How’s the real estate market? Great, OK and not so great – Orange County Register
In conversations with friends, colleagues, interested parties and the like, I am often asked the following question: How is the commercial real estate market doing? My answer varies depending on the perspective of the questioner.
Especially if you are the owner / investor of a building in which people manufacture and ship things – AKA an industrial building – you have seen an exponential increase in value. Chances are the rent your tenant is getting to you has outpaced our insane inflation spike. The downside? As a user of this industrial property, you will be confronted with dramatically increased costs in 2022.
If you are about to move, plan for a very limited range of moving locations.
As the owner of a number of offices, you face a different situation. You see, the uncertainty caused by the pandemic has stalled the movement. As a result, most write shorter leases with little (if any) rental growth to keep spaces filled and cash flow to be kept. Tenants who can foresee the demand and are willing to commit to longer rental periods are strongly motivated by landlords.
Retail – wow! In itself, this issue is worthy of divisions.
How do we as commercial real estate practitioners deal with these meandering market figures? Well, again, it specializes in specialties – office, industrial or retail, and most importantly – which side of the transaction you serve.
The focus of our team is on approx. 40% owner and 60% resident representation. When we’re on one side, we rarely go down the aisle and set up a double agency.
Short Summary. Dual Agency is permitted in California real estate transactions and refers to an agent who represents both buyers and sellers.
Our selling and letting tasks – in which we support an owner in finding a buyer or tenant for an empty building – are comparable to the birthday of a 5-year-old. There is chaos and multiple gifts. Countless inquiries, inquiries for demonstrations, several offers, overbids and the checking of inmate qualifications will soon follow. Now all we need is a bouncy castle.
We recently added a listing in Santa Ana that starts on a Friday. In just three days we had 61 inquiries, 22 tours, five offers – four at the offer price or more. Yes. It was crazy! And we hadn’t even cut the cake yet.
Another effort is related to the needs of our residents. We resort to hand-to-hand combat. By this I mean that the air support is over and a search in the several lists does not reveal any alternatives. The heavy artillery has been used up, but conversations with active brokers who may have something downstream have not. Ammunition has been used up, a short mailer on the market also comes with crickets.
What remains is mano y mano. We make a list of everything – occupied and available – and call the property owners hoping to take a break. Two such searches have now dwarfed a year! Fortunately, we have prepared your expectations.
Another tactic we use is having a very open conversation about how to stay tuned and get along. Adding an office or two, taking advantage of underutilized stacks, outsourcing part of the operation – all of these can accomplish this.
I think we could just answer – when asked – how is the market? It depends on!
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.