December.
The last month of 2025. Soon, families across Southern California will be lighting
candles, trimming trees, gathering for Hanukah, Christmas and Kwanzaa, and
counting down the seconds to a brand-new year. It’s a festive season - one that
always seems to arrive earlier and earlier, but I digress.
December
also brings something else: perspective. A reminder that 2026 will be here
before you know it, and with it a new set of opportunities and challenges for
commercial real estate owners and occupants.
While
many industries begin to slow down as the holidays approach, December is one of
the most consequential months of the year for anyone who owns, leases, manages,
or invests in commercial property. The final weeks of the year serve three
essential functions:
Planning
for the Year Ahead.
This
is the time when landlords evaluate rent rolls, upcoming renewals, debt
maturities, and operating expenses - and make strategic decisions for the
coming year. Occupants, meanwhile, revisit headcount projections, space needs,
and whether their current footprint still aligns with how they operate in a
post-pandemic hybrid world. In short, December is when next year’s real estate
strategy is set into motion.
A
Meaningful Recap of 2025.
Every
year tells a story, and 2025 was no exception. For owners, rising construction
costs, fluctuating interest rates, and evolving tenant expectations shaped the
narrative. For occupants, efficiencies, supply-chain recalibrations, and
shifting labor patterns influenced real estate decisions. A December recap
helps frame what worked, what didn’t, and what trends are likely to carry into
2026.
Preparing
for Critical Deadlines.
From
tax planning to lease notice periods to budgeting cycles, December is full of
dates that matter. Missing one can mean financial consequences - or missed
opportunities - well into the new year. Many companies don’t realize that
decisions made (or delayed) in December often determine whether next year’s
real estate costs rise gently, or spike dramatically.
As
we turn the page on 2025, December offers a rare moment to pause between what
was and what will be. Whether you own commercial real estate or occupy it, the
decisions you make in these final weeks set the tone for the year ahead. Take
the time to assess, adjust, and anticipate. With thoughtful planning and a
clear-eyed view of the market, 2026 can be a year of opportunity rather than
uncertainty. Until then, may this holiday season bring you peace, perspective,
and a prosperous start to the new year.
The Background:
I provide location advice to owners and occupants of industrial real estate in Southern California. Frequently, this advice results in a company buying a building to occupy. With prices at historic lows and cheap financing, this in many cases can result in a "rental" rate cheaper than a market rental rate. The "rental rate" I am referencing is the debt service achieved when applying the purchase price financed at today's low interest rates. When an ownership structure involves the owners of the business that will occupy the real estate...a terrific union is formed. The "company" pays the rent (debt service), and the owners benefit from the appreciation, depreciation, and stability of facility costs. What happens if the owner decides to sell the company (tenant)? Should the real estate be retained?
The Misconception:
When the owner of the company and the occupant of the real estate are identical...but defined by entity...the owner of the real estate controls the decisions of the tenant...length of lease, annual increases in rent, tenant improvements considered, etc. When an owner of a company decides to sell the company (tenant) and retain ownership of the real estate some misconceptions occur.
The new tenant will run the business the same as the original owner
The new tenant will decide to stay in the real estate for many years
The new tenant will pay rent in a timely manner
The new tenant will care for the real estate the same way as the original "tenant"
While owning real estate and the company that occupies the real estate may prove to be a sound financial decision, owning real estate while not owning the company may not be as sound. As an example, I encountered a closely held company that purchased a 50,000 square foot building for their use. The company occupied the building for eight years until the owners decided to sell the company. The owners retained the real estate and signed a five year "leaseback" with the new owners of the company. The owners of the real estate enjoyed a nice cash flow for five years. At the end of the five years, however, the company decided to vacate the building and relocate to a facilty in another state. The owner of the real estate was now forced to compete with other owners of 50,000 square foot buildings...in many cases better capitalized...to secure a new tenant. The owner could not secure a tenant and the owner was forced to sell the building in an undesirable dip in the real estate cycle.
The Solution:
We advise many owners in this situation to sell the building as a leased investment upon the execution of the new lease to an owner whose core assets fit the criteria. We then suggest reinvesting the proceeds through a tax deferred exchange into an asset class with less risk...IE a multi tenant project OR simply paying the tax on the proceeds and investing in a non-real estate asset.
By
the time you read this column, Thanksgiving will be relegated to leftovers and
gridiron scores. You’ve all enjoyed family and possibly gone to Irvine regional
Park to have your annual Christmas image made. Maybe you’ve even ridden the
Christmas train.
But
as the leaves continue to turn and fall, I wanted to take this opportunity to
give thanks for an amazing commercial real estate year and those that made it
so.
I’m
thankful for the folks at the Southern California News Group, especially my
editor, Samantha Gowen for your continued confidence and allowing me to publish
my missives here on a weekly basis.
I’m
grateful for all of the offices throughout the Lee & Associates network,
which allowed me to take their valuable time and deliver seminars on the
QUALIFY framework.
This
year found me publishing my very first book, The SEQUENCE. The reception among
friends, family, colleagues, brokers throughout the United States, and clients
has been remarkable. The book has resonated exactly the way I pictured it, as a
personal journey and framework for building a successful career and commercial
real estate. The title really hits as it is a double entendre. The first
meaning of SEQUENCE are the steps of a commercial real estate transaction. The
second and more important meaning, in my opinion, are the steps you take and
the decisions you make, that allow you to build a foundation to be successful
in our business. Thank you to all who have purchased the book, read it, and
taking the time to send me a note.
I’m
thankful to my clients who have trusted me with their precious commercial real
estate assets. That e-commerce distributor who expanded their footprint by
triple in the in the Inland Empire, that plastic bottle distributor who made a
flight to quality, and the national material handling company, who has trusted
me with their real estate business for the past 20 years and continues to grow
and amaze.
I
attended some memorable conferences this year, including the SIOR fall
conference in Louisville, Kentucky. Thank you to all who made it an
unforgettable conference.
And
finally thank you to my wife of 46 years, my confidant, traveling partner,
mother of our three children, grandmother to our six grandchildren,
accomplished author and tremendous friend. The life we’ve built together has
been nothing short of spectacular and I am forever humbled to be your husband.
My wife and I have been on a mission
since 2017 to visit all fifty states. After this weekend, we’ve now reached
forty-four, including Alaska and Hawaii. The only ones left are the great
plains states, Virginia, and Vermont. We were so close to Vermont last summer
but decided instead to spend a few days in western Massachusetts. In hindsight,
we should have crossed that border when we had the chance. Next year, we’ll
have to make a special trip to the northeast to finish the list.
This past weekend found us in the
Steel City, also known as “The Burgh”- Pittsburgh, Pennsylvania. When we drove
in from the airport and emerged from the I-376 tunnel, an incredible panorama
of skyscrapers opened before us. Framed by three rivers, the Pittsburgh skyline
is one of the most impressive I’ve ever seen. From our base there, we were able
to visit Steubenville, Ohio; Cumberland, Maryland; and Weirton, West Virginia -
all within a short drive.
You may be wondering what any of
this has to do with commercial real estate. If you’ve followed my column for
any length of time, you know I can’t help but look for real estate lessons in
everything I experience. This weekend was no exception. Let’s take a look at a
few takeaways from the Allegheny River Valley.
Steubenville, Ohio:
Protecting the Foundation. Just
across the Ohio River from West Virginia sits the historic town of
Steubenville. It began as a frontier fort designed to protect surveyors mapping
new land. Without those early surveyors, the land could not have been divided,
titled, or developed. In many ways, they laid the groundwork - literally and
figuratively - for the future economy.
The lesson for commercial real
estate is clear. Before any deal can progress, the groundwork must be done
properly. That means understanding zoning, confirming ownership, verifying
building conditions, and doing your due diligence before you commit. Much like
those surveyors, we protect our clients by defining the boundaries and
identifying the hazards. Skipping this step can leave you exposed, just as the
early pioneers would have been without a fort to retreat to.
Pittsburgh: Reinvention at
Scale. Once the beating heart of
America’s steel industry, Pittsburgh suffered a severe economic collapse in the
late 1970s and early 1980s. But instead of fading away, the city reinvented
itself. It invested in education, technology, and healthcare. Today, Pittsburgh
is home to world-class universities, robotics startups, and medical research
centers. Its economy no longer depends on steel, it depends on innovation.
This kind of reinvention is
something we often see in commercial real estate. Properties, like cities, go
through life cycles. A building once used for heavy manufacturing may find new
life as a logistics hub or a research lab. An outdated office building might
become a mixed-use creative space. The key is seeing potential where others see
decline. Pittsburgh teaches us that reinvention, when paired with vision and
investment, can lead to thriving new opportunities.
Cumberland, Maryland: The
Power of a Downtown Revival. Traveling
south from Pittsburgh, we stopped in Cumberland, Maryland, a small mountain
town with big character. Decades ago, its downtown looked tired and forgotten.
But today, it’s been completely transformed. Streets have been repaved,
buildings repainted, and storefronts refilled. There’s energy, color, and
commerce where there once was blight.
In our world, downtown revival
projects often start with one bold investor or a city initiative that
reimagines what’s possible. When one property owner takes the leap to remodel,
others follow. Before long, momentum builds. Cumberland shows us that with
vision and collaboration, even a struggling location can experience a
renaissance.
If you’ve ever driven through an
older industrial corridor that suddenly seems alive again - with breweries,
boutique manufacturers, and adaptive reuse projects - you’ve seen this same
story play out closer to home.
The North Shore: Building
Around Experience. One of the
most striking parts of Pittsburgh is its North Shore, home to the Steelers,
Pirates, and Pitt Panthers. Decades ago, this area was primarily industrial.
Today, it’s a bustling entertainment district filled with stadiums,
restaurants, a casino and hotels. What was once a manufacturing zone is now a
center of experience and energy.
Commercial real estate increasingly
revolves around creating experiences. Whether it’s a retail development
designed around community gathering spaces or an industrial project that
prioritizes employee amenities, success depends on understanding how people
want to use the space. The North Shore redevelopment shows how powerful it can
be when cities - and property owners - think beyond square footage and focus on
what draws people in.
Lessons from the
Allegheny. Traveling through the Allegheny
River Valley, I was reminded that markets evolve, industries adapt, and places
reinvent themselves. From Steubenville’s early foundations to Pittsburgh’s
transformation and Cumberland’s revival, the story is the same: progress
requires vision, courage, and a willingness to build something new from what
once was.
Commercial real estate is about much
more than bricks and mortar. It’s about understanding cycles, reading signs of
change, and helping clients navigate transitions. Whether you’re developing a
warehouse, repositioning an office, or reimagining a neighborhood, the
principles are the same as those found in the river valleys of the east -
prepare well, adapt quickly, and invest with vision.
My wife
and I just returned from Louisville, Kentucky; the home of Muhammad Ali,
Jennifer Lawrence, Louisville Slugger bats, the Kentucky Derby at Churchill
Downs, the “hot brown” open-faced sandwich and lest I forget - bourbon whiskey
by the barrel full! You see, we attended the fall conference for the Society of
Industrial and Office Realtors (SIOR). This year’s soirée was held in
Louisville, Kentucky.
On
the agenda was a bit of sightseeing, touristing, networking and world-class
learning from the best and brightest in our industry.
So
today, you’re getting a two-fer. What the SIOR Global Conference and
Louisville, Kentucky can teach us about commercial real estate.
The
horses are at the post, so here goes.
SIOR
Lesson #1: Relationships Trump Algorithms. No matter how advanced our tools become - CRMs, AI-assisted
valuations, digital twins - the commercial real estate business is still a people
business. The SIOR conference reaffirmed this. Deals still get done because
of trust, credibility, and consistency. The speakers
hammered home that in an age where data is everywhere, clients choose advisors
who care, listen, and show up - not just those who can crunch numbers.
Louisville
Lesson #1: Southern Hospitality Sells. From the moment we landed, Louisville reminded me that how
you make someone feel often matters more than what you tell them.
Every server, Uber driver, and shop owner radiated warmth. That same principle
applies in real estate. Want to stand out in a crowded market? Treat every
client like a guest at your table. The courtesy you extend today becomes the
relationship you close tomorrow.
SIOR
Lesson #2: Adaptability Wins the Race. One panel discussed industrial data centers and their
voracious need for cooling water and gobs of megawatts. These large boxes
filled with many smaller boxes are not your data centers from the late 1990’s.
The take-home? You must understand the “power story” and how to effectively
tell it. The brokers and owners who thrive are those who evolve with the market
rather than fight it. The best in our business don’t just react to
disruption - they anticipate it.
Louisville
Lesson #2: Reinvention Is in the City’s DNA. Louisville was once known primarily for bourbon and baseball
bats. Today, it’s also a hub for logistics, tech startups, and healthcare
innovation. Old factories are now creative offices and distilleries have become
experiential brands. Sound familiar? It’s the same evolution our properties are
following. Reinvention keeps you relevant - whether you’re a city or a
commercial real estate professional.
SIOR
Lesson #3: Community Builds Credibility. The SIOR network is more than a collection of brokers -
it’s a community. We share referrals, best practices, and market insights
freely. In doing so, we elevate the profession. When one of us succeeds
honorably, all of us benefit. That’s a powerful reminder that collaboration
beats competition, especially in an era when clients expect local expertise
with global reach.
Louisville
Lesson #3: Pride of Place Matters. Louisville doesn’t try to be Nashville, Chicago, or
Dallas. It leans into what makes it Louisville: horse racing, bourbon,
history, and heart. The same applies to commercial real estate. Know your
market, celebrate its quirks, and champion its strengths. Whether you’re in
Pittsburgh, the Inland Empire of SoCal, or Manhattan , authenticity attracts business.
Final
Furlong: What It All Means
The
SIOR Fall Conference and the city that hosted it delivered the same message in
different accents:
Success
in commercial real estate - and in life - isn’t about chasing trends. It’s
about relationships, adaptability, community, and authenticity.
Louisville
may have been 2,000 miles away from our home in Orange County, but its lessons
fit perfectly here in Southern California. Because whether you’re selling
bourbon or buildings, the fundamentals remain the same: serve people well, stay
curious, and keep learning from every stop along the way.
I must
admit, I used to be a huge baseball fan. The crescendo of my fandom occurred in
2002 when the Angels prevailed over the Giants in the seventh game of the World
Series. I couldn’t imagine it ever being any better than that season, so my
interest waned. Last night, I found myself tuning in for the seventh game
climax and oh my goodness, what a game!
You
may be wondering what the seventh game of the World Series has to do with
commercial real estate. Indulge me for an inning or two while I explain.
1.
Never assume the game is over. In the Game 4 win vs. the Philadelphia Phillies, the
Dodgers prevailed 2-1 in 11 innings thanks to a bases-loaded, two-outs scenario
that turned on a misplay.
CRE
lesson: Deals may drag on, go to “extra innings,” or appear stalled. Staying
engaged, remaining ready and spotting the opportunity when it comes can make
the difference. Just because it looks like lapsed momentum doesn’t mean the
deal is dead.
2.
Deals like ballgames can turn on one swing. Last night, the Dodgers were down to their last outs until
an unlikely number two hitter launched a home run in the top of the
eleventh inning. Then in the bottom of the inning they held on by stranding a
runner on third with one out and turning a game-saving double play. Game over!
Dodgers win.
CRE
lesson: That’s commercial real estate in a nutshell. You don’t always win with
your cleanup hitter. Sometimes the surprise player steps up. And when pressure
mounts, execution and defense matter as much as offense.
3.
Keep depth and “bench strength” ready. In that win and others, the Dodgers relied on talent beyond
their starting pitchers and starting eight with role players stepping up.
CRE
lesson: Build a team and system so you have back-up options: alternative
properties, secondary brokers, backup financing, contingency plans. When the
“regulation innings” don’t finish the job, you’ll want your bench ready to step
in.
4.
Execution under pressure counts. The 11th inning is the “extra” inning with fatigue, stress,
and uncertainty all rising. The Dodgers executed.
CRE
lesson: As deals drag closer to closing - or during unforeseen disruptions
(zoning issue, financing hiccup, tenant pull-out) your ability to execute
calmly under pressure distinguishes you. Systematic processes, clear roles,
pre-planned checklists help you perform when others choke.
5.
Persistence builds culture.
The Dodgers’ repeated success in extra-innings, high-leveraged situations shows
a mindset and culture of fighting until the end.
CRE
lesson: Over the long term, cultivating a team/brand that refuses to give up,
that always follows through to finish strongly builds credibility. Your track
record in “extra innings” (long deals, tough markets) becomes a differentiator.
6.
Use the moment to build story and momentum. Such a dramatic win becomes part of the team’s narrative.
CRE
lesson: When you bring a deal over the finish line under challenging
conditions, tell it. Use the story to broadcast success, attract next clients,
build your reputation.
Every
commercial real estate deal has its ninth-inning moment, when the outcome can
shift with one good swing or a steady glove. The brokers who win are the ones
who keep believing, keep executing, and never let the pressure change their
approach.
One of our grandsons is active in the Cub Scout program. His
mom, our daughter, has found herself thrust into the role of outdoor activities
manager for the den. She asked if I wanted to tag along with our grandson and
her on a weekend camping trip to Oso Lake. I haven’t slept on the ground in
twenty years - but the weekend sounded fun - so I agreed to go.
My recollection of Oso Lake was during its private bass fishing
era. Apparently, it was leased to the Boy Scout program in around 2008 and it
has been converted to an overnight campground for Scouting of America.
You may be wondering, what an overnight Cub Scout camp out has
to do with commercial real estate. Only these things. Please indulge me as I
review a few.
Adaptive Reuse and Repositioning: The Oso Lake Model
My first thought upon arriving at the camp wasn't about tent
poles or s’mores, but about adaptive reuse and repositioning. Here was a
property - a former private fishing lake - that had changed its highest and
best use. For decades, it was a specialized recreational asset. Today, it's a
bustling youth campground.
In Southern California commercial real estate, this pivot is the
name of the game, especially with the shifts we've seen in office and retail.
Think of an older, vacant office park being converted into much-needed
multifamily housing or a sprawling aerospace campus repurposed into a warehouse
project. The physical location remains, but the function and therefore the
value driver completely change. Oso Lake proves that even a property with a
strong legacy can find a new life and a more vital role in the community by
adapting to a new demographic and market need.
Zoning and Entitlement: You Need the Right Permit for the
Campfire
We had specific rules about where we could set up our tent,
where the cars had to be parked, and even the type of fire we could build. No
rogue campfires allowed - you had to use the designated, permitted fire pit.
In commercial real estate, this translates directly to zoning
and entitlements. You can have the best vision for that old shopping center
(say, turning it into a mixed-use development with apartments and ground-floor
retail), but if the city's zoning code only allows retail, your project is dead
in the water - or facing years of costly, uncertain negotiations.
Just like a Scout leader needs the proper fire permit, a
developer needs the proper zoning and approvals to execute a project. Southern
California's local jurisdictions are all unique, and mastering those specific
rules is as critical as mastering the knot-tying merit badge.
Demand Drivers and Demographics: Who is Your Tenant (or Camper)?
Who is coming to Oso Lake now? It's not the exclusive
bass-fishing crowd; it’s families, Cub Scouts, and school groups. The Scouting
of America program understood the demographics of their users - families
looking for structured, safe, accessible outdoor experiences - and positioned
the property to meet that specific demand.
This is the very essence of understanding the market in our
region. Are you developing an industrial park? Your tenant demand is driven by
e-commerce, logistics, and supply chain efficiency. Are you building a new
Class A office building? Your tenant is driven by a desire to attract talent
with amenity-rich, highly-collaborative spaces.
Just like the Cub Scout program must cater to the needs of young
families, your commercial property must cater to the evolving needs of the
businesses and people who will occupy it.
The camping trip was a great reminder that success, whether in
the woods or in a boardroom, comes down to understanding the fundamentals:
adaptability, playing by the rules, and knowing your audience.
Now, if you'll excuse me, I need to go see if my grandson packed
out all his trash. That, too, is a lesson in good stewardship - a topic for
another column entirely.
Our
travels took us to Dallas, Texas for the last week of the State Fair of Texas -
the world’s largest state fair - I’m told. After all, everything is bigger…
Anytime
we travel, I always look for a lesson or two or at least a way to improve
brokering commercial real estate. This trip was no different, but maybe a bit
harder to ascertain.
So
maybe a look at how the Orange County Fair and State Fair of Texas differ would
be fun with a bit of commercial real estate mixed in. If you’re up for it, here
goes.
The
first thing that hits you at the Texas State Fair is the scale. It’s enormous.
Big Tex greets you from his perch above the fairgrounds, smiling down on acres
of exhibits, food stalls, and carnival rides. The Orange County Fair by
comparison feels more intimate, more navigable, and, well, more California
casual. Both are successful in their own way, but they serve different
audiences with different expectations.
Commercial
real estate is much the same. Some markets operate on a Texas scale - huge
industrial parks, massive logistics hubs, and sprawling development tracts.
Others, like Southern California, require creativity within tight boundaries.
We don’t always have more land to build on, so we learn to repurpose,
subdivide, and modernize. It’s the difference between having a wide-open canvas
and mastering the art of working inside the frame.
Another
noticeable difference is pace. At the Texas fair, people linger. They stroll,
talk, eat, and soak in the atmosphere. In Orange County, we move faster. We
come for an afternoon, check a few exhibits, maybe catch a concert, and then
we’re on to the next thing.
This
mirrors brokerage styles. In some regions, deals develop slowly through
long-term relationships and measured conversations. In others, the tempo is
brisk - speed, competition, and timing often determine who wins. The best
brokers, like fair organizers, understand their crowd. They adjust their rhythm
to match the market.
Then
there’s the food. At the State Fair of Texas, deep-fried creativity reigns
supreme. Fried butter. Fried bacon-wrapped hot dogs. Even fried cookie dough.
It’s indulgent, over the top, and delightfully unapologetic. At the Orange
County Fair, you’ll still find your share of fried temptations, but there’s
also a nod toward fresh, local, and organic.
This
difference in flavor has a lesson too. In brokerage, knowing your client’s
appetite is everything. Some crave big, bold moves - buying large portfolios,
chasing redevelopment plays, or taking on risk for the promise of reward.
Others prefer steady, predictable, and sustainable decisions. Our job is to
serve what satisfies, not just what’s trending on the midway.
I
also noticed something subtle but powerful at both fairs: community pride. The
Texas fairgrounds tell the story of the state - its agriculture, innovation,
and culture. The Orange County Fair showcases local artists, small businesses,
and family-owned farms. Both fairs remind their visitors that they’re part of
something larger.
Great
commercial real estate brokers do the same. We connect businesses to
communities, not just buildings to tenants. When a manufacturer expands, a
warehouse fills, or a property sells, we’re shaping the local economy. Every
transaction adds a thread to the fabric of the region we serve.
So
what can the State Fair of Texas teach us about commercial real estate?
That
size matters, but so does fit. That pace varies, but focus wins. That knowing
your audience - whether they want fried Oreos or fresh fruit - is the key to
satisfaction. And most importantly, that pride in place transforms transactions
into relationships.
As
Big Tex would say, “Howdy, folks!” Whether you’re buying, selling, or leasing,
make your next deal something to smile about.
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.
Our travels took us to Philadelphia, Pennsylvania
last week. No. Not for the pivotal Dodger vs Phillies series but for a stop on
my book tour and bit of work. Yes! We were able to sample a Philly cheesesteak
- alas a vegan one - and ascend the Rocky steps to city hall. We even attended
a musical in the same theatre Thomas Jefferson graced in 1807.
You may be wondering what a trip east can teach us about commercial
real estate? Indulge me while I review a few reasons.
Legacy matters. Walking the cobblestone streets of Old City, you are reminded
that history leaves an imprint on everything. The architecture tells a story of
adaptation and endurance. Buildings that once housed print shops or tanneries
now host tech startups, art galleries, and coffee roasters. The lesson? A
well-built structure can live many lives. In commercial real estate, we often
focus on the next deal, but Philadelphia reminds us that long-term vision and
sound fundamentals outlast the trends of the moment.
Density breeds creativity. Every block in the downtown core bursts with energy. Office
towers sit shoulder to shoulder with residential conversions and vibrant
street-level retail. It is a living example of how proximity drives
collaboration. In Southern California, where sprawl is our default, we can
learn from Philadelphia’s mixed-use fabric. The best projects today are those
that layer uses - industrial with office, retail with residential, community
with commerce. When people and ideas collide, opportunity follows.
Transit changes everything. Unlike most West Coast cities, Philadelphia was built for
pedestrians and trains, not cars. That simple difference shapes land use,
property value, and even tenant demand. Industrial users there still rely on
rail access. Office tenants value walkability. Neighborhood retailers thrive
because foot traffic never stops. The takeaway for us is clear: accessibility
sells. Whether through freeways, ports, or planned transit corridors, the ease
of connection defines the worth of location.
Pride of place builds value.
Philadelphians are proud of their city. You can feel it in every mural
and every conversation at the corner market. That civic pride translates into
investment, maintenance, and long-term ownership. As brokers and owners, we
know that when people believe in their community, properties stay leased and
values rise. A clean street, a cared-for façade, or a supportive business
district can elevate an area faster than any zoning change.
Reinvention is not a phase - it is a
way of life. From its colonial roots to its
modern skyline, Philadelphia has reinvented itself countless times. Industry
shifted. Populations moved. Yet the city continues to evolve, not resist. That
spirit of adaptation is exactly what today’s commercial real estate world
demands. Office conversions, e-commerce distribution, re-shored manufacturing -
all of it requires the same willingness to look at existing assets and ask,
“What could this become?”
So, what can the City of Brotherly Love teach us about commercial real
estate? That legacy, density, access, pride, and reinvention are not just urban
characteristics. They are timeless business principles. The best deals, like
the best cities, are those that continue to create value long after the ink
dries.
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.
Last weekend, I attended
my 50th high school reunion. It was a night filled with laughter, memories, and
the occasional moment of “Wait, who are you again?” Fifty years. That’s a long
time. My high school English composition teacher, Mrs. Beck, would be pleased
I’m still using complete sentences, correct punctuation and an occasional pun.
But I digress.
As I looked around the
room, I couldn’t help but notice how much this gathering had to say about the
business I’ve spent my life in: commercial real estate.
The Power of Relationships
A reunion is really a
relationship check-in. You see the people with whom you stayed in touch, and
you also rediscover connections that simply went dormant. Some classmates
reminded me of things we did decades ago that I had forgotten. It struck me
that commercial real estate works the same way. Relationships never really
expire. A client I helped in 1998 might call me today with a new need. When you
treat people right, time becomes an ally, not an obstacle.
Cycles and Constants
At the reunion venue, I
saw the full spectrum of change. Hairstyles, waistlines, and technology have
certainly evolved. Yet the essence of people remains constant. The same is true
of our business. Markets rise and fall. Interest rates climb and dip. Industrial
demand surges and softens. But the fundamentals never change. Location, supply
and demand, and integrity still matter more than anything else.
Adaptation Equals
Longevity
A few classmates had
completely reinvented themselves. They took risks, learned new skills, and
embraced change. Others had refused to evolve and seemed stuck in time. In real
estate, the difference between thriving and surviving often comes down to the same
thing. Those who adapt to new tools, new markets, and new client expectations
remain relevant. Those who don’t fade into memory.
Legacy Over Titles
No one at a 50th reunion
brags about their job title or income. The conversation turns to family,
friends, and impact. That perspective hit me deeply. In commercial real estate,
we can get consumed by the next deal or the next commission check. Yet, in the
end, our legacy is not measured by the size of our portfolio but by the
reputation we built and the people we helped along the way.
The Long Game Always Wins
Some of the strongest
friendships in that room began with small moments fifty years ago. The same is
true in brokerage. A quick conversation, a handwritten note, or an act of
service can echo decades later. The long game always rewards those who play it with
consistency and care.
Fifty years of shared
history reminded me that success in both life and commercial real estate is
about connection, character, and commitment. The deals come and go. The
relationships endure.
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.
M
any family-owned businesses face this reality at
some point: you decide to sell your company.
Congratulations! It’s the culmination of years,
maybe decades, of hard work. But if your business occupies real estate, whether
owned by a related entity or leased from a third party - there’s another big
question: what happens to the building?
The answer depends largely on whether your
company owns the property
through a related entity or simply leases space from an unrelated landlord. Each path requires a different
strategy.
Scenario One: Owned Real Estate
If your operating business occupies a building owned
by you or a related entity, several options emerge:
Sell the real estate before the business sale. You can sell the building to an owner - occupant and arrange to
vacate once the company transaction closes. This separates the real estate deal
from the business deal, providing clarity for all parties.
Lease the building to the buyer of the business. Instead of selling, you might keep the property and sign a lease
with the buyer of your company. This allows you (or your family entity) to
continue collecting rental income long after the business changes hands.
Formalize a lease before the sale of the business. Another option is to establish a lease between the related
entity (property owner) and the operating company before selling. This locks in occupancy terms, giving the buyer
certainty and making the business sale potentially more attractive.
Scenario Two: Leased Real Estate
If your company rents from an unrelated,
arm’s-length landlord, the conversation is different. In this case, the
business buyer will want to know:
• How much time is left on the lease?
• Are there options to renew or expand?
• Is the rental rate market-competitive?
A strong lease can be an asset to the sale, while an
expiring or above-market lease can become a liability. In many cases,
negotiating an extension or adjustment with the landlord before selling the
business can smooth the path for a transaction.
Why This Matters
Buyers aren’t just purchasing your business
operations - they’re buying continuity. If the real estate arrangement is
murky, the deal becomes more complicated. By addressing how the building fits
into the transaction, you eliminate uncertainty, increase buyer confidence, and
often enhance the overall value of the sale.
Final Thought
Selling a business is one of the biggest financial
and emotional decisions a family will ever make. Don’t let the real estate
piece become an afterthought. Whether you own or lease, work with advisors who
can help you consider all potential directions so you can move on to your next
chapter with peace of mind.
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.
Imagine buying a property only to discover that
hidden underground tanks are leaking fuel into the soil, or that decades ago a
dry cleaner left behind chemicals that still linger beneath the surface.
Suddenly, your new investment comes with a multi-million-dollar cleanup bill.
That’s the risk posed by a little-known acronym:
REC, short for Recognized Environmental Condition. And if you’re buying,
selling, financing or potentially leasing commercial real estate, it’s
something you need to understand.
What is a REC?
In the commercial real estate world, a REC means
there is the presence or likely presence of hazardous substances or petroleum products on a property.
These conditions may come from:
• A past or current release of contaminants into the soil, water, or
air.
• Evidence suggesting a release might have happened, like stained soil
or corroded barrels.
• Circumstances that pose a material threat of a future release.
Think of a REC as a red flag during due diligence.
Just like a cracked foundation might derail a home purchase, a REC can bring a
commercial deal to a grinding halt.
Why Lenders and Buyers Care
A REC isn’t just an environmental issue, it’s a
financial one.
• Financing: Banks typically require a clean environmental report before
approving a loan. If a REC is flagged, the deal may be delayed, restructured,
or even killed.
• Liability: Under federal and state laws, the new property owner could
be held responsible for cleanup, even if they didn’t cause the problem.
• Value: Properties with RECs often appraise lower and can sit on the
market longer.
How the Process Works
When an industrial or commercial property changes
hands, buyers usually commission a Phase I Environmental Site Assessment (ESA).
This involves reviewing past records, inspecting the property, and interviewing
current or former operators.
If the Phase I flags a REC, the next step is a Phase
II ESA, which involves testing soil, groundwater, or air to confirm whether
contamination exists.
Depending on results, options include:
• Remediation (removing or treating the contamination).
• Seeking regulatory closure if issues have already been addressed.
• Purchasing environmental insurance to cover potential risks.
• Negotiating price adjustments to reflect the added risk.
Historical and Controlled RECs
Not all RECs are created equal.
• HREC (Historical REC): A past issue that’s been resolved to
regulators’ satisfaction and no longer poses a risk.
• CREC (Controlled REC): A contamination issue that remains, but with
restrictions in place (for example, limiting property use to industrial
operations only).
While these don’t always kill deals, they do shape
how a property can be used and what obligations an owner inherits.
How Buyers and Sellers React
For buyers, a REC means choices: walk away,
renegotiate price, or push the seller to pay for further testing or cleanup.
For sellers, a REC can mean offering concessions, securing insurance, or even
cleaning up the property in advance to avoid surprises in escrow.
The Bottom Line
A REC doesn’t always spell disaster for a
transaction. But it always changes the dynamics. Buyers, sellers, and brokers
who understand how RECs work can work through the challenges, avoid liability
and keep deals alive.
In commercial real estate, knowledge isn’t just
power. It’s protection.
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.
I recently guested on a podcast called The Industrial Real Estate Podcast. You see, its
host, Chad Griffiths, is a fellow industrial real estate broker and Society of
Industrial and Office Realtor. We share a passion for industrial real estate
and authoring books about our craft - his, Industrialize, and mine The SEQUENCE.
Our sixty minutes together was not quite Mike Wallace worthy, but for two
professionals geeking over truck doors it was close.
As I reflected on our conversation, a thought
occurred. In the time Chad and I have brokered - Chad over twenty years and I
over forty - how many classes of industrial real estate have become obsolete?
As the mind dump morphed into a review, I believed
it to be column-worthy. So here goes.
Concrete Block Structures
In the 1960s and 70s, the standard for small to
mid-sized warehouses in Southern California was concrete block. At the time, it
was inexpensive, durable, and easy to build. Fast forward a few decades and
block buildings fell out of favor. Why? They were prone to cracking, offered
limited design flexibility, and were far less energy-efficient than tilt-up
concrete panels. Today, investors look at a block structure and immediately
calculate how much it will cost to either retrofit it for earthquake safety or scrape
it altogether.
Warehouses with Ceiling Heights Shorter than 24 Feet
What was once considered “plenty of clearance” is
now laughably short. In the 1980s, 16–20 feet clear worked just fine when
distribution was more about floor stacking and hand-moving pallets. Then came
the rise of racking systems, e-commerce fulfillment, and the drive for cubic
efficiency. A 20-foot clear building today is relegated to mom-and-pop
distributors or creative reuses like breweries and gyms. Institutional tenants
won’t touch them. Twenty-four feet is the minimum bar now, with 32–36 feet quickly
becoming the new normal.
Buildings with Insufficient Loading for Large Trucks
Dock-high loading once meant a few truck wells
tucked into a building’s backside. That was fine when trucks were smaller and
supply chains less demanding. Now, tenants expect wide truck courts, multiple
dock positions, and a minimum of 130-foot depth for maneuvering 53-footers. A
shallow court or limited dock access instantly disqualifies a building from
consideration. In fact, I’ve had clients walk away from otherwise functional
properties simply because the loading couldn’t accommodate modern logistics.
Warehouses Converted to Telecom Hubs in the Late
1990s
During the telecom boom, a frenzy of
industrial-to-telecom conversions swept across the market. Warehouses were
gutted, generators added, and raised floors installed to handle racks of
equipment. When the bubble burst, many of these facilities sat dark, expensive,
and ill-suited for their original purpose. Few could be economically converted
back to warehousing. They became the white elephants of the industrial world,
proving how risky it can be to over-specialize a building.
Pre-Dot Com Data Centers
Much like the telecom conversions, the first wave of
data centers built before the dot-com collapse were designed for a world that
never fully arrived. Oversized chillers, underutilized floor space, and
outdated cabling left them obsolete within a decade. While the need for data
centers eventually exploded, it was the next generation - purpose-built,
hyper-efficient facilities - that captured the market. The early ones often
limped along, trading hands at discounts before being demolished or radically reconfigured.
Research and Development (Flex) Buildings
Once the darling of the 1980s and 90s, flex R&D
buildings were designed with equal parts office, light manufacturing, and lab
space. They attracted tech startups, defense contractors, and medical firms.
But as industries changed, those needs shrunk or migrated into either pure
office towers or specialized industrial campuses. Flex buildings with 50%
office and 50% warehouse became hard to lease. The market wanted either full
warehouse/distribution or Class A creative office - not the in-between. Today,
many flex projects have been scraped, converted to logistics buildings, or
repositioned for other uses.
Final Thought
Obsolescence in industrial real estate is both
predictable and instructive. What was “state of the art” in 1985 may be
functionally useless today. Brokers, investors, and occupants alike should
remember: buildings have life cycles just like everything else. The trick is
recognizing when a feature is no longer an asset but a liability - and acting
before the market forces your hand.
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.
As I write this, I’m
looking out over the vast blue Pacific Ocean. My wife, Carla, and I decided to
splurge for our 46th wedding anniversary. The horizon stretches endlessly, a
full moon reflects on the ocean, waves roll in with steady crashing, and I can’t
help but reflect on our life together.
You may wonder - what does
being married since the Carter administration have to do with commercial real
estate?
Bear with me. I believe
who you love and with whom you choose to spend your life matters foundationally
to building a successful career. In my case, Carla’s patience, wisdom, and
encouragement have been the bedrock under everything I’ve accomplished in brokerage.
And along the way, I’ve learned a few lessons that apply equally well to
marriage and to commercial real estate.
Commitment Outlasts Market
Cycles
Marriage requires
commitment - not just when things are easy, but through the tough times too.
Real estate is no different. Since I began in the early 1980s, I’ve watched
interest rates soar, the savings and loan crisis unfold, bubbles inflate, and
recessions squeeze the market. Through it all, commitment - whether to a
client, a property, or the process - proved more valuable than chasing
short-term gains. Just as in marriage, staying the course yields long-term
rewards.
Communication is
Everything
After 46 years, Carla and
I still occasionally misunderstand each other. But we’ve learned to keep
talking, keep listening, and keep clarifying. The same principle applies in
commercial real estate. Deals collapse when communication falters. Clients don’t
expect perfection; they expect honesty. A simple phone call explaining a
setback can preserve trust better than any contract clause.
Patience Produces Fruit
No one celebrates 46 years
without patience. There were times when raising kids, building careers, and
paying bills felt overwhelming. But patience - trusting that small investments
of time and effort compound - got us through. Commercial real estate rewards
patience as well. Transactions can drag on, negotiations can stall, and
entitlement processes can feel endless. Yet patience, paired with persistence,
is often the difference between a failed deal and a successful close.
Shared Values Create
Alignment
Carla and I built our life
on shared values: faith, family, and integrity. Those values guided decisions
on where to live, how to raise children, and even how to face hardship. In
brokerage, I’ve found that values alignment with clients is equally important.
Not every prospect is a fit. When you align with those who share your values -
fairness, transparency, long-term thinking - the relationship flows, and the
work is more rewarding.
Adaptability is Survival
Marriage is a constant
process of adaptation. People grow, circumstances shift, and unexpected
challenges arise. Carla and I had to adapt when careers changed, when children
left home, and when new seasons of life arrived. In real estate, adaptability
is equally critical. A strategy that worked in one market cycle may not work in
another. Brokers who survive are those who adjust without abandoning their
foundation.
Closing Reflection
Looking out at the
Pacific, I’m struck by how steady and timeless it feels. Yet even the ocean is
always in motion, waves constantly breaking and reforming. That’s marriage.
That’s commercial real estate. Both require a balance of commitment and
flexibility, patience and action, values and adaptability.
As I celebrate 46 years
with Carla, I’m reminded that no career is built in isolation. The
relationships that anchor us at home often provide the resilience and
perspective we need in business. Success, in life and in real estate, rests not
only on the deals we make but on the people who walk with us through the
journey.
Every thriving Southern California manufacturing or
logistics company started somewhere—often at a kitchen table or in a garage.
What happens between that first spark of an idea and the eventual decision to
sell the company is a fascinating—and often overlooked—journey. The
throughline? Real estate.
The Stages of Business Growth and Real Estate
Decisions
The Idea Stage. Home-Based Operation. Most
businesses start small. At this stage, real estate decisions are limited—but
the dream of expansion is already forming.
Lease vs. Buy. The First Big Decision
As soon as a company outgrows the home, it’s time to
lease or buy space. Leasing provides flexibility, but ownership plants the
first seeds of wealth building.
Owning Your Building. Many family operators
eventually buy the building they occupy. This decision transforms monthly rent
payments into an appreciating asset that can outlast the business itself.
Growth Through Expansion or Acquisition. Success
brings complexity—hiring more people, adding machinery, opening new locations,
or acquiring competitors. Each move requires thoughtful real estate strategy.
Exit Planning and the Role of Real Estate.
Eventually, founders face succession or sale. If selling to a strategic
operator, the real estate may be carved out of the deal. If selling to private
equity, the real estate is often critical to their investment thesis.
The Hidden Lesson
In many cases, I’ve seen the real estate owned by
the business worth far more than the operation itself. That building becomes
not just a workplace but a long-term family asset, a hedge against business
cycles, and a powerful vehicle for generational wealth.
Closing Thought
The journey of a family-owned business in Southern
California is never just about products, people, or profits—it’s also about
property. Whether starting in a garage or exiting through a private equity
sale, real estate is the silent partner that can shape the legacy of a business
for generations.
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.
