5 Ways to Close your Commercial Real Estate Deal Faster

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Two weeks ago - in this space - I discussed the reasons your commercial real estate deal is taking so long to close. As promised - today I will discuss ways to close your commercial real estate deal faster. Our discussion two weeks ago focused upon several areas which I will use as a framework for today’s conversation.

Search. Before you search - give some real thought to all of the solutions to your space needs - staying put and re-working your layout, out sourcing a portion of your operation, taking an additional building from your current owner. Also, engage someone who can assist in zeroing in on precisely how much square footage you need.

Negotiations. In a word - Realistic! If you attempt to scalp an owner these days - you’ll be disappointed. Figure out why you are moving. Will you top line revenue increase by a large percentage? Will you be able to give a key employee a private office and thus increase her efficiency? Will a move translate into cost savings? Are you more proximate to labor or suppliers. When considered through this lens - a few cents per square foot or dollars on the purchase price pales.

Due diligence. As a commercial real estate owner - do yourself a huge favor and prepare your building for sale. Please don’t use your precious marketing time unwisely! Order an inspection so you know what repairs are needed. How’s the roof? Does the property have a rich environmental history? Make the necessary repairs. Disclose the others and price accordingly. Gather all of the pertinent documents a buyer will need to review such as - utility bills, leases, operating statements, insurance, plans, and permits. Stage your building as though it was appearing on an episode of Property Brothers. You’ll be grateful!

Financing. Buyers. Get yourself pre-qualified! I would also suggest choosing a lender, having them do a thorough underwriting of your package and know where your source of funds is originating. Many times in today’s competitive market - without a prequalification - your offer will simply be overlooked for one that is complete.

City approvals. Two suggestions here. The first would be to visit the municipality where you are considering relocating. Ask ask them where they would suggest you locate. The second suggestion would be to hire a person who can help you navigate the various city issues you will encounter.

Transition planning. Moving is expensive, disruptive, and inefficient. While considering your area of re-location – also have a moving and storage company give you a bid on the timing and cost of your move. Armed with the specifics - you’re now equipped to venture into the available space market.

Allen C. Buchanan, SIOR is a principal with Lee & Associates Commercial Real Estate Services. He can be reached at 714.564.7104 or abuchanan@lee-associates.com

Commercial Real Estate Content Marketing - Does it Matter?

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One of the ways I survived the economic downturn of 2008 was to “work out loud” - a phrase coined by my bride of forty years. Simply, it is the practice of taking my daily tasks as a commercial real estate professional - finding, winning, and fulfilling business - and writing about them. Who knew the weekly missives would someday appear in your subscription of the Orange County Register Sunday Real Estate Section. Moreover - an internet catalog of commercial real estate topics now exists for inquiring minds. A digital footprint is created which is akin to a marketing sign on a vacant building - a touchpoint is formed.

My fear - when I started blogging in 2010 - was only two people would read my ramblings - my wife and me! Turned out - I was ahead of the content marketing curve - before content marketing was a thing. Now, I’m known nationally - in my industry - as one of the early adopters of social media to distribute the content I create. Doubt what I say? Perform a Google search for Allen C. Buchanan and see for yourself. What few of us anticipated? Many owners and occupants of commercial real estate would seek on-line counsel for their commercial real estate issues. If properly crafted - blogs, videos, white papers - can address questions that arise through owning and occupying commercial space.

Recently, I opined: “We must - as commercial real estate professionals - appeal to the on-line searcher. A common mis-conception is we simply use the modern media sources - FaceBook, Twitter, YouTube, Instagram - as a way to advertise available properties. Unfortunately - these ads get deleted like that cable subscription. What pulls a building shopper to us these days is content. Content that portrays us as experts in our field - not simply a name on a sign. Content that inspires to action, entertains, or educates as a means of demonstrating our knowledge. Good content - videos, “how-to” articles, thought pieces - serve as a large net for existing and future buyers. Advertising buildings for sale only appeals to folks in the market today - a very small slice of the population.”

Chances are - if you’re an avid reader of this column - you’ve some stake in commercial real estate. You own it or occupy it. Therefore - when a need arises - a vacancy to fill, more space for your operation, it’s time to buy or sell - what will you do?

I’m guessing one of several things.

You’ll contact the agent you’ve known for years. Ok. No web search needed. However, if your go-to agent has not embraced content as a means of finding you a tenant or buyer or sourcing additional space - are you being short changed?

You’ll ask a friend for a referral. Absent a relationship with someone in our business - you’ll probably see if that referral has a web presence or check out LinkedIn for some color. By the time you meet - you’ll have a pretty good understanding of his background, expertise, focus, and clientele.

You’ll scoop out those mailings you’ve received from active neighborhood pros and call one. By the way - if you’ve not investigated the service provider - you should - before you call! Client testimonials, case studies, years in the trade, experience with your particular requirement - all should be vetted. Yep. On-line.

You’ll perform an on-line search for the need you have. Bingo! In your browser - you might type “How do I choose a commercial real estate agent?” “What should I avoid when marketing my building?” “Considerations when leasing a commercial space.” Those search results pull you toward an expert who produced the thought piece. You get a sense of her knowledge without ever meeting her. Determined? Whether you want more and if you will engage her.

Does commercial real estate content matter? Absolutely! Just ask Siri.

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

What’s Taking So Long with my Deal?

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Commercial real estate deals take time to complete - generally, a lot longer than buying your family’s residence. Best case - but rarely? The deal is completed in thirty to forty-five days. More typically? Seasons change with no conclusion to the transaction.

What begins with a simple framework of search, locate, negotiate, contract, execute, and close - many times morphs into a mire of minutiae. Layer in some professional advisors - lawyers, bankers, environmental engineers, accountants, appraisers, building inspectors, contractors and commercial real estate agents - who all must have their say - and the complexity begins.

What - you may ask - takes so long? Indulge me as I describe a few areas where transaction traffic gets pinched akin to your commute on the 405.

Search. Available inventory is at an all-time low. 98 of every 100 industrial buildings is occupied. This is great for owners - but if you’re looking for a place to re-locate your business - you are scrambling to find the right spot. So, if you could simply run out and check a half a dozen sites and choose the best - awesome! The reality is you may wait months for the right match to come along. The days are getting shorter and leaves beginning to turn.

Negotiations. Because of the historically low vacancy - owners are bullish. They understand occupants have very few - if any - choices. High asking prices follow. Motivation migrates. Concessions wane. Couple this with an occupant determined to find a “deal” and negotiations reach an impasse. The clock ticks.

Due diligence. Once you find that dream building and have struck an agreement - you now must figure out if you can buy it. Third party reports must be ordered to investigate all manner of details - appraised value, environmental history, condition of title, roof, air conditioning, structural, seismic, biological, zoning, permitting - to name a few. Normally, transactions are structured with a time-frame to complete these studies - but rarely are the time frames generous enough to allow proper ordering, investigating, reporting, reviewing and approving. One slip in scheduling can cause endless delays and the need to return to the bargaining table to beg for additional time.

Financing. Many small business owners employ the Small Business Administration - SBA - to finance their commercial real estate purchases. Depending upon the size of the loan and lender appetite - two approvals are necessary - one from the bank and the other from the Federal Government. When we experienced our government shutdown last December - SBA loan approvals screeched to a halt. Any loan package not in the approval queue before the hiatus suffered an interminable delay. Great scrutiny is placed upon the environmental health of the real estate and the value as determined by an appraisal. Unfortunately, you and your purchase operate on the loan’s timeframe.

City approvals. The use to which the property will be placed as well as any changes planned - office, power, warehouse racking, freezer cooler space - will need to be vetted and approved by the municipality. We once encountered a city approval process that eclipsed a year! This year - by the way - after leases were signed. Fortunately, we anticipated the approval timing and were able to negotiate a satisfactory structure.

Transition planning. Moving a manufacturing plant can be a bit more involved than packing your household belongings. Pair the complexity of the relocation with the inability to be “out of business” for any duration and planing becomes tantamount.

Please tune in next week as I’ll provide some suggestions to roll back Father Time and expedite your deals.

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

5 Things to be a Commercial Real Estate Expert

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I mentioned our summer intern in a previous column. Ahhh - the enthusiasm of youth! It’s a beautiful thing. Questions that emanate from the Cal State Fullerton senior are thought provoking and column worthy.

So here goes! What does it take to be an expert in commercial real estate? To respond - I’ll focus on the nuts and bolts vs things such as an agent license from the DRE, a Broker, empathy, professionalism, diligence, a wee bit of intellect, staying power, honesty, integrity, and the right mentor - sounds like a Boy Scout! Yeah all of those are critical - but can be said of most sales professions. To be an expert in commercial real estate you really need five things - which I’ll describe below.

Inventory. What is available for sale and for lease and more importantly - what exists at the baseline that is occupied. To determine buildings currently on the market - we use a combination of multiple listing services available to commercial agents (or those willing to pay a hefty monthly fee) - CoStar, Catylist, ILS. We supplement this information with Loopnet and our proprietary data. Baseline stats - standing stock or planned and under construction buildings are tracked using LandVision, Reonomy, CoStar, Catylist, or old school methods - such as saving brochures.

Transactions. You really must know what has leased or sold - also known as COMPS. Sale deals - because they are generally a matter of record - can be easily catalogued. Lease deals rely upon broker to broker sharing. But, the true experts understand the story behind each transaction - what caused the occupant to choose that building and the underlying motivation of the owner.

Trends. Most look in the rear view mirror of deals. But you must couple this with a look forward. Sure. Past performance can be an indicator of future success. But what if storm clouds are massing? Many of us missed the warning signs of impending doom in 2008. Using these predictions - of market direction - assist in advising our clients.

Ownership. Tricky - but crucial! Commercial real estate owners are one of two genres - owner occupants or owner investors. The former owns the premises and occupies the parcel with his business. If an owner relies upon the rent generated by the building - with no ties to the occupant - he’s an owner investor. Here’s where the expertise is needed - piercing the ownership entity. If High Dollar, LLC owns the real estate and ABC Manufacturing, Inc. is housed there - is the owner an occupant or investor? The only way to know is to research the common members of the LLC and corporation. See what I mean?

Occupancy. Easier! A simple canvass, phone call or door knock will yield this information - but its time consuming. Whether the resident leases or owns the site is another matter and relates to the ownership section.

So there you have it! Easy business. Hmmm. Not so much.

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