Making a Commercial Real Estate Decision Requires FOCUS!

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As a frequent reader of this column, you know how much I like acronyms! You may have seen my missives on NUCLEAR, ask MR BOB, and even one from my friend and neighbor, Rudy - CLIP. Acronyms and their sister, nemonic devices, got me through school - somewhat unscathed - as they train your mind to remember lists and/or a process. Today. Yep! Another one. Proper attribution must be given to my business coach, Rod Santomassimo of the Massimo Group for this sequence. If you’d like to learn more - he’s written a great book entitled Knowing Isn’t Doing - Don’t Kid Yourself. If you’re facing a commercial real estate decision - specifically a relocation - I’d suggest you run down the list and ask yourself a few questions. In other words FOCUS!

F. Facts. Your current location as an owner or an occupant of commercial real estate contains a set of knowns - facts. You been at your location for a period of time. You lease. You own, etc. Layer in such things as the expiration of your rental agreement or a loan maturity. Consider the drivers of your business and how those may have changed. Was a competitor acquired? Did you add employees or machinery since you moved in? By the way. At this point - you may already have a direction. Humor me. Work yourself through the balance of the exercise. Sometimes - results may vary. 

O. Opportunity. Let’s now carefully delve into what’s working with the building and importantly, what’s not. Examples of what’s working could be - your customers know where you are, freeway frontage provides free advertising, or the lease rate you negotiated is 20% below the market rates. However, if the spot causes your employees to park down the street or if your warehouse must be completely unloaded and reloaded so folks can work - those are problems. You may also want to give some reflection to the motivators when you leased or bought the real estate. Was the market on fire and you took what you could get with the promise of re-evaluation? 

C. Consequence. Simply. You’ll need to do some math here. Consider what happens if you do nothing vs something - in dollars and cents. We recently counseled a logistics company. Considered was converting a leased premise to an owned one with a lot more space. Clearly, the new digs were going to cost a great deal more. However, the downside of staying put and continuing to lease would cripple their ability to grow their business. The loss of revenue - by standing pat - was enormous. 

U. Understanding. Now you know your situation, have dived into what’s working or not, and have calculated the monetary impact of your options. All that remains is a road map. Proceed to the next step. 

S. Solution. As the solution is column worthy itself - you’ll have to tune in next week for some suggestions. 

So, please don’t lose FOCUS this week until we meet again. 

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.blogspot.com.