Friday, September 25, 2015

JOB CREATION through Commercial Real Estate Transactions...DON'T Squelch them!

Image Attribution: www.forbes.com
Are Commercial real estate deals a job creator? Conversely, if commercial real estate transactions are NOT occurring, does that mean that jobs are lost? To add one additional layer to this discussion - if  the governing agencies adopt policies that limit commercial real estate transactions, are jobs lost as a result? Well let's dive in, shall we?

Commercial real estate transactions. Deals come in three flavors, a purchase, a new lease or a renewal of an existing lease. In a purchase or a new lease, there are two sides of the transaction - the owner and the occupant. Generally, these two sides engage representation in the form of a commercial real estate professional(s). Our services are employed by an owner to find occupants for empty buildings or to assist occupants in their search for a building. When we are successful in bringing an owner and an occupant together and a lease or purchase closes, we are paid a fee for our services - simple, right? So where is the job creation in that circumstance? Easy, the more deals that are occurring, the more professionals that are needed. But how about other job creation? Let's examine the stages of the deals and the potential jobs that result.

Pre-transaction. Quite possibly, prior to searching the market for a new business home, an occupant consults with his CPA to gain some insight into the tax advantages of a move, the viability of taking on additional expenses, and the justification of leasing vs. owning a location. Preparation of tax returns and financial statements for lender or owner approval may also be an element of the pre-transaction - job one. Consultation with the occupant's business bank typically occurs - job two. Some sense of the legality of owning or leasing a building and the best entity from which to own or lease commercial real estate is done with legal counsel - job three. Depending upon the complexity of the occupant's operation, an occupant may consult with a project manager that can shepherd the occupant through the moving process - job four. Certainly, an owner or an occupant gets a feel for the market, lists the building for lease or sale through a commercial real estate professional and/or teams with a broker to search for a building - jobs five and six...not counting support staffs that make deals happen!

Transaction execution. Escrow officer - job seven. Title representative - job eight. Natural Hazard Disclosure consultant - job nine. Building inspector - job 10. Project manager - job 11. Governmental agency consultant - job 12. Fire consultant - job 13. Environmental consultant - job 14. In the case of a purchase, a lender - job 15. An appraiser - job 16. The attorney, CPA, and business banker also may play a role in the execution of a commercial real estate deal but their jobs were counted in pre-transaction.

Post transaction. An architect - job 17. Contractors for office construction or remodel, flooring, painting, electrical, heating and air, plumbing - jobs 18-24. Office furniture purchase and installation - job 25. Internet cabling and phone system - job 26. Material handling equipment, forklifts, warehouse racking, conveyor systems - job 27. Security systems - job 28. Maintenance folks for the new location, landscape, heating and air, roof, parking lot, fire sprinkler systems, janitorial - jobs 29-35. A moving and storage company - job 36.

So, as I have illustrated, commercial real estate transactions create jobs - LOT'S of jobs! So, absolutely, if the governing agencies limit, through regulation, the propensity of commercial real estate deals - movement - then jobs are lost.