There’s no better example than the Lockheed SR-71 to drive home the value of having a high-altitude perspective.
The iconic surveillance plane, first delivered in the early 1960’s, was decades ahead of its time and is still considered one of the most successful aircraft in history in terms of achieving its intended purpose. Its only armament was a super-high-resolution camera. From over 100,000 feet in the air at a speed exceeding Mach-3, the sinister-looking jet streaked over enemy territory without fear of enemy fire. A missile that could even come close to it had yet to be invented.
What does the SR-71 have to do with industrial real estate? It is the best metaphor we could think of to emphasize the importance of seeing the big picture when it comes to making real estate decisions. Too often real estate investors, owner/users and tenants make decisions without considering all the elements of making smart choices. They tend to compartmentalize their decisions and wait until something needs to be done and only gather enough information to send them in a general direction. Tenants tend to wait until their leases are about to expire before they look for space. That can have disastrous consequences, especially in these times of limited supply. They end up taking what they can get, even if the property they choose doesn’t meet their most important needs.
Owner/users tend to target fix on price and choose the lowest price alternative even if the property they acquire will not fully optimize the growth of their business. Investors often find themselves in a hurry to meet their exchange deadline and end up with a property in a market they know little about just to avoid a big capital gains tax bill. We see these scenarios more than we would like.
Which brings us to our main point. It is worth the time and the effort to acquire the knowledge necessary to make a truly informed decision that serves your long term interests. A tenant who gets out there early just might find the absolute best building for his business a year early, and figure out a way to negotiate out of his existing lease obligation, an option that many owners will consider these days considering how fast lease rates are rising.
We see owner/users continue to operate from buildings that no longer support efficient operations because they don’t want to incur the cost of moving, which may be a fraction of the revenue they are missing out on by not being able to grow. The fact is; anyone who owns their own building can sell it a record price in less than a month. The problem lies in finding one to buy and that may take more time than expected. But, by always being on the lookout, the right opportunity will eventually present itself, and the readiness to act quickly cannot be overstated.
Investor/owners often become complacent with regard to their assets that, in this day and age, usually perform satisfactorily, if not optimally. Rather than look to improve the quality of their real estate assets or otherwise upgrade their portfolios through the use of tax-deferred exchanges, they accept the status-quo and settle for sub-optimal performance.
A high-altitude perspective is the solution to informed decision making, which is what we strive to achieve for our clients. We want you to know everything you need to know to act strategically. Just knowing what the last similar building sold for is not enough. That overemphasizes price as a component of long term value. We want you to look at the big picture, including location, product type, product quality, current and expected market conditions, tax implications, cost of capital, building quality & condition, elements of functional obsolescence and potential for revenue growth. The list goes on. Your goal should be to look at any real estate investment from as many perspectives as possible and consider the short and long term opportunities and challenges associated with any industrial property.
The SR-71 could see half a country at the same time or zero in on a single vehicle from the stratosphere.
If you take a high altitude look at your next real estate decision you can do the same. You’ll be able to look at a particular asset in the context of a bigger picture and we think that gives you a much better chance at making a decision that truly serves your interests.
We can assist you in that process. We have the experience, knowledge and resources to get you to altitude so that you can see it all for yourself and feel good about your decision, whether that means buying, selling, leasing or doing nothing at all. Just give us a call. We are here to help.