5 LOVE Languages of Commercial Real Estate Brokers

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 My wife, Carla and I were introduced to Gary Chapman’s book, The Five Love Languages, in 2011. This classic easy read was originally published in 1995 and contains the keys to a successful relationship - by understanding your mate’s love language and learning to speak it!

If you are unfamiliar, as was I, with the five languages, they are touch, time, affirmation, gifts, and service. It is quite coincidental that we discovered the book while on a forty-five day road trip around the US. Carla’s language is time and mine is affirmation - so the trip was time spent together with some affirming words to me that we wouldn’t go broke as we abandoned our day jobs for a little R and R.

The book caused me to reflect recently on the five love languages that we experience as commercial real estate brokers - so I decided to spend some time in your service, touching the keys to exercise my creativity in producing this gift to you. Hopefully, at least four or five of you out there provide me with some affirmation - whew! Got ‘em ALL.

So, in no particular order, here are the five love languages of Commercial Real Estate - AKA, what drives us.

Money. You will know this guy’s language straight away if you get in the way of a money driven broker and a dollar bill. He will bowl you over to get to the greenback. This broker will sacrifice his client for the commission and is looking for the quickest way to the paycheck. Doing what’s best for the client? - only if it results in the largest

fee - not my favorite guy with whom to negotiate.

Relationships. Golf, Laker’s games (well maybe in the early 2000’s), cocktails, lunches, gifts at Christmas, gifts at birthdays, gifts for gifts - this guy is ALL about the relationship and keeping the client happy, healthy, well fed and well watered. Generally, his clients are his friends as well. Dining with spouses, vacations - why not invite a client/friend to join. 

Analysis. Sometimes referred to in the biz as the “over broker”, this practitioner’s hallmark is the spreadsheet. Lease vs buy, effective rent, amortization, termination penalties - you name it, he spreads it - he spreads even your thinning patience. Done in the name of “what’s best for his client”, this broker is a frustrated engineer. Let’s just zoom back here and see the deal for its good points, shall we?

The “Deal”. AKA, the deal junkie, this guy is all about making transactions - big, small, it simply doesn’t matter - he just enjoys watching two parties say yes. He would have been a justice of the peace but the hours suck. Generally, this guy is creative and has myriad transaction experience from which to draw. If you move on past his listing, he will hound you until you place your occupant in another building - then he will hound your client.

Drama. Proportions are blown with this fellow. The simplest item becomes a federal case and you wonder if he even consulted his client before he blew his stack. Yelling, screaming, and constant F-bombs are a steady diet. A smooth transaction is out of the question - what fun would that be?

Well, there you have the minimum. But I thought of a couple more - Bonus Languages.

Networking. Provisors, BNI, Chambers of Commerce, RBN, SIOR, CCIM - this guy is EVERYWHERE! Sometimes I wonder when he finds time to transact amidst this flurry of swapping business cards. His elevator pitch is honed, rarely delivered without passion, and with scant regard to the setting. Yep - even at his daughter’s dance recital!

Legalities. Few of us are lawyers but many of us get our Perry Mason on when negotiating a contract. Let’s leave the waivers of subrogation, mutual indemnities, and liquidated damages to those with ESQ following their names - shall we?

So, what is your Commercial Real Estate love language? I would really appreciate your comments.

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.

Should Commercial Real Estate Be More Like Amazon Prime?

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Aha, got ya! Catchy titles can do that, huh? If you doubt it for a moment, raise your hand if you checked out "Bruce Jenner's love child with Natalie Gulbis" in the latest Enquirer? I thought so! 

So, a bit of context. I was shopping with my bride of 40 years this week - actually, she was shopping, I was there for support. She wanted to buy a postage scale. We went to our local Office Superstore/Max/Depot and to our delight, there were five choices - all in stock and ready to follow us home. The problem was, the price. Ever the thrifty (which is one of the reasons I love her), she whipped out her faithful iPhone, scanned the bar code, and immediately discovered the scale could be purchased through Amazon Prime for HALF the price - with one day FREE shipping! OK, now she had my attention! But how were we supposed to have instant gratification, bag the bear, and take it back to our cave - today? The solution was to ask for a "price match" from the cashier. I should mention that I have socks older than the cashier - but I digress. Apparently, this merchant only matches cheaper prices on THEIR website - not from Amazon Prime. Guess what, the scale is still on the Superstore/Max/Depot shelf and not in our garage. The one in our garage was delivered by a friendly man in a brown truck yesterday. 

Should commercial real estate deals be more like Amazon Prime? Should some tech guru create an app that allows you to check the deal you're about to ink vs other owner motivation in the market? What if you were at the closing table and your client asked for a moment to check his phone. Oops, need a few more days to see this other property that just hit the market. Never happen, you say? The business is too complex, there are too many variables, no two spaces or owners are identical - etc, etc, etc. 

OK, I get it. All I know is that our friendly Superstore/Max/Depot lost a sale because THEY were shortsighted.

Are we shortsighted as well? Look. Commercial real estate deals - akin to fire - need three things to burn - an owner, an occupant, and a property. We layer in a few more variables as practitioners - what’s transacted, what’s available and price trajectory. Plus, our licensing allows us to bring the elements together, help the parties agree, and document the transaction.

Could a site eliminate the role of a broker? Potentially. Here’s how. An occupant can view available inventory through Loopnet. Maybe not as accurate as other walled gardens of inventory - but passable? For every Loopnet Listing - an owner awaits a bite from a prospective tenant or buyer. So you have the three elements - owner, occupant, and property. What’s missing? The platform from which to transact. Are there on-line portals for deals currently? Yessir! Ten-X. So would a marriage of these two spell the demise of our profession? I’ll leave that to Inquiring minds.

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.

Cut Out the Broker - Save 6%! Maybe Not

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I told the owner of my building, hey if you decide to sell, call me first. I'll buy it and we can avoid paying the 6%". REALLY? This was a conversation I recently heard. I was not eavesdropping, mind you. I was the guest of a network buddy of mine at the monthly meeting of trade organization. The conversation was between my friend and one of his clients - that I had met previously. As I stood there with them - I recalled trying to help him last year with some space issues he was facing - for FREE!

The comment really irked me and I flippantly responded, "yeah, by all means, cut out those greedy brokers!" The client quickly excused himself and walked away. He realized the comment struck a nerve.

I've thought about that encounter a lot over the past week and have tried to imagine myself in his position. If I leased a building and had an opportunity to buy it, would I "cut out the middle man?"

Indulge me and I will attempt to explain why I wouldn't - with full disclosure that I have seen the "end of the movie." By the way, I believe this buyer's sentiment is rooted in the premise that "we didn't find the building or negotiate" the deal - so where is the value? I also believe his position is on widely held by most occupants of commercial real estate.

Here is the value - a commercial real estate professional can anticipate the issues and structure the deal around them or formulate a suitable alternative. This is BEST done before final terms are negotiated, but sometimes, we are shackled.

So let's assume we are talking about a 20,000 sf building, a $4,000,000 purchase - or a $240,000 ($4,000,000 x 6%) dollar savings (potentially). $240,000 represents $12 psf on the square footage of the building. A lot of money for sure! However, if the buyer overpays (based upon market data that brokers track) this "savings" can be consumed quickly.

What if the property doesn't appraise? How does the buyer bridge the gap? Brokers are skilled at solutions due to the market comps, current avails, etc.

What if something "untoward" is discovered - historic hazardous materials, seismic zone, non ADA compliance, unpermitted office or other improvements, a sprinkler system that is inadequate, a lien against title? OK you get the idea. A seasoned professional - has overcome these challenges many times before.

Who will handle the management of the deal's execution - escrow, title, inspections, loan qualification, review of leases, estoppels, etc? A real estate attorney trained at identifying issues - but equipped to resolve them?

What if specialized consultants are needed in the execution process? Buyers can utilize our networks.

So how do you "hear the buyer's concerns?” Remember, the buyer is convinced you are excess baggage.

From experience, I reduce the fee and offer to manage the transaction. Specifically, in return for my involvement, the fee is 1-2%. I justify this because I didn't find the building or negotiate the terms - just like the client believes. But, I can add significant value from the agreement forward to close.

As we know, negotiating the terms is generally the EASY part. The execution is the difficult step. Win win, done!

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.

Trends, Trends, and More Trends!

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What is in store for the real estate market over the next 18 months? What about interest rates, commercial leasing, mall re-positioning, rent control, homelessness, and the question of “what keeps you awake at night?” These issues were volleyed by a panel of esteemed commercial and residential real estate professionals yesterday at the monthly luncheon of The Risk Management Association - RMA* On the dais were Jeffrey Bloom, EVP and Director of CRE, Comerica Bank, Steven Card, Senior Managing Director, Savills, Jack W. Carroll, Sperry Equities, and Brett Whitehead, President and CFO, Brandywine Homes. I found their comments column worthy so here goes!

Trends. Tight supply of commercial and residential offerings - fueled by tough city entitlement processes - which limits new construction. Older commercial real estate suffers from a lack of amenities - open concept layouts for office buildings, fitness centers and a general shortage of the stuff new workers crave. Adjusting these aging facilities will take an enormous amount of capital to retrofit.

Interest rates. Clearly, both sects - commercial and residential have benefited by the recent rate drop. Approaching 6% were rates last winter. The plummet this summer has created a bit of a residential buying spree. Cheaper mortgage rates also bring into play deals which otherwise might have been overlooked because of pricing. How long will the beneficial rates hang around? Who knows. Ask Jeff Lazerson!

Commercial leasing. Steve Card from Savills lamented the lack of suitable alternatives for his office tenants. With so few seats available - a game of musical chairs ensues. You don’t want to be left standing when the music stops. We’re experiencing similar frustrations with manufacturing and distribution space. What’s left on the market is a bit motley. Steve opined - and I agree - it would take a super large downturn in our economy to get vacancy back into the normal realm - 15% for office and 6% for industrial.

Mall re-positioning. Brett Whitehead of Brandywine homes shared with the audience - Brookfield Homes has purchased 150 regional malls nationwide! Seen as an opportunity to capture the “experience” many young residents seek - these well located, but vastly under-performing assets will be re-tooled into the neighborhoods of the future with proximity to dining, shopping, entertainment, and employment.

Rent control. General consensus among the experts was rent control is here to stay but is generous - 5% plus inflation. However, purchasing decrepit complexes with under market rents, refurbishing and jacking up the rates will no longer be a strategy.

Homelessness. Seen as a political rather than a real estate issue - the panel politely jettisoned this hot potato. Stay tuned.

What keeps you up at night? Steve Card, Savills - finding the right deal for his tenants in a market with very little available. Brett Whitehead, Brandywine Homes - delivery time of new neighborhoods. Jack Carroll, Sperry Equities - increasing costs and timing loan maturation with lease expirations. Jeffrey Bloom, Comerica Bank - earthquakes! As these are impossible to predict and underwrite.

*A bit about RMA. The Risk Management Association (RMA) is a not-for-profit, member-driven professional association serving the financial services industry. For more information, please visit their website https://www.rmahq.org/

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