Are asking prices obsolete in this crazy real estate market? – Pasadena Star News
Ask for prices. Pay me that and we’ll make a deal. Easy? Not so fast.
In our inflated industrial real estate market, every COMP is a new flood mark. The demand for production and logistics buildings exceeds supply. Read: There are roughly three to four times as many buyers as sellers. Is that scientific? No. Strictly anecdotal from my experience this year and the last six months of 2020.
Therefore, sellers are advised to be careful not to leave shekels on the sideboard. One way to accomplish this is to enter the market inexpensively. The traditional back and forth of a negotiation – offer, against, against, strike – is history. What is being replaced is similar to the old saying “bring me a stone”. Yes, it is indeed a stone. Now bring me another stone. Formerly called “countering yourself” – a no-no – is now widespread.
Here is the typical cadence these days when representing a buyer. We scan available inventory that matches the buyer’s parameters. If there’s a game you’re in luck. Two or three? Jackpot! Then contact the seller’s agent to confirm availability and touring log. Oops. Sorry, we are under contract. No, that was sold last week. No, the tenant renews.
Our system is pretty archaic when compared to our brothers in residential property sales. Yes, we have to call brokers – quite inefficient – to verify information. Realty Boards optimize this with their availability – active, active pending, active, contingent, etc. But there is no such happiness in our world. Commercial real estate does not fall under the same jurisdiction.
But I digress. Back to search. Faced with limited or no success – what now? Now we then scan the list of buildings available for rent. There may be only one seller hiding between the leases. You have to filter out the “parts” of larger buildings as a buyer would have to buy something much larger and filter out the owners who are atypical sellers. Get on this phone and choose your colleagues. OK cool. You found a way.
A proposal must tick ALL the boxes – price north of last sale, superior financial qualifications, very few – if any – contingent liabilities, quick closure, large deposits, a bit of elf dust, a hope and a prayer. Often the off-market hail marys are dropped in the end zone. No score as time is running out.
But you still have the buyer. What now? Hand-to-hand fight. You draw a list of everything – vacant or occupied. Put together a nice letter that outlines your needs and be very specific. Send them to the owners. You might just hit Pay Dirt.
So are asking prices out of date? It would certainly appear that way!
Allen C. Buchanan, SIOR, is a Principal at Lee & Associates Commercial Real Estate Services, Orange. He can be reached at [email protected] or 714.564.7104.