Friday, May 31, 2019

Random Commercial Real Estate Thoughts

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Occasionally, it’s a great idea to clear the inbox of your mind. Today, I unpack several issues clogging my consciousness.

When is an owner “unreasonable”? Often an occupant will find itself with too much or too little space. If they lease their premises - this can be problematic - especially if lease term remains. You see, a tenant cannot simply “walk away” from a lease - it’s a contractual obligation. Therefore, the options are threefold - sublease, a buy-out, or make do. Generally, a sublease is the route taken. Language in most leases allows an occupant to find a replacement - sub-tenant - to fulfill its term. The owner has the right to approve any assignment and cannot unreasonably withhold permission. But what is “unreasonable”? Credit of the proxy, use to which the surrogate will operate, portion of the space taken, and term desired all form the basis of an owner’s approval. If all of the boxes are checked - creditworthy, clean legal use, and all of the space and term absorbed - a refusal may be construed as unreasonable.

Small business owner attitudes. As 2019 dawned - I sensed a shift in outlooks. After all, the government was shuttered, the stock market was wildly gyrating and interest rates were rising. The stench of uncertainty wafted. With almost half the year in the books - unemployment is at record lows, interest rates have fallen, and attitudes have improved. Candidly - the housing market performance and tariff hikes still have me wary. But we will see.

The unexpected does occur. I received a call last Thursday from a residential colleague of mine. She and I concluded a deal in 2009. A friend of hers was panicked. An F-16 had just crashed through his space. He needed to move - FAST! But what about his remaining lease term, the damage to his inventory, the gaping hole in the owner’s roof? That’s why we have insurance - on the owner’s and tenant’s side of the aisle. Note to owners - make sure your occupants have updated their policies and their premiums are paid!

Lawyers. I love the legal profession! So much so - I nearly went to law school. But, I chose commercial real estate instead. Too many in my profession find themselves at odds with counsel. In order to succeed as a commercial real estate professional - you must learn to peacefully co-exist with attorneys. Just understand - we get paid to solve a deal’s issues. If an attorney irons out a problem too quickly - the fees stop and liability begins. Our job is to negotiate economic points - price, term, deposits, concessions. Inherent risk is involved when transacting, however. Enter lawyers. Most want the same result - a closed deal. Just allow them to have their say.

Networking is not selling. Networking is about giving - not receiving. Doubt what I say? How many times have you attended a Chamber meeting, Rotary lunch or Provisors gathering to buy anything? Bingo! So - if none of the attendees are there to buy - why would you show up to sell? You’ll be sorely disappointed. You might as well spend that time knocking on doors or making prospecting dials - if you’re looking to sell. Discover how you can help another achieve their goals - and networking will become a gold mine of strategic contacts.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at or 714.564.7104. His website is

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