Friday, May 10, 2019

Commercial Real Estate is Still Local - Three Reasons

When I started plying my trade in the early eighties - our means of sourcing new business were the phone, a Rolodex, shiny shoes, and a big smile! My, my, how things have changed! If you were engaged to find someone a building or secured an agency to list a vacant property - your methods of getting the word out we’re limited to the U.S. mail, newspaper ads, calls, signs, and telling your fellow brokers. Area specialization was key. Because there were no multiple listing services - local knowledge was your value.

Flash forward. From our kitchen table - we now can access an ownership of any commercial property in the United States - and there are over 48,000,000 of them! Want to find a vacant building in Austin, Texas? No problem. Your client operates four hundred locations nationally? We are now equipped to manage his account through the technology at our fingertips. Competition for business is no longer local as everyone has access to the same information.

So with the advent of technology and the open doors we all share - has the local nature of commercial real estate been lost? Hardly!

Value is still local. One of my current assignments has taken me a bit out of my patch. I’ve been hired to locate a distribution center for an East Coast operator. Generating a list of available properties is a snap. Understanding the nuances - not so much. An example. We discovered the zoning of one of the buildings we liked would not allow our use. Hmmm. Had I been entrenched in that area daily - I would have saved some time. In SoCal, the farther east you look - the cheaper commercial real estate pricing becomes. However, distance from the port is greater - which adds a layer of cost. In some cases utilities are higher. Hmmm. Didn’t think about that.

Relationships rule. We recently competed against four different buyers for a building for sale. All four buyers had made asking price offers. Demonstrated by all was proof of funds and an ability to close quickly. We won the deal! Why? Because I had successfully closed several previous transactions with the owner’s broker. He had confidence in our ability. We see each other at the gym. We talk at open houses. We play golf together. I sat at his table at our recent SIOR event. This sort of familiarity is impossible if your practice spans many states.

It’s the market. I can look at a building on paper - let’s say in Tempe, Arizona. Certain boxes can be checked - size, amount of office, loading, warehouse clearance, price. I can jump on Southwest Airlines and see it in an hour. Great! What I can’t determine is recent sale and lease activity. How many properties - with similar features are currently available? What are the local value drivers - employment, population growth, attitudes of municipalities, housing? Sure. I can utilize the same database used for the avails but a true understanding of why the comps sold or leased can only be catalogued by someone there every day. That’s value!

Akin to a beat cop who walks the streets or patrols a neighborhood - commercial real estate is still a local business - and always will be.

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