Friday, December 31, 2021

Does Your Team Have Too Many Quarterbacks

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Ahhh, winter! The smell of burning fires, a few sprinkles down low and snowflakes in the higher elevations, cooler temps, the non-stop cadence of Christmas carols - its college football bowl season! A sport that’s truly American in its origins. Whether you played at a professional level or are just a fantasy geek - we ALL have played football!
What the heck does football have to do with commercial real estate? Indulge me and I will try to explain.
Some would say that the quarterback is the most important player on the gridiron. Certainly, in every level the quarterback is in charge. For all of you who have coached football at any youth level, you know that every kid wants to play QB. I still recall my first practice as coach of the All Star team. I showed up to be introduced to several quarterbacks. How do you field a team with that? The answer is you can't and nor can every kid play the position. A successful football team requires eleven offensive and eleven defensive players who can block, tackle, snap, pass, catch, run, and kick - a group effort.
Now to commercial real estate. As some of you are aware, I recently added an administrative assistant. I am building a team. Our assistant will work across from another team member who’s position is to execute the business we generate. Some refer to the role as a transaction coordinator. So far everything is proceeding nicely. We are a week in and she is learning, helping, and assimilating the myriad things we do as commercial real estate practitioners. But why is she doing well? Is it my expert training, my good natured soul, my dashing good looks, dumb luck? Maybe all or none of these, but probably some of these reasons. I would offer that the main reason we are achieving some success is because we are not all quarterbacks. The three of us have our distinct roles and responsibilities which intersect but are autonomous at the same time.
Building a commercial real estate team, hints:
  • Look for role players, not all "rain makers"
  • Place an emphasis on compatibility
  • Don't add a team member, just because your company will pay for it...
  • Think long and hard about what is "missing" from your practice and staff accordingly
  • Can the role be filled virtually?
  • Pretend you have a virtual assistant for a week or so and imagine what the team member would be doing for you that day
  • Consider carefully your strengths and weaknesses - I know, I hear a collective - we're good at everything" - Uhhh, no you are not! Or even in rare cases, just because you are doesn’t mean you should complete the tasks.
  • Family members are great but they are family members. One step removed is good - one of our team members is our son-in-law. If you changed their diaper, they may not heed your mentor ship.
  • Carefully craft a compensation package that will allow learning but provide incentive.
Good luck to you with all of the quarterback on your team. You may want to mix in a wide receiver. After all, someone must catch the ball when it’s thrown.
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

Friday, December 24, 2021

How’s the Market?


In conversations with friends, colleagues, prospects, and the like - I get asked this question frequently - how is the commercial real estate market? My answer varies based upon the perspective of the questioner. Specifically, if you’re an owner/investor in a building where people make and ship things - AKA an industrial building - you’ve experienced an exponential growth in values. Chances are, the rent you receive from your tenant has outpaced our crazy inflationary uptick. The flip side? As an occupant of said industrial property - you’re facing dramatically increased costs for 2022. If a relocation is forecast, plan on very slim pickings of places to move.
As an owner of a suite of offices, you’re facing a different condition. You see, the uncertainty fraught by the pandemic has stalled movement. Consequently, most are writing shorter leases with little (if any) rent growth - to keep spaces filled and cash flowing. Tenants who can predict needs and are willing to commit to longer terms are finding significant motivation from landlords.
Retail - wow! That subject is column worthy by itself.
Now. How do we as commercial real estate practitioners deal with these meandering market metrics? Well, once again, it’s specialty focused - office, industrial, or retail and importantly - which side of the transaction you serve. Our team’s focus is approximately 40% owner and 60% occupant representation. If we’re on one side we rarely straddle the aisle and create a dual agency. Quick recap. Dual agency is allowed in California real estate transactions and refers to one broker repping both buyer and seller. Therefore. Our sale and lease assignments - where we are engaged to assist an owner find a buyer or tenant for a vacant building - are akin to attending a five year old’s birthday. Chaos and multiple gifts ensue. Myriad inquiries, requests for showings, multiple offers, over bids, and vetting occupant qualifications soon follow. All we need now is a bounce house. We recently took a listing in Santa Ana. We launched on a Friday. 61 inquiries, 22 tours, five offers - four at ask or over - unfolded over the next three days. Yeah. It was insane! And we hadn’t even cut the cake. A different effort is involved with our occupant needs. We resort to hand to hand combat. By this I mean - air support is over - a search of the multiple listings yields no alternatives. The heavy artillery has been expended - conversations with active brokers who may have something downstream don’t. Ammunition is exhausted - a quick mailer to the market also comes up crickets. What remains is mano y mano. We pull a list of everything - occupied and available - and start dialing property owners - hoping to catch a break. Two such searches have now eclipsed one year! Fortunately, we prepared their expectations. Another tactic we employ is a very frank conversation on how to stay put and make do. Adding an office or two, taking advantage of under utilized stacking, outsourcing a piece of the operation - all can achieve this.
I guess we could simply respond - when asked - how’s the market? Well, it depends!
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

Friday, December 17, 2021

My Commercial Real Estate Holiday Wish List


With Thanksgiving a recent memory, Chanukah in full swing, and Christmas fewer than 30 days away - it’s time for some holiday spirit! Sure. Costco has had holiday decorations since October 1 - but I digress. Countless kiddos around the globe - including our five grandkids - are assembling their lists. I thought it would be fun to pencil my 5 hopes for the 2022 commercial real estate market, AKA my shopping list for this year. So, with no further ado, here goes.
A more balanced market. Industrial real estate - buildings where folks make, store, and ship things, has been on a tear for the past six years. Currently, fewer than one in every one hundred structures are without an occupant! With demand outstripping supply, lack of new construction, a shift in the way consumers shop, and a hyper appetite for stuff - we find ourselves with an acute imbalance. Pricing for offerings has skyrocketed as a result and many wonder if rents are sustainable. So next year, I’m wishing for a bit more sanity. 
Disappearing office uncertainty. I’ve often opined, transactions occur when activity is waxing or waning. But uncertainty is a killer for a business reliant upon movement. Our office market has witnessed some big office deals - the sale of the former OC Register site and purchase of the campus previously occupied by Bank of America in Brea - by Amazon alike. But, a repurpose is in store for both. Gone are the former suites housing executives to middle management to clerical staffs. Replaced by worker sedans are countless blue delivery vans. Pandemic pressures shifted the office paradigm as companies countered with “hybrid” approaches - smaller footprints, virtual workplaces, less collaborative layouts. Wishing here for some long term leases on big blocks of offices. 
Solving the port issue. Talk about a perfect storm! Akin to an anaconda consuming a Thanksgiving meal or six - the bulge of e-commerce containers is slowly moving through. Many much more informed than I have waxed about the causes. Simply, all points of the supply chain are crimped - causing massive delays, shortages, and escalating price tags. Certainly, some reduction in regulation would help. A bit more warehouse space could counter. Asking America to pause its purchasing for a period? I’m wishing for a stable flow by July 4th. 
Continued low interest rates. Rising interest rates might be the best for us - like ripping off a bandaid. But, wow! How incredibly painful for an economy reliant upon cheap money. Our ten year treasuries - the benchmark for commercial real estate lending - has hovered in the low 1% range for a few years. Great for borrowers, but awful for savers. As our population ages and more of us are on fixed incomes - a bump in returns would be welcome. However, don’t forget that $1.2 trillion bag of goodies that must be repaid. Rising rates would make the payback more costly. All in all, my wish is for more of the same. 
A more diverse industry. Commercial real estate brokerage has historically been male dominated. However, two fall conferences we attended, evidenced change. I was thrilled to see over 40% women and minorities at the Commercial Real Estate Influencers Summit and Society of Industrial and Office Realtors Global event. My wish is for the face of commercial real estate to reflect our world. 
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

Friday, December 10, 2021

37.2% Inflation?

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Encouraged by my late father - thank you, Dad - I studied economics in school. Little did I know, the degree would provide me with an understanding of things such as supply, demand, inflation, markets and the like. Inflation. Much about this subject has been written, opined, commented upon, and dissected recently. Sure. Inflation is a tax. Why you might ask? Because if you go to your local Chevron, insert your debit card, pop open your tank and fill ‘er up - you’re shocked at how few gallons $20 will buy. Not long ago - like in early 2020 - gasoline prices were in the mid $3.00 per gallon range. Now? North of $5.00. Simple math. Gasoline is now 42.8% more expensive! Have your wages increased 42.8%? Yeah. I didn’t think so. So, with slightly more in your paycheck this year - say 4.5% - and with one of the things we buy often - gasoline - 42.8% more expensive - your take home pay has been “taxed”. Because, quite simply, your dollars are fewer and buying power decreased.
A similar bump is occurring with industrial real estate sales pricing. In 2009 and 2010 - during the Great Recession - here’s what was happening. If you drove down East La Palma Avenue in East Anaheim - one of our industrially zoned corridors in North Orange County - you’d have encountered approximately 22 buildings larger than 50,000 square feet available for sale. Average asking sale prices were $75-$80 per square foot. Thus, you could buy a 65,000 square foot building for just under $4,900,000. Recently, a similarly sized offering closed at over $25,000,000! For those scoring at home, that’s an annual increase of 37.2%!
What about rents? Let’s use an example in the Inland Empire East - that area east of I-15 including the cities of Riverside, Perris, Moreno Valley, San Bernardino, Colton, Rialto, Fontana, Beaumont and Banning. Massive amounts of new construction have occurred in this corridor as vacant land abounded and the demand for taller, bigger, well equipped logistics space prevailed. After all, that stuff you buy on Amazon must be stored and distributed from someplace. Only four short years ago, prevailing market rates were in the mid $.40s. Therefore, your thirst for 250,000 square feet was quenched by paying a landlord $112,000 per month. Now? That same 250,000 - if you could find one, BTW - would require $250,000 per month! A 123% increase over four years - 30.8% per year.
Ok. So what does this portend for owners and occupants of industrial real estate in Southern California? As predicted in the darkest days of the financial meltdown, the worm will turn! Idiomatically, “you say the worm has turned if someone who has accepted a lot of bad treatment from other people without complaining suddenly decides that they are not going to accept the situation any longer.” Indeed, the worm has. Owners are enjoying an unfathomable increase in their fortunes - as anticipated eleven years ago - but the extent of which no one could have foreseen. Occupants - the beneficiaries of motivated owners and plentiful vacancy - are experiencing a spike in their facility costs. And. Expect much higher rents going forward as exampled above.
Akin to a Space X craft, will this astronomical upward trajectory continue? In the short run - two to three years - in my opinion, yes. Why? Back to my economics degree studying supply and demand. With a ravenous appetite for more space (demand) coupled with a limited number of available buildings (supply) and mix in $1.2 trillion of stimulus dollars and you create a classic case of too many dollars chasing too few goods - which results in a higher price tag.
But, there’s hope. The worm will eventually turn! She always does.
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

Friday, December 3, 2021

Courses for Horses

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In my formative years in Texarkana, Arkansas - I played a fair amount of golf. You see, I was too slow and skinny to play football, and found it difficult to create space under my sneakers - making basketball a non-starter. We didn’t have the cool school sports of today such as lacrosse, swimming, and volleyball. Who knows. I might have sucked at those as well. Relegated to the golf course were my extracurricular sporting efforts. A saying during that time - “horses for courses” became a part of my lexicon. It describes how certain golfers do well on specific golf courses - while others languish. Jack Nicklaus won six Masters green jackets on one course while Lee Trevino never won at Augusta National. Weird.
You might be wondering - what the heck does that have to do with commercial real estate? Please indulge me as we play a round…figuratively.
As described many times in this space - industrial occupants are either manufacturers, warehouse logistics providers, or some combination. As examples - plastic injection molding, aerospace tooling, and Ramen noodle producers are all making a product. Raw materials are received, a process is completed, the finished goods are temporarily stored, and out the door they go. Simple. You may be thinking. Hmmmm. Are the types of companies above manufacturers or warehouse logistics operations? After all, some things - raw materials and finished items - are stored and shipped. They are by definition manufacturers because something that enters - flour, oil, and water - exits differently, Ramen noodles.
So with that background - what kind of “course” does this “horse” need in order to succeed? Certainly, a building zoned for manufacturing - generally classified as M-1, M-2, Light or Heavy manufacturing, or business park. Next, given the specific process undertaken - in the case of our Ramen guy - where and how (truck or rail) will things such as flour, oil, and water enter the plant. Once in, will they be stored or thrust immediately into machinery? How will the enterprise deal with layout? We’re making food. Can a dirty warehouse suffice or will we require a more sterile area? Those large mixers, boilers, and cutters will require many amps of electricity. Finally, will the finished food be temporarily warehoused or packed onto idling trucks? As you can appreciate, not every “course” will be suitable. So, critical are said power, appropriate zoning, layout conducive to food production, and adequate ways to get in and out. Less important are amenities such as the height of warehouse ceilings, fire protection for the high piled commodities stored, and massive truck courts.
Let’s now shift to our warehouse logistics operators. Easiest to describe is Amazon - the masters - sorry - of supply chain distribution. Simply, all of the items you source, click, and purchase from your device follow a similar path. Someone - not Amazon - but like the manufacturers described above - makes something. In the case of a Kohler faucet, in Wisconsin. A Kraus sink, in China. A head of lettuce, the San Joaquin valley. Then the gargantuan Amazon distribution center gets it - by ocean container or rail to truck - refrigerated or not - to warehouse. Your online order is received, picked, packaged, boxed, labeled, and shipped to your door. Boom. I’ve over simplified the entire supply chain - but you get the idea. In order to efficiently house an Amazon warehouse - certain features are mandatory. Clearly zoning. Some cities limit truck traffic. Ooops. Can’t go there. Because of the volume of goods intake, needed are a significant number of doors that can unload trucks. Now what? Well, pile it up as high as possible while inside. You’ll need to think about the stacking height and whether the stuff will burn. For example, our Kohler sink will not burn but our plastic bottles of shampoo will. Therefore, the fire department will have a say on the fire suppression used. Even with all the prevention - an Amazon warehouse burned to the ground in Redlands, recently. Liberty, Liberty, Liberty…Liberty! - but I digress. Finally - and in an ideal setup - different doors capable of loading the orders onto departing trucks or vans. Less important? Power. Because production machines aren’t employed.
As if the amount of available inventory was not acutely lacking - now we understand not every “course” fits the “horse.” Further limiting supply.
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