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.