tag:blogger.com,1999:blog-39073094831261422462024-03-18T12:45:18.540-07:00Location Advice - California BusinessesAllen C. Buchanan, Principal, Lee and Associates #CRE. Complete commercial real estate location advice for owners and occupants of manufacturing, flex, and distribution buildings in Southern California. (714) 624-3896 abuchanan@lee-associates.com, www.allencbuchanan.blogspot.com
Unknownnoreply@blogger.comBlogger17125tag:blogger.com,1999:blog-3907309483126142246.post-6460464560698443312024-03-08T12:00:00.000-08:002024-03-08T12:00:00.131-08:00Advice I’m Giving These Days<div style="margin: 0in 0in 2.25pt; text-align: left;"><span class="s2"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRZ6ZPkiqRPj9nylMGnHEPPlkkwsFKAzMEGrqfld9bAy2Fh6kQ75kMKlWkSmUDtF2gBFObFpuWSKLwZwacn0lFOPcUaNVXSP0jypWqURP321EhUN1LhGrMimnY38g7qYTfUV7bm1LQBKvn8-1eD5itJ8F2Cc5pEpA2cQ2FXX38ve3tUjujCjrvRzyLk3A/s3000/Profile%20Picture_Allen_Closeup.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="3000" data-original-width="2400" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRZ6ZPkiqRPj9nylMGnHEPPlkkwsFKAzMEGrqfld9bAy2Fh6kQ75kMKlWkSmUDtF2gBFObFpuWSKLwZwacn0lFOPcUaNVXSP0jypWqURP321EhUN1LhGrMimnY38g7qYTfUV7bm1LQBKvn8-1eD5itJ8F2Cc5pEpA2cQ2FXX38ve3tUjujCjrvRzyLk3A/s320/Profile%20Picture_Allen_Closeup.jpg" width="256" /></a></div><span style="font-family: inherit;"><br />Hello friends! I’m penning this
on the balcony of my stateroom on a ship somewhere in the Caribbean. With
Nassau in our rear view mirror and steaming toward San Juan - the weather is
slightly overcast, mid seventies with a mild breeze blowing. Well not really, </span></span><span style="font-family: inherit;"><span class="apple-converted-space"> </span><span class="s2">but a man can dream.
Actually, I’m just pecking away at my dining room table in Orange. But I
digress. Today, I go deep on the advice we’re giving to a client of ours who
wants to purchase a building. They’re woefully short in space and have placed a
bandaid on their growth by adding 3PL pallet positions. </span></span></div><div style="margin: 0in 0in 2.25pt; text-align: left;"><span style="font-family: inherit;"><o:p> <br /></o:p><span class="s3"><b>Based
upon our direction in early 2024<br /></b></span><o:p> <br /></o:p><span class="s2">We’re early. Which is good if we
can get seller capitulation. Which we have. We’ve actually found someone
willing to sell to us. Problem is, our idea of value differs. But, remember
2021? We couldn’t compete with the number of buyers in the market with deep
pockets and a rabid desire to own. In my opinion, those times return this year
as rents stabilize and interest rates decline. <br /></span><o:p> <br /></o:p><span class="s2">The real soft spot in the market
is the rental market. I believe a financially qualified tenant could make an an
unbelievable deal today. Not quite to 2019 pricing - but close. Waiting to
purchase costs money. Let’s say today’s value is $358 per square foot and we
can strike at $350 per square foot and every month you rent costs $1.00 per
square foot.</span><span class="s3"><b> </b></span><span class="s2">If you wait twelve months, you must buy the same building at $338 per
square foot. <br /></span><o:p> <br /></o:p><span class="s3"><b>So
based upon this - their alternatives appear to be. <br /></b></span><o:p> <br /></o:p><span class="s3"><b>Stay
put. </b></span><span class="s2">By striking a short term deal with
his current landlord, we can watch the market and react when pricing becomes
more favorable. <br /></span><span class="s3"><b>Positives: <br /></b></span><span class="s3"><b>+
avoid moving twice </b></span></span></div><div style="margin: 0in 0in 2.25pt; text-align: left;"><span style="font-family: inherit;"><span class="s3"><b><br /></b></span><span class="s3"><b>Negatives:<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>space is smaller<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>already racked<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>3PL is costly <br /></b></span><span style="mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;"><o:p> <br /></o:p></span><span class="s3"><b>Strike
a short term Sublease</b></span><span class="s2">. Similar to staying put
but different in that the space need is solved. All of this money is sunk. The
client builds no equity and potentially misses out on market opportunity as the
two year sublease term is a long time.<br /></span><span class="s3"><b>Positives: <br /></b></span><span class="s3"><b>+
cheapest space alternative<br /></b></span><span class="s3"><b>+
racked </b></span></span></div><div style="margin: 0in 0in 2.25pt; text-align: left;"><span style="font-family: inherit;"><span class="s3"><b><br /></b></span><span class="s3"><b>Negatives:<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>no equity<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>racking RE-config<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>uncertainty after 22 months <br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>two moves<br /></b></span><span style="mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;"><o:p> <br /></o:p></span><span class="s3"><b>Buy
the deal we found<br /></b></span><span class="s3"><b>Positives: <br /></b></span><span class="s3"><b>+
certainty<br /></b></span><span class="s3"><b>+
size<br /></b></span><span class="s3"><b>+
divisibility<br /></b></span><span class="s3"><b>+
one move <br /></b></span><span class="s3"><b>Negatives:<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>price impasse<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>expensive<br /></b></span><span style="mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;"><o:p> <br /></o:p></span><span class="s3"><b>Lease
with an option to buy. <br /></b></span><o:p> <br /></o:p><span class="s3"><b>Positives: <br /></b></span><span class="s3"><b>+
lowers his basis<br /></b></span><span class="s3"><b>+
rent is equity<br /></b></span><span class="s3"><b>+
one move<br /></b></span><span class="s3"><b>+
time to ramp up operation <br /></b></span><span class="s3"><b>+
speed of move.<br /></b></span><span class="s3"><b>Negatives:<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>absolute non-starter with the
ownership<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s3"><b>difficult to peg an option price<br /></b></span><span style="mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;"><o:p> <br /></o:p></span><span class="s3"><b>Strike
new lease.<br /></b></span><span class="s3"><b>Positives:<br /></b></span><span class="s2">+ preserves operating capital<br /></span><span class="s2">+ cheaper </span></span></div><div style="margin: 0in 0in 2.25pt; text-align: left;"><span style="font-family: inherit;"><span class="s2"><br /></span><span class="s3"><b>Negatives:<br /></b></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><span style="mso-fareast-font-family: "Times New Roman";">no generational wealth creation<br /></span></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><span style="mso-fareast-font-family: "Times New Roman";">expense at the end of the term?<br /></span></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><span style="mso-fareast-font-family: "Times New Roman";">Over 120 months no equity build-up and loan pay down. <br /></span></span><span style="mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;"><o:p> <br /></o:p></span><span class="s2">What will the client do? You’ll
have to stay tuned as this saga is just now unfolding. <br /></span><o:p> <br /></o:p><span class="s2">Bon Voyage!<br /></span><o:p> </o:p><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a principal
with Lee & Associates Commercial Real Estate Services in Orange. He can be
reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.</span></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-18946735043632966012024-03-01T11:00:00.000-08:002024-03-01T11:00:00.246-08:00Can Subleases A Market Make?<div style="margin: 0in 0in 2.25pt; text-align: left;"><span style="font-family: inherit;"><span class="s2"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixG0bBt5ztjj6p-C7XTi8wJ96mUL9MKY6S4VlZ0kTboHXIpm3R3u_UIYby87Pe_tPUVP0ZgGsF6ZloTWx4-W8rQPwKZG2QFw2yp1cU16ABihsScxzbK5bVnfDvJP6ThqohObft2iO43GU7SfvVj_3iPrA8sGbjUEdjrWBlJ6sYF763LRf-5AaGIo5YhEo/s3000/Profile%20Picture_Allen_Closeup.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="3000" data-original-width="2400" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEixG0bBt5ztjj6p-C7XTi8wJ96mUL9MKY6S4VlZ0kTboHXIpm3R3u_UIYby87Pe_tPUVP0ZgGsF6ZloTWx4-W8rQPwKZG2QFw2yp1cU16ABihsScxzbK5bVnfDvJP6ThqohObft2iO43GU7SfvVj_3iPrA8sGbjUEdjrWBlJ6sYF763LRf-5AaGIo5YhEo/s320/Profile%20Picture_Allen_Closeup.jpg" width="256" /></a></div><br />By the time you read this, we will
have exhausted two months of 2024. Christmas lights will be appearing in home
improvement retailers in no time. But I digress. <br /></span><o:p> <br /></o:p><span class="s2">Last month, I wrote about
subleases. You might believe this is deja vu all over again. And, in some ways
it is. It’s just uncanny to me how our industrial market activity has gelled
around these remnant sales. <br /></span><o:p> <br /></o:p><span class="s2">In my associate’s and my
practice, the majority of deals we are currently pursuing are subleases. Allow
me to become a bit more granular and describe each situation. <br /></span><o:p> <br /></o:p><span class="s3"><b>Efficiency.</b></span><span class="s2"> We represent - and have since 2010 - an occupant whose business
spans the western United States. Currently, their SoCal locations house operations
in Ontario, Santa Fe Springs, San Diego and Valencia. This company has
increased their top line revenue organically and through acquisition. Hiring
has been at a fever pitch - their appetite for space therefore unquenchable.
However, substantial investment has been made in the mother ship hosting each
sub market. We’ve found it more economical to add a building or two versus
uproot, move, and consolidate. Until now, that is. A desire to be under one
roof and increase efficiency was the driver for their present relocation. One
of the leave behinds was the previous locations. Akin to crossing a stream and
having your feet split between two rocks - this group will stage its move and
transition from three buildings into one by year’s end. Meanwhile, term remains
on the leave behinds and must be addressed. We’re currently engaged to find a
surrogate. Once the move occurs and the buildings are vacated - very little
time will remain on the leases. Careful coordination with the owner’s
representatives has begun. It’s a work in progress. But one caused by growth -
not caused by overzealous space consumption. <br /></span><o:p> <br /></o:p><span class="s3"><b>Aquisition.</b></span><span class="s2"> In 2022, we were hired by an estate. Tragedy had struck the year
before as Covid claimed the life of a family member and patriarch of the
company. Owned were the enterprise and the real estate that housed it. Growth
of the business over decades found the operation straddling three addresses.
Now the de facto owner - the executor - angled to sell the buildings and the
company. You see, none of the following generations had experience running the
business - thus no desire to continue ownership. The executor’s timing was
impeccable as he maximized both real estate and company values at the top of
the market. Included in the real estate sale to an investor were three - five
year leases. However, the business buyer had excess capacity at another location
and didn’t need the three leased buildings. Consequently - as frequently is the
case - an acquisition caused a real estate requirement. In this case, the
disposition of the three leases. We advised the tenant to market the subleases
aggressively and the market responded in kind. With any luck, we’ll be done
this week and all three will be subleased. <br /></span><o:p> <br /></o:p><span class="s3"><b>Market timing. </b></span><span class="s2">We represent an eCommerce distributor. All manner of foot ware,
wearable technology, and beauty products are imported from China and sold
locally through mass retailers. This group, based on the east coast, has been
on a rampant kick to acquire competitors and grow its business. Part of the
inventory is stored in a building in the Inland Empire and the overflow in a
third party logistics provider. It’s now time to purchase premises to
accommodate the growth. However, there is a problem. This buyer’s idea of value
is less than the going pricing. We’ve not found a seller willing to capitulate.
We believe there are more price declines coming but the space needs are
stressing the operation. Subleasing a larger facility for two to three years
seems to be the answer. If the purchase market responds and we can acquire at
our price point, we’re not hampered by a long term lease. But, if not, we
simply renew with the owner and continue our operation in a leased
address. <br /></span><o:p> </o:p><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-92045924399897393272024-02-23T11:00:00.000-08:002024-02-23T11:00:00.134-08:00What Are Experts Saying?<div style="margin: 0in 0in 2.25pt; text-align: left;"><span style="font-family: inherit;"><span class="s2"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjK3ikdHv8gO_PVtf7tGw8EDOoueS6OlIfOYffFLQ6_v7WB-xe2VEP-qBw5fUAj2XvWkz2ZkEqRmIAD8Djtk9-CwGZ0Jh2mSebrtOubC-StYsZJjXYwRfXffQ0Mu8zHnZeQmNF_P9TKzJpsOukXtJYKFNyWOot6K8V5GrnRRHhk2mjYgEgzOD9M-gPlMfE/s3000/Profile%20Picture_Allen_Closeup.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="3000" data-original-width="2400" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjK3ikdHv8gO_PVtf7tGw8EDOoueS6OlIfOYffFLQ6_v7WB-xe2VEP-qBw5fUAj2XvWkz2ZkEqRmIAD8Djtk9-CwGZ0Jh2mSebrtOubC-StYsZJjXYwRfXffQ0Mu8zHnZeQmNF_P9TKzJpsOukXtJYKFNyWOot6K8V5GrnRRHhk2mjYgEgzOD9M-gPlMfE/s320/Profile%20Picture_Allen_Closeup.jpg" width="256" /></a></div><br />I am a huge networker and have
been since the commercial real estate market tumbled in late 2008. As I scanned
the scorched earth of what little remained of a vibrant business - I wondered
if our commercial real estate activity would ever return. Buyers weren’t
transacting, sellers couldn’t sell and lenders refused to lend. The financial
world was in free fall as values lost nearly 40% - seemingly overnight.
Brokers, reliant upon deals were forced to wait - something very few us were
good at doing. <br /></span><o:p> <br /></o:p><span class="s2">So as 2009 dawned, I found myself
with little to occupy my time. As another week ended with no revenue, my wife
would ask “how my volunteer job was going”. <br /></span><o:p> <br /></o:p><span class="s2">On a whim, I attended a business
forum at Cal-State Fullerton which yielded an introduction to a printer. Said
printer in turn invited me to a networking event the following week. Scanning
the room for leads I found no one in need of buying or selling commercial real
estate. However, I discovered several professionals who had clients in need of
my services. It was an indirect approach to sourcing business that opened doors
for the next two decades through strategic referrals. You see, certain advisors
drink from the same trough as commercial real estate professionals. CPAs,
wealth advisors, business bankers, commercial insurance agents, attorneys, and
those engaged in business sales all represent business owners in need of
buying, selling or leasing the locations from which they operate. The cool
thing is we don’t compete with one another, we complement. <br /></span><o:p> <br /></o:p><span class="s2">I’ve now settled in as a member
of a group that informally meets once a month to share knowledge and industry
happenings. What follows are insights from several group members and what they
anticipate for 2024. <br /></span><o:p> <br /></o:p><span class="s3"><b>Business
banking.</b></span><span class="s2"> Cost of capital through deposits
is more expensive. Thanks to several regional bank failures last year - Silicon
Valley, Signature, and First Republic, greater scrutiny by regulators is being
placed on loans and reserves. Consequently, now is not a great time to borrow
money. <br /></span><o:p> <br /></o:p><span class="s3"><b>Mergers
and acquisitions. </b></span><span class="s2">2023 found very few
companies trading hands. Rising interest rates and uncertainty among business
owners caused a deep freeze of selling. Our investment banker is confident 2024
will be better as expectations have normalized and interest rates have declined. <br /></span><o:p> <br /></o:p><span class="s3"><b>Accounting
and tax. </b></span><span class="s2">Any business considering a sale
over the next five years should start now getting their proverbial house in
order. <br /></span><o:p> <br /></o:p><span class="s3"><b>Law. </b></span><span class="s2">Our group has an attorney specializing in estate planning and one who
assists merging and acquiring companies. Estate tax laws change significantly
in 2025. Encouraged to act now are all affected by the lifetime exemption which
sunsets next year. <br /></span><o:p> <br /></o:p><span class="s2">Echoed was sentiment that 2024
should deliver more business sales. <br /></span><o:p> <br /></o:p><span class="s3"><b>IT. </b></span><span class="s2">Artificial intelligence and its impact upon businesses is top of mind.
Some companies are still morphing to all manner of virtual work which keeps
information technology vendors scrambling. <br /></span><o:p> <br /></o:p><span class="s3"><b>HR. </b></span><span class="s2">The employment environment has found some equilibrium. More talent is
seeking positions and businesses are finding it easier to hire. Compliance with
new regulations enacted by our legislature last year requires constant
monitoring. <br /></span><o:p> <br /></o:p><span class="s3"><b>Insurance. </b></span><span class="s2">Any company that spends six figures annually in worker’s comp premiums
should consider creating a captive insurance company. Simply, you self insure
along with others in your trade. Equity is built versus throwing away money
into coverage not used. <br /></span><o:p> <br /></o:p><span class="s3"><b>Wealth. </b></span><span class="s2">Folks can actually make money on idle cash. This is great news for
savers but tough for businesses reliant upon borrowing for growth. With
treasury, money market, and certificate of deposit yields north of 5% last
year, a decent return could be made with very little risk. As interest rates
decline this year, other return instruments will have to be sourced. <br /></span><o:p> <br /></o:p><span class="s2">You can see why I enjoy this
group! I get insight into all of the areas - other than commercial real estate
- my clients deal with every day. </span><o:p> <br /></o:p><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-68512802707787803302024-02-14T08:48:00.000-08:002024-02-14T08:48:18.635-08:00Valentine’s Day<div style="margin: 0in 0in 2.25pt; text-align: left;"><span style="font-family: inherit;"><span class="s2"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKCxa3E85dXYa_vtlNCkffChiMrH1jhdisT21nwOIcEd2a1rmeNjhXBUudsbYUVPWOqGwZN5g-gdvwWvKssVQUlxVkQCI3gsLVfHKlbkL6Jw-rnYSvwIaU624c2EqAARR8zorg6WPiEPMfcAUCkgstJ8dHYXAKOPqaBJhglD3Zm2c43tlQkLxKVaPTIxM/s3000/Profile%20Picture_Allen_Closeup.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" data-original-height="3000" data-original-width="2400" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiKCxa3E85dXYa_vtlNCkffChiMrH1jhdisT21nwOIcEd2a1rmeNjhXBUudsbYUVPWOqGwZN5g-gdvwWvKssVQUlxVkQCI3gsLVfHKlbkL6Jw-rnYSvwIaU624c2EqAARR8zorg6WPiEPMfcAUCkgstJ8dHYXAKOPqaBJhglD3Zm2c43tlQkLxKVaPTIxM/s320/Profile%20Picture_Allen_Closeup.jpg" width="256" /></a></div><br />A
day for lovers. Valentine’s Day falls every February 14th and is celebrated by
couples worldwide. <br /></span><o:p> <br /></o:p><span class="s2">According
to Wikipedia - “It originated as a Christian </span><a href="https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Fen.m.wikipedia.org%2Fwiki%2FFeast_day&data=05%7C02%7Cjharper%40lee-associates.com%7Cd08c2fec86e645f5464508dc2bda6ab9%7C92db559b7f56459fb08ae7db0c1b0f45%7C0%7C0%7C638433464300637819%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=FVESDK7sBAPd3OTOp7YgkEhSMBd9dI3H6y1n8qBXFW0%3D&reserved=0">feast day</a><span class="s2"> honoring a </span><a href="https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Fen.m.wikipedia.org%2Fwiki%2FChristian_martyrs&data=05%7C02%7Cjharper%40lee-associates.com%7Cd08c2fec86e645f5464508dc2bda6ab9%7C92db559b7f56459fb08ae7db0c1b0f45%7C0%7C0%7C638433464300647385%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=wR%2FaM46XEVJ4jgw6USjYZHHNFZgscvKCLXRal%2FpVVkc%3D&reserved=0">martyr</a><span class="s2"> named </span><a href="https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Fen.m.wikipedia.org%2Fwiki%2FSaint_Valentine&data=05%7C02%7Cjharper%40lee-associates.com%7Cd08c2fec86e645f5464508dc2bda6ab9%7C92db559b7f56459fb08ae7db0c1b0f45%7C0%7C0%7C638433464300653957%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=eNIofmGlHL7YVpA9gIc12CSdgEyT%2FUbeZlyFZ5S02sk%3D&reserved=0">Valentine</a><span class="s2"> and through later folk traditions, it has also
become a significant cultural, religious and commercial celebration of </span><a href="https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Fen.m.wikipedia.org%2Fwiki%2FRomance_(love)&data=05%7C02%7Cjharper%40lee-associates.com%7Cd08c2fec86e645f5464508dc2bda6ab9%7C92db559b7f56459fb08ae7db0c1b0f45%7C0%7C0%7C638433464300660406%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=hlqDj8dLEyDRXzbptFpuhAST0%2FUKghI7dpiaEsyJ8Us%3D&reserved=0">romance</a><span class="s2"> and love in many regions of the world.” <br /></span><o:p> <br /></o:p><span class="s2">And
here I thought it was an excuse to stuff my face with chocolate and those cute
little heart shaped candies with the cryptic messages stenciled on their sides.
But I digress. <br /></span><o:p> <br /></o:p><span class="s2">As
I ponder Valentine’s Day, my thoughts turn to commercial real estate and the
parallels I can draw. Here goes. <br /></span><o:p> <br /></o:p><span class="s3"><b>Do you love your
commerical real estate holdings? </b></span><span class="s2">I was taught early in my career to help buyers divorce
- sorry - themselves from the emotion of commercial real estate ownership. By
this I mean the numbers should guide your decision to buy or sell - not your
feelings. I reflected upon an owner I met who owned a freestanding single
tenant building in Anaheim. He was a builder. He had constructed this holding.
I was engaged to be his agent whenever a vacancy was pending. Every three to
five years the panic would creep in as he knew his cash flow would soon stop
and he’d be forced to suffer a dry spell. His negotiating leverage was lessened
and he ended up with some sketchy residents. All because he needed someone,
anyone, to pay the rent. Over serious objection - after all, this was his baby,
I convinced him to sell the building to an occupant and trade the proceeds into
a building with multiple tenants. My theory was if you lost one or two
occupants, you still had money to pay the bills - not the in and off light
switch of a single tenancy. Reluctantly, he agreed. He’ll tell you that was the
best decision he ever made! He now owns three such buildings and enjoys a great
retirement. <br /></span><o:p> <br /></o:p><span class="s3"><b>Send your tenant a
valentine. </b></span><span class="s2">The
new year is in full swing and a good benchmark to finish old business and start
new. Many landlords reconcile the past year’s expenses with their tenants in
February. The crush of year end is solidly in the rear view and the first
quarter is half over. If you budget your operating expenses such a property
taxes, building insurance and maintenance annually, you’ll need to make certain
assumptions. Now that the true costs are known, you can bill your resident for
underpayment or credit for overpayment. Second half property taxes are due in
February. Send in your payment this month. The county assessor will love you
for it. <br /></span><o:p> <br /></o:p><span class="s3"><b>Negotiation, compromise,
and commitment.</b></span><span class="s2"> In
both commercial real estate deals and romantic relationships, negotiation and
compromise are key. Whether it's negotiating terms of a lease or compromising
on where to go for dinner, the ability to find common ground is important.
Commercial real estate investments often involve long-term commitments, similar
to the commitment involved in a serious romantic relationship. Both require
careful consideration and planning for the future.<br /></span><o:p> <br /></o:p><span class="s3"><b>You marry commercial real
estate. You date the interest rate. </b></span><span class="s2">For those of you who are a bit concerned about
interest rates </span><span class="apple-converted-space"> </span><span class="s2">these days, don’t forget your deal can be refinanced
once interest rates settle into a more favorable level. Focus upon the basis
under which you acquire the buildings. By this I mean the price you pay. If you
can separate your emotion, as discussed above, and focus on the income
producing capability of a commercial real estate asset, you’ll make a smart
buy.<br /></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298">abuchanan@lee-associates.com</a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298">allencbuchanan.blogspot.com</a><span style="color: black;">.<br /></span><o:p> </o:p></span></div>
Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-3907309483126142246.post-8568709430479848342024-02-09T11:00:00.000-08:002024-02-09T11:00:00.148-08:00Subleases <div style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variation-settings: normal; margin: 0in; text-align: left; text-size-adjust: auto;"><span style="font-family: inherit;"><span class="s2">Sublease
listings remind me of a half yearly sale at Nordstrom. You better get there early
in the markdowns to get a deal of selection and price. The longer you wait, the
price gets better but the selection wanes until your only choice is an XS
purple long sleeve tee. But. The price is unbeatable. If you’re like I am, an
XS tee only has once use - that of a dish rag. But I digress. <br /></span><o:p> <br /></o:p><span class="s2">Much
has been ballyhooed about the amount of industrial space coming back to the
market - so I did a little research. My trusty spreadsheet is not quite as
robust as Jonathan Lansners, but I made it work. <br /></span><o:p> <br /></o:p><span class="s2">As
a quick review, a sublease is a remnant sale of sorts. When an occupant
originates a lease agreement, the contracts vary in length. Depending upon the
size of the premises, lease terms range from 2-10 years. Many times smaller
buildings mean shorter leases. If an occupant can’t - or doesn’t choose to -
fulfill the term obligation, they’re faced with three choices. These are a
buyout from the owner, a default, or a sublease. A buyout is best for the
tenant as they are relieved of the remainder for a fraction of the cost. Since
the owner takes the risk and expense of finding a replacement, the situation
must be quite compelling. A default is least palatable for both parties - owner
and occupant. Subleasing is a nice compromise. The tenant markets the excess
space in hopes of locating a surrogate to live out its lease term. <br /></span><o:p> <br /></o:p><span class="s2">So,
on to the numbers. <br /></span><o:p> <br /></o:p><span class="s2">Presently,
in all of Orange County, 92 listings in excess of 50,000 square feet exist. Of
these 92, 12 are subleases or 13%. Los Angeles county came in at 497 listings,
73 subleases for 14.6%. Inland markets, spanning that vast swatch of industrial
space to our east, clocked in at 245 listings of which 34 were subleases or
13.8%. Most of the give backs appear in square footages above 100,000 square
feet. As an example, in the IE the percentage jumps to 16%!<br /></span><o:p> <br /></o:p><span class="s2">Ok,
you may be wondering, why does this matter. Allow me to expand on a few
reasons. <br /></span><o:p> <br /></o:p><span class="s3"><b>Market impact.</b></span><span class="s2"> The most
valuable subleases in the industrial market closely mimic that of a direct
lease. By that I mean the term is long enough for an occupant to spread his
moving costs over a period of time. Using our Nordstrom half yearly sale as an
example, a beautiful suit in your exact size at a 30% discount is much more
appealing that one two sizes too big which will then need expensive
alterations. Your savings are eaten up by the expense of making it fit. Plus,
in some cases, all sales are final and you can’t take advantage of Nordstrom’s
generous return policy. Subleases are similar because all sales are final. Your
benefit is in the discounted price - not in other concessions such a tenant
improvements. <br /></span><o:p> <br /></o:p><span class="s2">Additionally,
subleases have a downward push on market lease rates. Of the 12 buildings
currently available for sublease in Orange County, all will trade at a rate
significantly less than that direct listings. With a few of these, the
discounts can be explained as anomalies. However, if a large percentage of
leasing activity is with these remnants, an adjustment of pricing occurs
because the pricing is driving demand. <br /></span><o:p> <br /></o:p><span class="s3"><b>Occupant considerations. </b></span><span class="s2">In a sublease
arrangement, the tenant becomes the sub-landlord, and the surrogate becomes a
sub-tenant. Many occupant/sub landlords price their sublease at a slight
discount versus a direct lease with an owner. In my opinion, this is a mistake,
because a sub lease really needs to pop and provide a shock and awe price to
attract demand. <br /></span><o:p> <br /></o:p><span class="s2">In
order to affect a sublease, you must seek and gain approval from the owner of
the property. This approval may not be unreasonably withheld, but it’s a step
which must be accomplished. An unauthorized sublease can create a default,
which is never advisable.<br /></span><o:p> <br /></o:p><span class="s2">With
your surrogate in place, don’t forget you, as the tenant, are still ultimately
responsible for the lease obligation. Yes, you’ve located someone to pay the
rent in your stead. However, if they fail to pay rent or break another lease
covenant, the owner may look to you for a remedy.<br /></span><o:p> <br /></o:p><span class="s3"><b>Owner considerations.</b></span><span class="s2"> If your
tenant is financially viable, and has simply outgrown your building thus the
need for a sublease, your position is generally pretty solid. If, however, your
occupant is struggling for other reasons, such as a downturn in business, or an
industry collapse, it’s important to pay close attention to their process of
locating a surrogate. Depending upon your tenant’s lease rate compared to the
current market rents, it might make business sense to allow your tenant to buy
out of their obligation. Under this circumstance, you take the risk of finding
a new occupant, but avoid a potential bankruptcy by your tenant which could tie
up your real estate for several months. Ultimately, you have the right to
approve anyone that wants to sublease your building. As mentioned in the
paragraph above, this cannot be unreasonably withheld, but it’s well within
your purview to require a use compatible with your building to be sought along
with a financially viable group.<br /></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-59990088490626821482024-02-02T11:00:00.000-08:002024-02-05T10:09:17.690-08:00Selling Motivation<div style="margin: 0in; text-align: left;"><span style="font-family: inherit;"><span class="s2">What’s
selling motivation, you may be wondering. True that! We’ve not experienced much
since the middle of 2022 when the Federal Reserve mounted its stair climber and
hiked interest rates several times over the next eighteen months. Most of the
selling motivation from the start of 2021 was fueled by crazy high prices
investors were willing to pay paired with cheap money. Some never considering a
sale of their property cashed in during this run up. We even saw the occupant
premium disappear for a few months. An occupant premium refers to a higher
price the user of a building is willing to pay versus that of an investor. You
see, occupants consider the utility a piece of real estate has to offer its
operation whereas an investor is interested in the income generated. Generally,
that means they’ll pay more. Once the easy money evaporated and investor buyers
were relegated to the sidelines - selling motivation ebbed. I believe in 2024,
we’ll experience a different kind of selling motivation - more forced selling.
Bear with me as I review five situations that could render me prescient. <br /></span><o:p> <br /></o:p><span class="s3"><b>Transition
triggered by one of the Ds.</b></span><span class="s2"> Transitions can predict
a sale. Most common among the transitions owners face are divorce, death,
disposition, distress, disputes, and dissolution. When a </span><span class="s3"><b>marriage
ends</b></span><span class="s2"> and
the combatants must reconcile the assets, sometimes a sale occurs. </span><span class="s3"><b>Death</b></span><span class="s2"> creates
an interesting tax treatment known as a “step up in basis” which makes selling
more attractive. Sometimes business owners decide it’s time to </span><span class="s3"><b>sell
their companies.</b></span><span class="s2"> What
follows, occasionally is the sale of the building the operation occupied. A
vacant address with a mortgage means someone must foot the bill. </span><span class="s3"><b>Distress</b></span><span class="s2"> happens
when no one wants to rent the premises. </span><span class="s3"><b>Arguments</b></span><span class="s2"> can lead
to a sale. When partners can’t agree on a direction for the property, selling
could be imminent. Finally, when an ownership entity is </span><span class="s3"><b>dissolved</b></span><span class="s2"> a
property is sold. Effectively ending the involvement of the members. <br /></span><o:p> <br /></o:p><span class="s3"><b>Lender
pressure. </b></span><span class="s2">Here’s
my theory. Stress among regional banks has been widely reported - especially,
if the bank has risky loans on the books or faces upward rate pressure in its
bond portfolio. The demise of Silicon Vally Bank and First Republic are
examples. If a bank funded construction loan was originated at the beginning of
2022 - which financed the construction of a new building - certain assumptions
were made. These included the costs, the time to complete the build, the lease
rate that would be achieved, and the amount of carrying time before an occupant
moved in. The expectation was a permanent loan would replace the short term
construction loan. But now the new structure is delivered into a very different
world - lease rates have softened and vacancy times have expanded. Plus
interest rates have risen substantially. Lenders fear their construction loans
may not be timely repaid and could force a sale. <br /></span><o:p> <br /></o:p><span class="s3"><b>Owner
capitulation. </b></span><span class="s2">Refinancing into a higher interest rate market
could bring some owners to the table with selling motivation. This will
especially be true with the owners of office properties. If the owner of an
office building faces substantial vacancy, and must resort to lowering its
lease rates to attract a tenant, the income generated by the office building is
less than anticipated and may not service the debt. Additionally, if
substantial capital expenditures are necessary in order to attract occupants,
the money may not be in the budget. As you can see, a tsunami of issues could
cause a seller to hand the keys to their lender. The lender, not wanting to own
commercial real estate, then disposes of the property at a discounted amount.<br /></span><o:p> <br /></o:p><span class="s3"><b>Short
term rollover. </b></span><span class="s2">We currently represent an occupant looking to
acquire a building in the Inland Empire. During 2021, this business owner was
effectively blocked from purchasing because he could not compete with the
investor activity. Investors were willing to pay astronomical prices with very
few contingencies, and close quickly. Therefore, we sold and leased back for
two years. Our theory was we could re-buy before lease expiration and we
believed the market was headed for a correction. We are now noticing some
building owners, faced with a pending vacancy, looking to sell rather than
experience the lengthy and costly process of originating a new tenancy.<br /></span><o:p> <br /></o:p><span class="s3"><b>Investors
awakening from their slumber. </b></span><span class="s2">Who knows when we’ll see an
uptick in investor activity. My prediction is this genre of buyers - faced with
allocation requirements, a declining interest-rate market, and a realization of
where lease rates have settled, will cause some buying activity this year. The
interesting part of the equation will be how owners - not faced with any of the
pressures above - will react to unsolicited investor offers. We shall
see. <br /></span><b><span style="color: black;"><o:p> <br /></o:p></span></b><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-64952616424668794652024-01-26T11:30:00.000-08:002024-01-26T12:02:44.723-08:00Trends<div style="margin: 0in; text-align: left;"><span style="font-family: inherit;"><span class="s1">Over
the past three years we experienced changing markets. By that I mean the
dynamic between buyers and sellers that sets stage for negotiation and results
in transactions. <br /></span><o:p> <br /></o:p><span class="s1">At
the beginning of 2021 - as we slowly awakened from the ether of pandemic
lockdowns, two trends emerged - rampant on-line shopping and hybrid work
forces. Both of these affected commercial real estate and the three asset
classes - office, industrial and retail - in different ways. Owners of
industrial spaces - especially those equipped to welcome logistics providers -
saw a rabid increase in demand. Fulfilling on-line orders quickly and
efficiently required more on hand inventory - read. A place to receive, stage,
store, and distribute said goods. <br /></span><o:p> <br /></o:p><span class="s1">Conversely,
as our shopping experiences turned from visiting our local retailer in person
to surfing the web - foot traffic to brick and mortar stores lessened and
spaces became ghost towns. On the office front, tenants choreographed a
thoughtful dance of safety of work forces vs in-office appearances. We realized
we could ply our trades from most anywhere - our home, from the front seat of
our cars, or abroad - and many did. Therefore, office and retail tilted toward
tenants and industrial spaces were heavily slanted in owner’s directions. <br /></span><o:p> <br /></o:p><span class="s1">As
we dawn 2024, the aggressive pursuit of available inventory by industrial
tenants has ebbed, investor activity has been reduced to a trickle, and we’re
seeing signs of lease rate softening. <br /></span><o:p> <br /></o:p><span class="s1">In
light of changing markets, how should you - as an occupant of industrial space
- tender your offers? That, dear readers, is the focus of the balance of this
column. <br /></span><o:p> <br /></o:p><span class="s2"><b>Know
the trends.</b></span><span class="s1"> At
the beginning of 2023 we counseled </span><span class="apple-converted-space"> </span><span class="s1">our industrial
occupants to watch lease rates. Our prediction was significant softening would
occur by the end of the year - and therefore, to transact at the beginning of
the year might result in a rate higher than anticipated. Our gamble proved
prescient as we experienced a declination of rates - in some cases by
25%. <br /></span><o:p> <br /></o:p><span class="s2"><b>Know
the metrics.</b></span><span class="s1"> A
simple review of how many available properties within a certain size range
exist versus how many similar properties have leased or sold, is a good way to
measure the velocity of a market. As an example, if during the past year three
buildings between 25 and 35,000 ft.² have leased or sold, and presently there
are 15 available, one could surmise that five years of supply exist. This, of
course, assumes everything stays the same, pricing is not reduced in order to
spur demand, or something outside our economy causes the need for space to
increase - i.e. a pandemic.<br /></span><o:p> <br /></o:p><span class="s2"><b>Understand
the owner’s situation.</b></span><span class="s1"> If an owner is currently carrying a vacant
building, it’s important to gauge how willing she will be to accept a deal. For
someone who purchased the building at the peak of the market with the
appurtenant increase in operating expenses, and potentially debt service, her
willingness to strike at a number less than her carrying costs might be
difficult. By the same token, if an ownership has existed for many years with
low operating expenses, and little to no debt - any deal might look
appealing. <br /></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p1" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-24371279025982109322024-01-19T11:00:00.000-08:002024-01-26T12:03:11.702-08:00Institutional vs Private<div style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variation-settings: normal; margin: 0in; text-align: left; text-size-adjust: auto;"><span style="font-family: inherit;"><span class="s2">One
of my predictions headed into 2024 is that we’ll see an uptick of buying
activity - especially from institutional purchasers. Why you may be wondering?
For three reasons. Number one. Most haven’t transacted since the middle of 2022
and must to balance allocations. Number two. We should get clarity this year
about one of the metrics that determine commercial real estate value - rental
rates. Number three. A declining interest rate environment which will make
Treasuries less compelling and real estate more so. <br /></span><o:p> <br /></o:p><span class="s2">Allow
me to add color to these three reflections. But first a quick review of my
definition of an institutional investor. If you’re a teacher, firefighter,
police officer, or work at city hall you can relate to a potion of your
paycheck that’s deducted to fund your retirement. Prior to the predominance of
401ks, Private employers also provided pensions and took a slice of your salary
to do so. If you pay into a whole or universal life insurance policy - those
premiums must be invested as well. All of the above form pools of capital that
need returns and are used to buy stocks, bonds, money market funds and
commercial real estate. Each asset class has its own percentage the fund
managers dictate. Advisors - at the direction of fund managers - use these funds
to make buys. Thus an institutional investor. <br /></span><o:p> <br /></o:p><span class="s2">Now
to that promised detail. <br /></span><o:p> <br /></o:p><span class="s3"><b>Pencils down.</b></span><span class="s2"> When we began
2022, institutional interest in commercial real estate was rabid - especially
if you owned and operated a company from your building - you had many buyers
knocking on your door. The play two years ago was to purchase the real estate
and provide the occupying company a lease-back of preferably two years in
duration. Demand during this period of time drove values to unseen levels. In
some cases doubling the amount buyers were willing to pay by double. The theory
was by 2024, rental rates would far eclipse the lease back amount -therefore,
providing a greater return on the investment. However, when the Federal Reserve
started to hike interest rates in the middle of 2022 - coupled with global
uncertainty - we saw a shift in Investor attitudes. The term, “pencils down“
permeated the industry. For the entirety of 2023 this outlook continued and
institutional investor activity was reduced to a trickle. <br /></span><o:p> <br /></o:p><span class="s3"><b>Where are rents.</b></span><span class="s2"> One of
the fundamental metrics in the world of commercial real estate is rental rates.
Think of it as the heartbeat of the industry. The coming year holds the promise
of clarity in this crucial metric. As I’ve written in the space, rents in
class-A industrial in North Orange County seem to have found a level that has
spurred demand. So why is this so important? </span>Imagine you're considering
buying a commercial property. You need to know how much rent you can expect to
charge tenants. If this number is vague or uncertain, it's akin to navigating
in the dark. But when you have a clear picture of expected rental rates, it's
like having a bright guiding light. Clear rental rate data allows investors to
make informed decisions. They can assess whether a property is undervalued or
overpriced, which ultimately impacts the return on investment. It's the
linchpin that can make or break a deal.<br /><o:p> <br /></o:p><span class="s3"><b>Rates.</b></span><span class="s2"> Now,
let's talk about something that affects every investor's decision-making
process - interest rates. In 2024, we're looking at a landscape of declining
interest rates. But why should that matter for real estate? Picture this. You
have some money to invest, and you're considering your options. On one side,
you have Treasury bonds, historically considered a safe bet. On the other side,
you have commercial real estate. Traditionally, when interest rates on
Treasuries are high, they're a compelling choice because they offer a
relatively safe and stable return. However, when interest rates start to drop,
as they're doing now, the risk ratio changes. Suddenly, the returns on Treasury
bonds become less appealing, while the potential returns from real estate start
to become more compelling. Investors look for opportunities that offer higher
returns, and that often leads them to the commercial real estate market. </span>In a world where real estate
can provide solid returns in a low-interest environment, the appeal of this
asset class becomes evident. It's a shift that institutional investors can't
afford to ignore.<br /><o:p> <br /></o:p><span class="s2">So
to sum it up. 2024 holds the promise of an exciting year for commercial real
estate. Institutional investors, with their careful balancing of allocations,
eagerly await clarity on rental rates as they navigate the changing interest
rate landscape. These factors, when combined, create a compelling case for
increased buying activity. <br /></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-75054504420234326172024-01-12T11:00:00.000-08:002024-01-26T12:03:26.145-08:00Advice I’m Giving These Days<div style="margin: 0in; text-align: left;"><span style="font-family: inherit;"><span class="s2">As
I pen this, we begin the second week of 2024. National Football playoff
matchups are set, the first Professional Golf event is in the books, Washington
v Michigan takes center stage for the NCAA football championship - Go Huskies,
it feels like winter in socal as temps dip into the thirties at night, the
television and movie industry awarded the Golden Globes, and the Iowa
presidential primaries are just over a week away which officially begins an
election year. Yes! A lot is happening. As 2024 ramps into full swing, here’s
the advice I’m giving to my owners and occupants of industrial buildings. <br /></span><o:p> <br /></o:p><span class="s3"><b>Look
at total cost.</b></span><span class="s2"> Generally,
our annual transaction mix is around 70% leasing and 30% sales. 2023 was no
exception. 2022 reversed that ratio as we experienced a buying frenzy in the
first half of the year. But as I mentioned in my annual prediction column last
week, I expected some rate softening last year and we got it. For context,
let’s use a 40,000 square foot building in the Inland Empire. In January 2023,
the prevailing ask was $66,000 per month triple net - rent net of operating
expenses. By the end of 2023 it had dropped to $54,000 - an 18% decline.
However, ignored in that calculus are the “gross up expenses” of property
taxes, insurance, and costs associated with mowing the lawn, servicing the air
conditioners, and keeping the roof water tight. These vary widely. For an owner
who purchased his building recently, expect these extras to be approximately
$6000 per month. The low end - for an owner who’s held title for many years
could be half - $3000 per month. Added to our triple net rates and a $54,000
per month cost escalates to a range of $57,000-$60,000. We advise clients these
days to consider the “grossed up” rates when comparing alternatives. <br /></span><o:p> <br /></o:p><span class="s3"><b>Buying</b></span><span class="s2">. More
buildings for sale will hit the market this year. Fueled by vacancies - not
experienced in years - some owners will cash out vs originating new leases. We
just completed a deal where the owner spent 36% of the leases future income
just to attract our client to his building. Downtime, abated rent, beneficial
occupancy, refurbishment, tenant improvements, and paying commercial real
estate professionals for their representation are among the expenses necessary.
We’ll also see sales of buildings to their tenant occupants. I’ve mentioned
many times in this space - your best buyer is your resident. What about
interest rates, you may be wondering? Some wise person once opined, “you marry
the building, you date the interest rate”. Focus upon the price you’re paying.
You can always refinance if rates settle lower. Also, consider owner financing.
We struck a sale last year using this structure. Encumbered by a long term
lease that paid them effectively a 3% dividend - they were thrilled to sell,
carry the paper, and get a higher return. Plus, the crush of taxes is
protracted. <br /></span><o:p> <br /></o:p><span class="s3"><b>Expiring
lease.</b></span><span class="s2"> If
you occupy a building under a lease arrangement and your lease expires sometime
in 2024, we advise proceeding with caution - particularly if your lease
commenced prior to 2021. Lease rates have experienced an exponential rise, but
are now softening. Depending upon pon the nature of your ownership - private or
institutional - you may be able to strike a renewal at a rate below that of the
market. Pay special attention to the owner’s cost to replace you. Remember the
example above where an owner spent 36% of his future income just to secure a
resident? Some owners can’t afford to do this and are willing to reduce the
rate in order to keep you. Look to class-A industrial buildings as well. our
prediction is that these rates will soften and you may be able to get a better
building for the price of one that’s a bit more antiquated.<br /></span><o:p> <br /></o:p><span class="s3"><b>Election
year. </b></span><span class="s2">Jonathan
Lansner did a masterful job reviewing election year trends as they affect our
economy. If you didn’t catch his piece, I’d highly recommend you find it, cut
it out, and pin it to your bulletin board. Enough said. <br /></span><o:p> <br /></o:p><span class="s3"><b>Cap
rates. </b></span><span class="s2">We
pay very close attention to a United States Treasury instrument known as the 10
year treasury note. Commercial lending, as well as capitalization rates closely
follow this indicator. We started to see a fairly astronomical rise in 10 year
notes last year. They reached a crescendo in November topping 5% for the first
time in a couple of decades. They’ve now settled back to a more reasonable
level of around 4%. Simply, you can invest idle cash and receive a risk free
return of 4% on your money. Many opt to do this versus investing in the
uncertainty of real estate ownership. For context, this same rate at the
beginning of 2022 was a poultry 1.76%. As the 10 year note, falls into the 3
1/2% range, institutional investors shift their focus to investing in
commercial real estate, which has the effect of lowering capitalization rates.
This could spell a spate of buying activity by the big boys.<br /></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-1780878154132259352024-01-05T11:00:00.000-08:002024-01-26T12:03:38.688-08:00Predictions 2024<div style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variation-settings: normal; margin: 0in; text-align: left; text-size-adjust: auto;"><span style="font-family: inherit;"><span class="s2">Happy
new year! If you’re reading this, most likely you’ve already blown two or three
resolutions. That’s ok. Just resolve to read this column each week and you’ll
be fine. Well. At least you’ll be up to date on all things commercial real
estate. Last week, I reviewed my prognostications from a year ago. I must
admit, getting a perfect score - nailing all my predictions - was better than
watching Alabama return to Tuscaloosa defeated, but I digress. Today, I turn
toward our newly minted 2024 and what to predict this year. <br /></span><o:p> <br /></o:p><span class="s3"><b>Industrial lease rates will soften.</b></span><span class="s2"> This
time last year, a client of ours was facing an expiring lease. We tried to find
a suitable alternative to move his operation. Nothing was ideal. We advised him
to stay put, negotiate a short term fix - 6-12 months and continue our search.
His owner would only agree to six months so we had a new deadline - June of
2023. We nearly struck pay dirt in March but jettisoned the opportunity due to
its size - just not quite big enough. Once again, we approached his owner asking
for some more time. He agreed to extend through December. Our gamble paid off
as we secured a suitable building at a 15% discount! Why, you may wonder?
Simple economics. We tracked new avails and ones leaving the market and noticed
an imbalance. Yep. More was coming than going. We knew someone would drop their
rate to secure a great tenant. Expect more of the same this year - especially
with Class-A buildings above 100,000 square feet. At last count in the OC -
eleven were open for business and seeking a resident. Two left the market last
year. Hmmm. Someone will get motivated and make a deal, comps will reset to the
new level and the frenzy will begin. <br /></span><o:p> <br /></o:p><span class="s3"><b>Expect sales volume to increase. </b></span><span class="s2">The forces
outlined in the paragraph above will trickle into the sales world. By that, I
mean </span><span class="apple-converted-space"> </span><span class="s2">an owner
awaiting a tenant may choose to sell. A further catalyst could be the
underlying debt on the asset. Imagine you’ve originated a short term
construction loan to build a class A structure. You considered construction
costs, time to build and lease. Your calculus was based upon conditions in
early 2022. You’ve delivered a new building into an entirely different market -
longer vacancy and lower rates. Your lender might be getting a bit nervous.
When will the maturing debt be repaid?Thus pressure to dispose of the new
build. <br /></span><o:p> <br /></o:p><span class="s3"><b>Recession or no? I say no. </b></span><span class="s2">Last year I
took a contrarian approach and predicted we would avoid a recession in 2023.
Recall, recession is a decline in gross national product for at least two
quarters. I believed in the resiliency of the United States economy, especially
the consumer, and we skated by a recession in 2023. As I write these
predictions today, the only storm clouds I see on our horizon, are global
uncertainty in the Middle East. Specifically, will the Red Sea shipping lane
disruption cause inflationary pressures on goods delivered? If this proves to
be the case, the federal reserve may be persuaded to delay cuts in interest
rates, which are predicted for this year. However, I’m reminded of our status
in January 2020. We were rocking along when a microscopic foe sent us to our
spare bedrooms. Therefore, beware of the Black Swan event. <br /></span><o:p> <br /></o:p><span class="s3"><b>Interest rates. </b></span><span class="s2">Last year, for
the first time in a couple of decades, you could actually make money on idle
cash. We saw a peak in Treasuries occur last year when the 10 year T-note
eclipsed 5%. The rate this morning is slightly above 3.8%. This is good news
for borrowers, bad news for savers and could cause an uptick in institutional
buying activity. These behemoth money managers are constantly seeking return
and might view commercial real estate as a safe haven to earn some additional
juice. I believe the 10 year notes will level at around 4 to 4.25% percent this
year.<br /></span><o:p> <br /></o:p><span class="s2">Ok.
So there you have it. My commercial real estate crystal ball. Best wishes, dear
readers for much success in 2024. <br /></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-19190109942826648132023-12-29T11:00:00.000-08:002024-01-26T12:04:16.248-08:002023 Recap<div style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variation-settings: normal; margin: 0in; text-align: left; text-size-adjust: auto;"><span style="font-family: inherit;"><span class="s2">Happy
new year, dear readers. I trust your 2023 was productive and I wish you great success
for 2024. As you read this on New Year’s Eve 2023 - let’s review what I
predicted in January 2023 and see how I did getting my Nostradamus on. <br /></span><span class="s2"> <br /></span><span class="s2">In
January of this year, I wrote:<br /></span><span class="s2"> <br /></span><span class="s3"><b>Industrial real estate. </b></span><span class="s2">Third party
logistics providers will give back space. If you’re unfamiliar with the term -
3PL or third party logistics provider - allow me to explain. Simply, a 3PL is
an outsourced warehousing service. Say you’re a company that needs to get your
product distributed to Walmart but don’t have the space or inclination to do so
yourself. Enter the 3PL who will charge you - by the pallet - to receive,
store, re-package, and ship your goods for you. For the past three years - to
keep up with the demand of online shopping - 3PLs thrived and leased hundreds
of thousands of square feet of logistics boxes. With the “de-inventorying”
currently occurring, these providers need fewer square feet. But there’s an
issue as many signed term leases which still have time to go. Therefore look
for much of this excess to enter the market as sublease space. </span><span class="s3"><b>July
2023 update.</b></span><span class="s2"> We’ve
seen a fair amount of give back as Amazon started the whittling process in late
2022. The push for space seems to be a lot less rabid than it was in 2021 and
2022. I frankly thought we would see more space returning to the market from
third-party logistics providers. Although we’ve seen a bit of this it’s not
happened on a wholesale basis the way I anticipated. So this one falls into the
category of let’s wait and see what happens for the balance of the year. </span><span class="s3"><b>December
2023 update. </b></span><span class="s2">The give back continues! I recently pulled a
list of spaces 275,000-425,000 in the Inland Empire. Of the 34 available, one
third were subleases - companies trying to shed space. </span><span class="s3"><b>Nailed
it!<br /></b></span><span class="s2"> <br /></span><span class="s3"><b>Recession?</b></span><span class="s2"> I vote
no. How’s that for contrarian thinking! Here’s how I read the tea leaves. The
Fed came out with guns blazing last year with three .75% and one .5% rate
bumps. As we’ve discussed, this increase affects the rate in which banks
borrow. The theory is more expensive money will cool a white hot economy as
businesses will re-think borrowing for expansion. If you look at Gross Domestic
Product or GDP for the third quarter of 2022 - it actually increased over Q2.
By the time you read this, we’ll have a glimpse as to how the fourth quarter
fared. Now couple that with core inflation which has declined for several
months. Finally, retailers are shedding inventory as mentioned above. In fact
this is deflationary as things are on sale. Now some might counter by opining -
we’ve not felt the full impact of the Fed rate increases, folks are spending
that idle cash left over from the pandemic, and massive layoffs await. We’ll
see. I choose to believe in the resiliency in the US economy. Plus. Did you
visit a mall, restaurant, or attempt to book a flight during the holidays?
Bedlam! </span><span class="s3"><b>July
2023 update.</b></span><span class="s2"> I
nailed this prediction as our economy has not fallen into recession. Some would
say the full impact of the federal reserve’s rate increases have not been felt
throughout. I still believe in the resiliency of the United States economy, our
ability to innovate, and the seemingly unstoppable consumer. We will see what
the next six months holds, but I for one believe that we have “stuck the
landing” and will avoid a recession. </span><span class="s3"><b>December 2023
update. </b></span><span class="s2">We
will finish 2023 recession free. Quite miraculous considering what many were
saying last year at this time. No one predicted the Hamas attacks on Israel or
ten year treasuries topping 5% - briefly in November. Unrest still rages in the
Middle East but interest rates have settled in the 4% range. 9 of ten believe
we will avoid recession in 2024. I for one hope they’re correct. </span><span class="s3"><b>Nailed
it!<br /></b></span><span class="s2"> <br /></span><span class="s3"><b>Return to the office. </b></span><span class="s2">Much has been
written on this subject. We’re starting the third year since all of us were
forced to return to our spare bedrooms. Remember that fateful day in March of
2020? Like yesterday! Fortunately, our team had spent the previous few months
figuring out how to duplicate our desktop mobily. Did we have insider scoop?
No. We just wanted the flexibility to do stuff in a client’s lobby, our dining
room, or the front seat of our car without losing productivity. We were lucky.
When the order came - we simply unplugged, drove twenty minutes home and
plugged back in. Many were not so lucky and found themselves grappling with how
to remain viable. Others simply ordered a bunch online and ate alot. I heard
this from a friend. </span><span class="s2">😎</span><span class="s2">I predict
workforces will return to the office this year. Sure, a hybrid model will be
employed where - as an example - Tuesday-Thursday will be office days and
Mondays and Fridays will be optional work from home. </span><span class="s3"><b>July
2023 update.</b></span><span class="s2"> I
read with great interest Jeff Collins and Jonathan Lansner‘s columns that
appeared in the Orange County Register yesterday. Vacancy throughout office
space has doubled since the pandemic in 2020. The new normal is a hybrid
workspace with the exception of a few industries. As an example the wealth
advisory businesses are back to the office full-time whereas flexible
industries such as real estate, healthcare, insurance, are still working
remotely. I would count this prediction as a miss thus far but we’ll see what
the next six months bring. </span><span class="s3"><b>December 2023
update.</b></span><span class="s2"> Certain
industries such as wealth management are back. Other typically office bound
crafts - attorneys, real estate professionals and CPAs are not. </span><span class="s3"><b>Nailed
it!<br /></b></span><span class="s2"> <br /></span><span class="s3"><b>Retail.</b></span><span class="s2"> A
continuation of the experiences that brought us back to brick and mortar stores
in 2022 will continue. As examples. On a recent visit to Main Place, we were
serenaded by era dressed carolers, and our grandsons thrust into a cube of
stuffed animals as human claw machines. I’ve never seen the place so packed! My
wife and I commented - what recession? Sans these experiences, however, I’m
afraid the on-line shopping is easier. What’s avoided are out-of-stocks, surly
clerks, crowds, and no parking. Speaking of Main Place. Our favorite parking
spaces are now consumed with a multi family building which is under
construction. Providing your own customer base and foot traffic - once the
units are fully occupied - is always a great idea. But how cities choose to
eliminate tax basis while at the same time increasing police and fire service
remains the tug-of-war. </span><span class="s3"><b>July 2023
update. </b></span><span class="s2">Brick
and mortar retail continues to it astonish me. I recently purchased some items
online and chose to return them at the store versus dealing with reboxing and
shipping them through UPS. I was greeted with lines in the return lanes that
would rival 405 traffic on a busy weekend. One of these was a lower end big box
retailer and the other was a higher end specialty seller. Expected would be the
lower end store to be busy but I was surprised to see the higher end specialty
retailer just as busy. People are traveling! I recently heard a report that the
July 4 weekend was the busiest in Los Angeles international airport’s history.
It appears the pent-up demand for wander lusters is quickly unfolding. </span><span class="s3"><b>December
2023 update.</b></span><span class="s2"> If
you visited a mall or power center during this extended shopping season - you
were met with a crush normally reserved for the intersection of the five, 57,
and 22. Gridlock indeed. Our economy seems to be settled in to a nice
combination of on-line and in person shopping. </span><span class="s3"><b>Nailed
it!<br /></b></span><o:p> <br /></o:p><span class="s2">For
those keeping score - a perfect 4 of 4 for this columnist. Next week, I’ll
proffer my predictions for commercial real estate in 2024. You won’t want to
miss that episode. Until then, be safe my friends. <br /></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-44009645303468465752023-12-15T11:00:00.000-08:002024-01-26T12:04:27.262-08:00Home for the Holidays - Navigating Real Estate in Family Business Traditions<div style="margin: 0in; text-align: left;"><span style="font-family: inherit;"><span class="s2">Family
owned and operated manufacturing and logistics providers - and the ways in
which their commercial real estate is managed - provide the cornerstone of my brokerage
practice. Growing up in a family owned and operated manufacturing business
helped provide keen insight into the challenges faced by these local employers
and key components of our local communities. I recall numerous Christmas
gatherings with our company’s employees and the special meaning of this time of
year. <br /></span><o:p> <br /></o:p><span class="s2">The
holiday season is a time of family, traditions, and gathering around a warm and
welcoming home. Much like the heart of the holiday season, family-owned
manufacturing businesses often have a central hub - their commercial real
estate. In this column, we'll explore the unique challenges and blessings that
come with harmonizing real estate and the traditions of family businesses.<br /></span><o:p> <br /></o:p><span class="s1"><b>Tradition
and Succession Planning</b></span><span class="s2">. Picture a family-owned manufacturing business
as the treasured holiday feast, and the real estate as the time-honored recipes
that have been passed down through generations. Planning for succession in such
an environment can be as intricate as the preparation of a family recipe. It's
about ensuring the family tradition continues to thrive while also preserving
the home in which it all began.<br /></span><o:p> <br /></o:p><span class="s1"><b>Decking
the Halls with Financial Considerations.</b></span><span class="s2"> The holiday season is
often marked by financial decisions - gifts to buy, decorations to adorn, and
feasts to prepare. Similarly, real estate assets within family businesses bring
their own financial considerations. Property values and rental income are like
the ornaments and lights that decorate the family tree, enhancing its beauty.
However, just as the holiday season comes with its expenses, so do real estate
assets with maintenance and operational costs. Balancing these financial
aspects is critical for a harmonious holiday season.<br /></span><o:p> <br /></o:p><span class="s1"><b>Gifts
and Legacies - Tax and Legal Implications. </b></span><span class="s2">Gift-giving is
a central theme of the holidays, but when it comes to real estate within family
businesses, it's essential to navigate the legal and tax implications
carefully. Just as Santa knows his route, families must be guided by
knowledgeable legal and financial advisors to minimize tax burdens and protect
their legacies.<br /></span><o:p> <br /></o:p><span class="s1"><b>Diversifying
the Feast - Expanding Traditions. </b></span><span class="s2">During the holidays, it's
common to try new recipes and incorporate diverse flavors into your traditions.
In the world of family-owned manufacturing businesses, real estate can be the
secret ingredient to diversification and growth. Ownership of the buildings
from which your company operates can be a magical way to increase generational
wealth. These strategies can bring new flavors to your business traditions and
ensure a bountiful holiday season.<br /></span><o:p> <br /></o:p><span class="s1"><b>Family
Harmony - A Must-Have Decoration. </b></span><span class="s2">The holiday season is a time
for unity and togetherness, but it can also bring forth differing opinions and
tensions within families. Managing real estate assets within a family business
can require the skill akin to Santa’s elves. The family, much like the
ornaments on a tree, should work together to create a harmonious atmosphere.<br /></span><o:p> <br /></o:p><span class="s1"><b>Holiday
Recipes - Learning from the Masters.</b></span><span class="s2"> As with any holiday
feast, it's often helpful to learn from the masters. Let's explore a couple of
real-life examples. The Smith family, seasoned in the manufacturing business,
wisely chose to own their real estate. As the value of the enterprise grew, so
did the worth of the real estate. Additionally, in tough times, rent paid by
the operation could be subsidized by the ownership of the building. It is
common these days for the value of the real estate to far eclipse that of the
occupying business. Merry Christmas indeed! On the other hand, the Johnsons
decided to lease the facilities from which their enterprise operated. They
avoided the heavy down payment needed to own their real estate. However, leases
have maturity dates and rents over time have risen. No additional equity is
built, and the operation must constantly face an evolving rental market. This
can be great when rents are depressed, but troublesome in a time like today,
when rents have escalated to an historically high-level.<br /></span><o:p> <br /></o:p><span class="s2">Blending
real estate assets with family-owned manufacturing businesses during the
holidays is similar to preparing a cherished family recipe - a delicate balance
of tradition, innovation, and unity. You can create a holiday season that's not
only joyful but also filled with the promise of enduring traditions and lasting
legacies.<br /></span><o:p> <br /></o:p><span class="s2">So,
as you gather around the family table during this festive season, remember that
your real estate assets can be the foundation of your traditions, and the
family business is the holiday feast that brings you all together.</span><span style="mso-fareast-font-family: "Times New Roman";"><o:p> <br /></o:p></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p1" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-12127303574954191322023-12-08T11:00:00.000-08:002024-01-26T12:04:41.345-08:00The True Measure Of A Lease Comp<div style="margin: 0in; text-align: left;"><span style="font-family: inherit;"><span class="s2">Tracking
the market is a task that consumes some of our time as commercial real estate
professionals. A fancy way of saying “what’s happening” in our commercial real
estate world - we look at things such as comparable lease transactions,
comparable sale transactions, number of new availabilities, and the number of
months needed to complete a lease or sale once the property enters as an
availability. <br /></span><o:p> <br /></o:p><span class="s2">By
analyzing these metrics, we’re able to gauge the health of our business. New
avails and time on the market are easy enough. The measures more difficult are
the comparable sales and leases as you must factor in some equalizer. By this -
and using housing as an example - you wouldn’t compare the price a 10,000
square foot beach front property to an inland condo without some means to level
the comparison. Price per square foot helps along with age of construction and
amenities. We’re then able to suggest a status of comparable, inferior or
superior. If we get quite granular, we can suggest a percentage by which a comp
is superior or inferior and add or subtract this from the sale price. <br /></span><o:p> <br /></o:p><span class="s2">Lease
comps are trickier. Leases - different from sales comps are not a matter of
public record. In other words, we can’t go to the county recorder to see where
a deal traded. We must rely upon relationships with fellow brokers, who will
share the points of a lease with us. <br /></span><o:p> <br /></o:p><span class="s3"><b>Important
to consider:<br /></b></span><span class="s3"><b>The
starting rate.</b></span><span class="s2"> Defined
as the lease amount the tenant pays upon commencement of the lease.<br /></span><o:p> <br /></o:p><span class="s3"><b>Operating
expenses.</b></span><span class="s2"> In
certain leases, an amount - in excess of base rent - is billed to the tenant.
Operating expenses include costs such as property taxes, building insurance and
maintenance. <br /></span><o:p> <br /></o:p><span class="s3"><b>Annual
increases. </b></span><span class="s2">These
are bumps in the lease rate that occur annually, or at some other throughout
the term. Most leases these days are written with fixed annual increases versus
the change that occurs in the consumer price index which we frequently saw in
the 1980s.<br /></span><o:p> <br /></o:p><span class="s3"><b>Term. </b></span><span class="s2">Number of
months that the tenant commits to pay rent. <br /></span><o:p> <br /></o:p><span class="s3"><b>And
concessions such as:<br /></b></span><span class="s3"><b>Refurbishment. </b></span><span class="s2">Generally
referred to as rent, ready items, such as paint, carpet, and general cleanup.
Not typically included in refurbishment, would be tenant specific improvements,
which are referred to as tenant improvements.<br /></span><o:p> <br /></o:p><span class="s3"><b>Free
rent.</b></span><span class="s2"> This
period is and the tenant gets to occupy the building free of base rent.<br /></span><o:p> <br /></o:p><span class="s3"><b>Beneficial
occupancy. </b></span><span class="s2">Any
occupancy granted prior to the commencement of the term is referred to his
beneficial occupancy, and sometimes may be called early possession.<br /></span><o:p> <br /></o:p><span class="s3"><b>Improvements
made to the building specifically for the tenant.</b></span><span class="s2"> As
mentioned above in the refurbishment section, tenant improvements would be
outside the scope of the normal cleanup. This could include things such as
adding offices, or upgrading the power panel.<br /></span><o:p> <br /></o:p><span class="s2">If
a fellow broker is willing to share all the points above, we can then do some
math and compute what’s known as the </span><span class="s3"><b>effective rate.</b></span><span class="s2"> Simply
stated, the effective rate considers rent - including increases - over the term
minus the concessions. The actual computation is a bit more complex. But you
get the idea. <br /></span><o:p> <br /></o:p><span class="s2">Now,
armed with the effective rate of each lease, we can assign the same - inferior,
superior, or comparable tag used for sales comps - based upon amenities. As an
example, a brand new class A offering should be superior to a thirty year old
counterpart. How superior you may wonder? In certain cases, the 30 year old
address may be functionally obsolete to modern occupants and may need to appeal
to a smaller pool of tenants who don’t need class A amenities. </span></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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<p class="p3" style="margin: 0in;"><o:p></o:p></p>Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-11908058525002117512023-12-01T11:00:00.000-08:002024-01-26T12:04:54.461-08:00Season of Giving<div style="margin: 0in; text-align: left;"><span style="font-family: inherit;"><span class="s1">We
are now in the season of giving. Having survived Black Friday and Cyber Monday,
we now turn our thoughts and plans toward the epitome of fall holidays,
Christmas, Hanukkah and Qanza. Time with family and friends during this holiday
season is at a premium. Our December calendar is almost full - with parties,
luncheons and gatherings. But, today, I am writing for three reasons - therapy,
education, and as a personal reminder. <br /></span><o:p> <br /></o:p><span class="s1">As
commercial real estate practitioners, we only have two things to sell - our
information and our time. Levels of our information are available as a
commodity, for the world to see, and we only have 168 hours per week -
that's it! Now, we can layer our expertise on top of the basic data levels -
but we cannot create anymore time. I realize that is trite but stay with me,
here. Avoiding commercial real estate time wasters is tantamount to locking
your house at night - if you don't do it, you might get robbed!<br /></span><o:p> <br /></o:p><span class="s1">I
mentioned in the preamble my three reasons, so here goes!<br /></span><o:p> <br /></o:p><span class="s2"><b>Therapy</b></span><span class="s1">. Without a
doubt, I have encountered (and unfortunately been engaged by) more time wasters
this year than I can remember in my career that spans four decades! And I pride
myself on my qualification skills. Some were requirements unable to be filled,
which resulted in lease renewals. Some were loooong drawn out request for
proposal processes or market surveys or tours or owner education or…All had the
same result - no revenue! Time invested with no return - the death knell of any
commissioned sales person! Now before you go all sappy and feel sorry for me,
please don't. I am the most blessed man on earth for myriad reasons that I'll
save for another column - but maybe you can learn from my mistakes this year.<br /></span><o:p> <br /></o:p><span class="s2"><b>Education</b></span><span class="s3"><b><i>. </i></b></span><span class="s1">OK, some of this is brokerage 101. But I'm going
to spin it for you.<br /></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><b>Work with control</b></span><span class="s3"><b><i><span style="mso-fareast-font-family: "Times New Roman";"> </span></i></b></span><span class="s1">I know, basic, right? But how many of you make this mistake?
I tell the young guys in here, "working without control is like drinking
and driving" You might get away with it but when you get caught - and you
will - the consequences are severe.<br /></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><b>Qualify, Qualify, and keep
Qualifying.</b></span><span class="s3"><b><i><span style="mso-fareast-font-family: "Times New Roman";"> </span></i></b></span><span class="s1">Qualifying
is ongoing. Remember to qualify "throughout the process", not just at
the front end of the transaction.<br /></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><b>Think "anti move"</b></span><span class="s1">. Let's face it, moving sucks! It's disruptive, time
consuming, counter productive, inefficient, and expensive. It’s like a knee
replacement - painful but necessary sometimes. Be VERY candid with your
occupants about the downside of moving locations. When things get tough in the
transaction - and they will, you can relay your discussion and remind your
clients why moving makes sense.<br /></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><b>Make the client "convince"
you. </b></span><span class="s1">How many of us have fallen for
"we want to buy a building"? I always ask my clients "why would
you want to do that?" The answer is illuminating!<br /></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><b>Beware of the corporate "local
guy</b></span><span class="s3"><b><i><span style="mso-fareast-font-family: "Times New Roman";">". </span></i></b></span><span class="s1">Ok,
these can be your biggest advocate or CHAMPION time wasters. Is the local guy
willing to give you complete access to the "real decision maker" or
are you trying to fulfill his dream location that has NO CHANCE of
materializing or passing corporate scrutiny?<br /></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><b>Beware of lengthy processes. </b></span><span class="s1">Decisions on who to hire are rarely the result of the
fattest proposal binder, the best power point or the most complete response to
an RFP. They generally boil down to a </span><span class="s3"><b><i><span style="mso-fareast-font-family: "Times New Roman";">"</span></i></b></span><span class="s1">relationship" - what a concept.<br /></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><b>At some point, they gotta give back</b></span><span class="s3"><b><i><span style="mso-fareast-font-family: "Times New Roman";">. </span></i></b></span><span class="s1">My Mom taught me </span><span class="apple-converted-space"> </span><span class="s1">a
relationship must be a fifty-fifty proposition. Why should this differ in a
real estate deal? Examine how much YOU are giving and how much the client is
giving in return. This can be as simple as timely returned phone calls, emails,
texts, etc. or as complicated as deciding on a strategic direction.<br /></span><span style="mso-list: Ignore;">·<span style="font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span><!--[endif]--><span class="s2"><b>Out of State - out of mind.</b></span><span class="s3"><b><i><span style="mso-fareast-font-family: "Times New Roman";"> </span></i></b></span><span class="s1">Anyone out there ever dealt with an out-of state company
that is tremendously responsive when you are face-to-face but once the plane
leaves the tarmac, so does the responsiveness? Candidly, I've still not
figured this one out!<br /></span><span style="mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin;"><o:p> <br /></o:p></span><span class="s2"><b>Personal
reminder. </b></span><span class="s1">TRUST
YOUR GUT!</span><span class="s5"><i> </i></span><span class="s1">If it walks
like a duck, quacks like a duck, has feathers, flies south for the winter (and
you are not in Eugene, Oregon) - chances are they are a commercial real estate
time waster!</span><span style="mso-fareast-font-family: "Times New Roman";"><o:p> <br /></o:p></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p1" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-18449423651748252682023-11-24T11:00:00.000-08:002024-01-26T12:05:07.455-08:00Finding the Right Commercial Real Estate Professional for You<div style="border: none; box-sizing: border-box; margin: 15pt 0in; padding: 0in; text-align: left; text-size-adjust: 100%; white-space: pre-wrap;"><span style="font-family: inherit;">Owning commercial property often means facing vacancies at some point. When that happens, consider the opportunity to rescue the occupancy. Take, for example, one of our long-term clients who recently renewed their lease with our guidance. We took an unconventional approach by advising them not to exercise their option to renew. Why, you ask? Because we believed we could secure a better deal from the owner outside the confines of the standard lease terms. Our hunch paid off; our client renewed at a remarkable 8% below the lowest market rate. The owner also avoided the costs associated with vacancy, potential refurbishment, tenant improvements, and increased brokerage fees. It was a win-win for everyone involved.</span></div><div style="border: none; box-sizing: border-box; margin: 15pt 0in; padding: 0in; text-align: left; text-size-adjust: 100%; white-space: pre-wrap;"><span style="font-family: inherit;">But let's face it, not every vacancy can be saved. When you can't salvage the occupancy, you'll likely need to engage a commercial real estate professional to find a tenant or buyer who can represent your interests in the market. The question is, how do you find the absolute best professional for the job?</span></div><div style="border: none; box-sizing: border-box; margin: 15pt 0in; padding: 0in; text-align: left; text-size-adjust: 100%; white-space: pre-wrap;"><span style="font-family: inherit;">Here's a simple guide to help you find the perfect match:</span></div><div style="border: none; box-sizing: border-box; margin: 15pt 0in; padding: 0in; text-align: left; text-size-adjust: 100%; white-space: pre-wrap;"><span style="font-family: inherit;"><br /><strong style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; box-sizing: border-box;"><span style="border: 1pt solid rgb(217, 217, 227); padding: 0in;">Define Your Reality</span></strong></span></div><div style="border: none; box-sizing: border-box; margin: 15pt 0in; padding: 0in; text-align: left; text-size-adjust: 100%; white-space: pre-wrap;"><b><span style="font-family: inherit;"><br /></span></b><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l3 level1 lfo1; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Is your property vacant or occupied, and if occupied, w</span>ill it become vacant during marketing?</li></ul><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l3 level1 lfo1; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Are significant improvements needed, like office </span>refurbishments, equipment removal, or major repairs?</li></ul><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l3 level1 lfo1; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Are you a seller or a landlord? What's the debt against </span>the property?</li></ul><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l3 level1 lfo1; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">How long can you afford to keep the building vacant?</span></li></ul><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l3 level1 lfo1; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">If you're the occupant, where will you relocate, and </span>what's your showing protocol?</li></ul><strong style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; box-sizing: border-box;"><span style="border: 1pt solid rgb(217, 217, 227); padding: 0in;"><span style="font-family: inherit;">Seek Specialty</span></span></strong><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l1 level1 lfo2; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Successful commercial real estate professionals often </span>specialize in a particular location or building category.</li></ul><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l1 level1 lfo2; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Consider the type of property you have - office,</span> industrial, or retail, and its sub-category.</li></ul><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l1 level1 lfo2; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">For example, if you have a manufacturing building in </span>Anaheim, California, look for a specialist in selling or leasing manufacturing buildings within a specific radius.</li></ul><strong style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; box-sizing: border-box;"><span style="border: 1pt solid rgb(217, 217, 227); padding: 0in;"><span style="font-family: inherit;">Comparable Inventory</span></span></strong><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l0 level1 lfo3; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Ask specialists for a list of comparable transactions</span> they've completed and currently available properties.</li></ul><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l0 level1 lfo3; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">However, remember that competence matters as much as</span> quantity. Ensure the specialist is a reliable representative for your property.</li></ul><strong style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; box-sizing: border-box;"><span style="border: 1pt solid rgb(217, 217, 227); padding: 0in;"><span style="font-family: inherit;">Evaluate Competition</span></span></strong><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l5 level1 lfo4; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Assess the competition in the market. A knowledgeable </span>specialist should provide insights into available competing properties.</li></ul><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l5 level1 lfo4; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Request a tour to understand how your property compares</span> and to gauge the specialist's market expertise.</li></ul><strong style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; box-sizing: border-box;"><span style="border: 1pt solid rgb(217, 217, 227); padding: 0in;"><span style="font-family: inherit;">Cooperating Brokers</span></span></strong><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l2 level1 lfo5; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Check with the specialist's main competitors for their </span>take on the specialist's reputation and competence.</li></ul><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l2 level1 lfo5; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Keep in mind that their competitors might have</span> potential tenants or buyers for your property.</li></ul><strong style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; box-sizing: border-box;"><span style="border: 1pt solid rgb(217, 217, 227); padding: 0in;"><span style="font-family: inherit;">Creativity</span></span></strong><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l4 level1 lfo6; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Look for a specialist who can offer unique marketing</span> strategies tailored to your property.</li></ul><ul style="-webkit-text-size-adjust: 100%; box-sizing: border-box; display: flex; flex-direction: column; list-style-position: outside; margin-top: 0in; text-size-adjust: 100%; white-space: pre-wrap;" type="disc"><li class="MsoNormal" style="--tw-border-spacing-x: 0; --tw-border-spacing-y: 0; --tw-ring-color: rgba(69,89,164,0.5); --tw-ring-offset-color: #fff; --tw-ring-offset-shadow: 0 0 transparent; --tw-ring-offset-width: 0px; --tw-ring-shadow: 0 0 transparent; --tw-rotate: 0; --tw-scale-x: 1; --tw-scale-y: 1; --tw-scroll-snap-strictness: proximity; --tw-shadow-colored: 0 0 transparent; --tw-shadow: 0 0 transparent; --tw-skew-x: 0; --tw-skew-y: 0; --tw-translate-x: 0; --tw-translate-y: 0; border: none; box-sizing: border-box; margin-left: 0.25in; min-height: 28px; mso-border-alt: solid #D9D9E3 .25pt; mso-list: l4 level1 lfo6; mso-padding-alt: 0in 0in 0in 5.0pt; padding: 0in; tab-stops: list .5in;"><span style="font-family: inherit;">Beyond the standard tactics, seek someone who thinks</span> creatively and can make your property stand out.</li></ul><span style="font-family: inherit;">Remember, lost revenue from vacancies cannot be recovered. Choosing the right commercial real estate professional can significantly impact your property's leasing or selling timeline, minimizing the loss. Make an informed decision to safeguard your investment.<br /><span style="mso-fareast-font-family: "Times New Roman";"><o:p> <br /></o:p></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or 714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div>
Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-1415206201928820042023-11-17T11:00:00.000-08:002024-01-26T12:05:19.171-08:00Happy Thanksgiving!<div style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variation-settings: normal; margin: 0in; text-align: left; text-size-adjust: auto;"><b style="font-family: inherit;">"Giving
Thanks for a Bountiful Year in Commercial Real Estate"</b></div><div style="font-feature-settings: normal; font-kerning: auto; font-optical-sizing: auto; font-stretch: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-numeric: normal; font-variation-settings: normal; margin: 0in; text-align: left; text-size-adjust: auto;"><span style="font-family: inherit;"><o:p> <br /></o:p><span class="s2">To
all my readers, Happy Thanksgiving! As we gather to celebrate this cherished holiday,
I can't help but reflect on the many reasons we have in the world of commercial
real estate to be grateful for in 2023. The fall season has always held a
special place in my heart, with its crisp air and vibrant foliage. It's a
season that culminates in Thanksgiving, a day dedicated to indulging in the
company of loved ones, feasting on delicious food, and, of course, watching
some football. Wherever you are, I extend my heartfelt best wishes for a
wonderful Thanksgiving day filled with joy, gratitude, and togetherness.<br /></span><o:p> <br /></o:p><span class="s2">As
we approach the end of 2023, with only six more weeks until we bid farewell to
the year and sing "Auld Lang Syne," let's take a moment to count our
blessings in the commercial real estate industry.<br /></span><o:p> <br /></o:p><span class="s3"><b>Booming Market</b></span><span class="s2">. Demand for
Class-A industrial has been a bit tepid as we’ve delivered a slug of new
inventory and the market adjusts to higher rents. However, within the last two
weeks we’ve seen two large deals transact - one in Fullerton and the other in
Brea. I still believe we have some softening ahead, but the green shoots of
tenant demand appear to be growing. <br /></span><o:p> <br /></o:p><span class="s3"><b>Technological Advancements</b></span><span class="s2">. Artificial
intelligence, also known as AI has significantly changed the ways content
creation happens. You know those flowery descriptions of your dream home that
appear on websites or brochures? Chances are - those were written by bots.
Commercial agents generally lag our residential counterparts by years. However,
targeted marketing campaigns, with letters, emails, texts, and collateral will
all go twin some generative content soon. Quick responses on listing inquiries
will follow. Clauses for letters of intent or contracts could be next. <br /></span><o:p> <br /></o:p><span class="s3"><b>Sustainable Practices</b></span><span class="s2">.
Sustainability has taken center stage, and it's heartening to see the
industry's commitment to green building practices and environmentally conscious
development. It's not just about reducing carbon footprints; it's about
creating healthier, more sustainable communities.<br /></span><o:p> <br /></o:p><span class="s3"><b>Adaptability.</b></span><span class="s2"> Commercial
real estate professionals have shown incredible adaptability and resilience in
navigating the last three years. Industrial in hyper mode throughout 2021 and
early 22, the office market cratering and then coming back to life in a
different form as hybrid work became a thing, and finally retail that placed a
premium on experience. The ability to pivot and embrace new ways of doing
business has been instrumental in overcoming challenges.<br /></span><o:p> <br /></o:p><span class="s2">This
Thanksgiving, while we remember our blessings, we do have some signs of
uncertainty for the year to come - decades high interest rates, global
uncertainty, wars in Ukraine and Israel, an upcoming presidential election, and
a potential recession. <br /></span><o:p> <br /></o:p><span class="s2">As
you gather around the Thanksgiving table, whether with colleagues, friends, or
family, take a moment to reflect on the collective blessings of the commercial
real estate industry in 2023. Let's express our gratitude for the opportunities
we've had and our determination to overcome challenges in the coming year.<br /></span><o:p> <br /></o:p><span class="s2">So,
as the aroma of a Thanksgiving feast fills the air and the excitement of a
football game captivates our attention, let's give thanks for the thriving
commercial real estate industry and the promising future it holds. <br /></span><o:p> <br /></o:p><span class="s2">Happy
Thanksgiving!</span><span style="mso-fareast-font-family: "Times New Roman";"><o:p> <br /></o:p></span><o:p> <br /></o:p><b><span style="color: black;">Allen C. Buchanan, SIOR, </span></b><span style="color: black;">is a
principal with Lee & Associates Commercial Real Estate Services in Orange.
He can be reached at </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">abuchanan@lee-associates.com</span></a><span style="color: black;"> or
714.564.7104. His website is </span><a href="https://www.blogger.com/u/1/blog/post/edit/3907309483126142246/5197070979696887298"><span style="color: blue;">allencbuchanan.blogspot.com</span></a><span style="color: black;">.<br /></span><o:p> </o:p></span></div><p class="p3" style="margin: 0in;"><o:p></o:p></p>
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Unknownnoreply@blogger.com01004 W Taft Ave #150, Orange, CA 92865, USA33.8145853 -117.86291955.5043514638211519 -153.0191695 62.124819136178843 -82.7066695tag:blogger.com,1999:blog-3907309483126142246.post-85012497226374070732017-06-23T11:00:00.000-07:002024-01-26T12:30:15.704-08:005 Reasons NOT to Sell your Commercial Real EstateSo often, folks in my profession are focused upon the reasons TO do something - like sell your commercial real estate. After all, we make our living selling and leasing buildings.<br />
<br />
However, sometimes there are compelling reasons to NOT sell your commercial real estate. Today, I would enjoy sharing a few of those reasons with you.<br />
<br />
<b><i>No transition. </i></b>As we recently discussed, a sale decision is generally preceded by a transition of some sort - such as selling the business that occupies your commercial real estate. If you no longer own the "tenant", the occupying business, you may prefer to not be a landlord - thus your motivation to sell. However, in the absence of a transition, why sell?<br />
<br />
<b><i>Tax consequences.</i></b> The sale of your commercial real estate will create punitive taxes that must be paid or deferred. In some cases, the tax man will claim 35-45% of your sale proceeds. Some sellers analyze the after tax proceeds of a sale and determine selling is not a viable option.<br />
<b><i><br /></i></b>
<b><i>No place to move.</i></b> Southern California has the lowest vacancy of available industrial buildings ever! 98 of every 100 buildings are occupied with very little turnover. If you sell the building that houses your business, where will you move the business?<br />
<br />
<b><i>A very low basis.</i></b> Remember the tax consequences we examined above? The taxes are generated by the difference in the current selling price and the price you paid - know as your gain. If you purchased your commercial real estate many years ago, chances are your basis is low. If you're fortunate to own your building with no debt - even better! The resulting occupancy costs for a tenant are also low. In the halcyon days, you reap the rewards. When things are a bit tougher, you can afford to lease your building for less because you have no mortgage payments.<br />
<br />
<b><i>An irreplaceable location.</i></b> Akin to an ocean front cottage, certain commercial properties enjoy locations that cannot be replaced. This could be a main boulevard frontage, proximity to amenities - hotels, restaurants, or entertainment, favorable zoning, special purpose improvements for your business - ISO 9001 certifications, certain use permits, or an abundance of electricity.Unknownnoreply@blogger.com01004 W Taft Ave, Orange, CA 92865, USA33.8151655 -117.8630163999999933.814752999999996 -117.86364689999999 33.815578 -117.86238589999999