Friday, January 16, 2015

Commercial Real Estate Advice Fit for my Family

Value of your location: The one thing that every business has in common is a location. Whether that location is a suite of offices, a manufacturing or distribution facility or is home based, all businesses need a location from which to operate.

A question that I get asked universally is what is my location worth today? Well, the great news is that if you own commercial real estate, specifically industrial space, your property has increased by close to 50% since January 2013...STAGGERING! We have now eclipsed 2007 levels  (the last high water mark for industrial values).

We are starting to see companies affect sale lease backs of their real estate to capitalize on the increased values. You can read more about sale leasebacks, here.

Rents have not moved as dramatically but we expect that to change within the next twelve to eighteen months. If you signed a lease in 2010-2012, plan on those rents being dramatically higher come renewal time.

Family advice: Tread cautiously in buying, renew your lease NOW.

Out of Space: Because the overall business climate is robust, we are seeing growth in industrial uses of all kinds. You may be facing a situation where you are out of space in your existing location. Let's face it, moving sucks! Moving is disruptive, expensive, and rarely achieve the efficiency you seek.

There are at least ten ways that you can stay in an existing location without having to suffer the disruption and expense of a move.

You can read about the ten ways to stay in your existing location, here.

Family advice: We have outgrown our location but don't want to move...10 ways to stay put.

Navigating the maze of commercial real estate: If you do find yourself in the maze of commercial real estate and MUST consider a move, I would offer this Family advice:

Start early. 12-18 months in advance of a projected move, a planned purchase OR a lease expiration is not too early...in fact, it may not be enough time if your operation is particularly special purpose or complex.

Engage great help. Assemble a team of the VERY best service providers you can afford...a commercial real estate professional, a CPA, an attorney, a commercial insurance provider...ALL can be invaluable to you at various times during your move consideration. Some of these professionals are paid by the hour. Others are not paid by you the occupant but are paid their fee by the owner of the property that you lease or purchase.

Consider ALL of your alternatives. Even though you believe there is NO way that your existing location will work for you...you just may have to make it work for a year or two. With 97 of every 100 industrial buildings occupied in Orange County, there are not many alternatives to choose from in the market. Also, owners are stingier with tenant improvement dollar and lease concessions than they were at your last lease origination.

Here is the message delivered by yours truly at an Orange County Business Group event yesterday...and by the way, I had two family members present.