killed.
                  Liability: Under federal and state laws, the new property owner could be held responsible for cleanup, even if they didn’t cause the problem.
                  Value: Properties with RECs often appraise lower and can sit on the market longer.
 
How the Process Works
 
When an industrial or commercial property changes hands, buyers usually commission a Phase I Environmental Site Assessment (ESA). This involves reviewing past records, inspecting the property, and interviewing current or former operators.
 
If the Phase I flags a REC, the next step is a Phase II ESA, which involves testing soil, groundwater, or air to confirm whether contamination exists.
 
Depending on results, options include:
                  Remediation (removing or treating the contamination).
                  Seeking regulatory closure if issues have already been addressed.
                  Purchasing environmental insurance to cover potential risks.
                  Negotiating price adjustments to reflect the added risk.
 
Historical and Controlled RECs
 
Not all RECs are created equal.
                  HREC (Historical REC): A past issue that’s been resolved to regulators’ satisfaction and no longer poses a risk.
                  CREC (Controlled REC): A contamination issue that remains, but with restrictions in place (for example, limiting property use to industrial operations only).
 
While these don’t always kill deals, they do shape how a property can be used and what obligations an owner inherits.
 
How Buyers and Sellers React
 
For buyers, a REC means choices: walk away, renegotiate price, or push the seller to pay for further testing or cleanup. For sellers, a REC can mean offering concessions, securing insurance, or even cleaning up the property in advance to avoid surprises in escrow.
 
The Bottom Line
 
A REC doesn’t always spell disaster for a transaction. But it always changes the dynamics. Buyers, sellers, and brokers who understand how RECs work can work through the challenges, avoid liability and keep deals alive.
 
In commercial real estate, knowledge isn’t just power. It’s protection.
 
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
 
 

Friday, September 19, 2025

When Industrial Real Estate Becomes Obsolete


I recently guested on a podcast called
The Industrial Real Estate Podcast. You see, its host, Chad Griffiths, is a fellow industrial real estate broker and Society of Industrial and Office Realtor. We share a passion for industrial real estate and authoring books about our craft - his, Industrialize, and mine The SEQUENCE. Our sixty minutes together was not quite Mike Wallace worthy, but for two professionals geeking over truck doors it was close.
 
As I reflected on our conversation, a thought occurred. In the time Chad and I have brokered - Chad over twenty years and I over forty - how many classes of industrial real estate have become obsolete?
 
As the mind dump morphed into a review, I believed it to be column-worthy. So here goes.
 
Concrete Block Structures
 
In the 1960s and 70s, the standard for small to mid-sized warehouses in Southern California was concrete block. At the time, it was inexpensive, durable, and easy to build. Fast forward a few decades and block buildings fell out of favor. Why? They were prone to cracking, offered limited design flexibility, and were far less energy-efficient than tilt-up concrete panels. Today, investors look at a block structure and immediately calculate how much it will cost to either retrofit it for earthquake safety or scrape it altogether.
 
Warehouses with Ceiling Heights Shorter than 24 Feet
 
What was once considered “plenty of clearance” is now laughably short. In the 1980s, 16–20 feet clear worked just fine when distribution was more about floor stacking and hand-moving pallets. Then came the rise of racking systems, e-commerce fulfillment, and the drive for cubic efficiency. A 20-foot clear building today is relegated to mom-and-pop distributors or creative reuses like breweries and gyms. Institutional tenants won’t touch them. Twenty-four feet is the minimum bar now, with 32–36 feet quickly becoming the new normal.
 
Buildings with Insufficient Loading for Large Trucks
 
Dock-high loading once meant a few truck wells tucked into a building’s backside. That was fine when trucks were smaller and supply chains less demanding. Now, tenants expect wide truck courts, multiple dock positions, and a minimum of 130-foot depth for maneuvering 53-footers. A shallow court or limited dock access instantly disqualifies a building from consideration. In fact, I’ve had clients walk away from otherwise functional properties simply because the loading couldn’t accommodate modern logistics.
 
Warehouses Converted to Telecom Hubs in the Late 1990s
 
During the telecom boom, a frenzy of industrial-to-telecom conversions swept across the market. Warehouses were gutted, generators added, and raised floors installed to handle racks of equipment. When the bubble burst, many of these facilities sat dark, expensive, and ill-suited for their original purpose. Few could be economically converted back to warehousing. They became the white elephants of the industrial world, proving how risky it can be to over-specialize a building.
 
Pre-Dot Com Data Centers
 
Much like the telecom conversions, the first wave of data centers built before the dot-com collapse were designed for a world that never fully arrived. Oversized chillers, underutilized floor space, and outdated cabling left them obsolete within a decade. While the need for data centers eventually exploded, it was the next generation - purpose-built, hyper-efficient facilities - that captured the market. The early ones often limped along, trading hands at discounts before being demolished or radically reconfigured.
 
Research and Development (Flex) Buildings
 
Once the darling of the 1980s and 90s, flex R&D buildings were designed with equal parts office, light manufacturing, and lab space. They attracted tech startups, defense contractors, and medical firms. But as industries changed, those needs shrunk or migrated into either pure office towers or specialized industrial campuses. Flex buildings with 50% office and 50% warehouse became hard to lease. The market wanted either full warehouse/distribution or Class A creative office - not the in-between. Today, many flex projects have been scraped, converted to logistics buildings, or repositioned for other uses.
 
Final Thought
 
Obsolescence in industrial real estate is both predictable and instructive. What was “state of the art” in 1985 may be functionally useless today. Brokers, investors, and occupants alike should remember: buildings have life cycles just like everything else. The trick is recognizing when a feature is no longer an asset but a liability - and acting before the market forces your hand.
 
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
 
 

Friday, September 12, 2025

Anniversary Lessons for Real Estate (and Life)


As I write this, I’m looking out over the vast blue Pacific Ocean. My wife, Carla, and I decided to splurge for our 46th wedding anniversary. The horizon stretches endlessly, a full moon reflects on the ocean, waves roll in with steady crashing, and I can’t help but reflect on our life together.
 
You may wonder - what does being married since the Carter administration have to do with commercial real estate? 
 
Bear with me. I believe who you love and with whom you choose to spend your life matters foundationally to building a successful career. In my case, Carla’s patience, wisdom, and encouragement have been the bedrock under everything I’ve accomplished in brokerage. And along the way, I’ve learned a few lessons that apply equally well to marriage and to commercial real estate.
 
Commitment Outlasts Market Cycles
 
Marriage requires commitment - not just when things are easy, but through the tough times too. Real estate is no different. Since I began in the early 1980s, I’ve watched interest rates soar, the savings and loan crisis unfold, bubbles inflate, and recessions squeeze the market. Through it all, commitment - whether to a client, a property, or the process - proved more valuable than chasing short-term gains. Just as in marriage, staying the course yields long-term rewards.
 
Communication is Everything
 
After 46 years, Carla and I still occasionally misunderstand each other. But we’ve learned to keep talking, keep listening, and keep clarifying. The same principle applies in commercial real estate. Deals collapse when communication falters. Clients don’t expect perfection; they expect honesty. A simple phone call explaining a setback can preserve trust better than any contract clause.
 
Patience Produces Fruit
 
No one celebrates 46 years without patience. There were times when raising kids, building careers, and paying bills felt overwhelming. But patience - trusting that small investments of time and effort compound - got us through. Commercial real estate rewards patience as well. Transactions can drag on, negotiations can stall, and entitlement processes can feel endless. Yet patience, paired with persistence, is often the difference between a failed deal and a successful close.
 
Shared Values Create Alignment
 
Carla and I built our life on shared values: faith, family, and integrity. Those values guided decisions on where to live, how to raise children, and even how to face hardship. In brokerage, I’ve found that values alignment with clients is equally important. Not every prospect is a fit. When you align with those who share your values - fairness, transparency, long-term thinking - the relationship flows, and the work is more rewarding.
 
Adaptability is Survival
 
Marriage is a constant process of adaptation. People grow, circumstances shift, and unexpected challenges arise. Carla and I had to adapt when careers changed, when children left home, and when new seasons of life arrived. In real estate, adaptability is equally critical. A strategy that worked in one market cycle may not work in another. Brokers who survive are those who adjust without abandoning their foundation.
 
Closing Reflection
 
Looking out at the Pacific, I’m struck by how steady and timeless it feels. Yet even the ocean is always in motion, waves constantly breaking and reforming. That’s marriage. That’s commercial real estate. Both require a balance of commitment and flexibility, patience and action, values and adaptability.
 
As I celebrate 46 years with Carla, I’m reminded that no career is built in isolation. The relationships that anchor us at home often provide the resilience and perspective we need in business. Success, in life and in real estate, rests not only on the deals we make but on the people who walk with us through the journey.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.
 
 

Friday, September 5, 2025

From Kitchen Table to Generational Wealth – The Real Estate Journey of Family-Owned Businesses


Every thriving Southern California manufacturing or logistics company started somewhere—often at a kitchen table or in a garage. What happens between that first spark of an idea and the eventual decision to sell the company is a fascinating—and often overlooked—journey. The throughline? Real estate.
 
The Stages of Business Growth and Real Estate Decisions
 
The Idea Stage. Home-Based Operation. Most businesses start small. At this stage, real estate decisions are limited—but the dream of expansion is already forming.
 
Lease vs. Buy. The First Big Decision
As soon as a company outgrows the home, it’s time to lease or buy space. Leasing provides flexibility, but ownership plants the first seeds of wealth building.
 
Owning Your Building. Many family operators eventually buy the building they occupy. This decision transforms monthly rent payments into an appreciating asset that can outlast the business itself.
 
Growth Through Expansion or Acquisition. Success brings complexity—hiring more people, adding machinery, opening new locations, or acquiring competitors. Each move requires thoughtful real estate strategy.
 
Exit Planning and the Role of Real Estate. Eventually, founders face succession or sale. If selling to a strategic operator, the real estate may be carved out of the deal. If selling to private equity, the real estate is often critical to their investment thesis.
 
The Hidden Lesson
 
In many cases, I’ve seen the real estate owned by the business worth far more than the operation itself. That building becomes not just a workplace but a long-term family asset, a hedge against business cycles, and a powerful vehicle for generational wealth.
 
Closing Thought
 
The journey of a family-owned business in Southern California is never just about products, people, or profits—it’s also about property. Whether starting in a garage or exiting through a private equity sale, real estate is the silent partner that can shape the legacy of a business for generations.
 
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.

Friday, August 29, 2025

Consistency, Authenticity, and Relevance: Why I Post Commercial Real Estate Content


In 2009, I tried something new. While many of my colleagues were still marketing with postcards and cold calls, I started a blog called Location Advice. It was not common at the time for commercial real estate brokers to share insights publicly, but I wanted a way to connect with owners, occupants, and other brokers beyond the usual handshake or phone call.

That experiment led to 2013, when I launched TUESDAY Traffic Tips, short YouTube videos on the nuts and bolts of brokerage. I posted every week. No studio. No script. Just a consistent commitment. Looking back, I was one of the first commercial real estate brokers in the country to post content this way. That consistency opened doors, including this very column. I can thank Twitter, now X, for the introduction that connected me to the Southern California News Group.

Why I Did It

The reason was not followers, likes, or clicks. I believed that visibility builds credibility, and credibility leads to trust. By showing up online with useful ideas, I could create value for my audiences of owners, occupants, and brokers before we ever sat across a table together.

What Makes Content Memorable

Fifteen years later, I have learned that memorable content comes down to three qualities:
• Consistency — Show up regularly. People may not read every post or watch every video, but they notice if you keep showing up.
• Authenticity — Be yourself. Clients connect with real stories and honest observations, not polished perfection.
• Relevance — Speak to the audience you serve. Commercial real estate is not about abstract theories. It is about space, timing, and decisions that affect real businesses and families.

The Payoff

Social media has never been about shouting into the void. It is about building trust at scale. Over the years, people who first discovered me through a blog post or video have become clients, colleagues, or referral sources. Others simply shared an article that resonated. Either way, the ripple effect continues.
Here is the takeaway. If you want your content to stand out in commercial real estate, or in any field, focus less on going viral and more on showing up. Be consistent. Be authentic. Be relevant. Over time, those three qualities create a brand people trust.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.

Friday, August 22, 2025

The Great Space Recalibration


Commercial real estate in Southern California has always reflected the ebbs and flows of business confidence.
 
Today, across industrial buildings , office suites, and everything in between, we are in the middle of what I call “The Great Space Recalibration.” Companies are rethinking how much space they need, what kind of space they want, and how to make their real estate align with a changed economic landscape.
 
Industrial: From Expansion to Efficiency. For the past decade, industrial tenants in the Inland Empire and Orange County raced to secure more square footage. E-commerce boomed, imports through the ports surged, and vacancy rates fell to record lows. But the story has shifted.
 
Instead of expanding, many manufacturers and distributors are now optimizing. Automation, robotics, and better inventory management allow them to do more with less. A tenant that once needed 200,000 square feet may be comfortable in 150,000 if it’s more efficient space. Landlords, who grew accustomed to quick leases and rising rents, are now negotiating harder and offering concessions that were unthinkable just two years ago.
 
Office: The Hybrid Question. The office market has undergone an even more dramatic recalibration. Remote and hybrid work are here to stay, and companies continue to evaluate their footprints. In Orange County, for example, tenants are renewing—but often for less space. A law firm that once leased three full floors may decide two is sufficient, with one floor redesigned into collaborative areas and hot-desking stations.
 
This trend isn’t simply about cost savings. It reflects a cultural shift: offices are no longer just places to house employees, but tools to attract talent and foster collaboration. The most in-demand spaces are those that are flexible, amenity-rich, and located in environments employees actually want to come to.
 
Retail: Leaner but Smarter. Retail has been recalibrating for years. E-commerce forced many stores to shrink their footprints and focus on experiential elements that can’t be replicated online. The winners are not necessarily the ones with the largest boxes but the ones who integrate online and in-person sales seamlessly. Think of a 5,000-square-foot store doubling as a distribution hub, pickup center, and brand experience all at once.
 
Why This Matters. The Great Space Recalibration has implications for everyone involved in commercial real estate:
• Occupants must carefully assess their true needs. More space is not always better if it is underutilized or expensive to operate.
• Owners must adapt to slower leasing cycles, more tenant scrutiny, and a greater demand for flexibility.
• Investors must look beyond raw square footage and ask: how usable, adaptable, and future-proof is this space?
 
Looking Ahead. If the past decade was defined by expansion, the next may be defined by efficiency. Companies are not retreating from real estate—they are right-sizing. They are using space as a strategic tool rather than just an overhead expense.
 
In Southern California, where land is scarce, costs are high, and innovation is constant, this recalibration may ultimately lead to a healthier balance. Tenants will get the space they truly need. Owners will invest in making buildings more flexible, sustainable, and tech-enabled. And communities will benefit from properties that serve the market more intelligently.
 
The Great Space Recalibration is not a crisis. It’s an adjustment. And like all adjustments in real estate, it will reward those who recognize the shift early and adapt accordingly.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.