Some thoughts on the current commercial real estate market climate, and our top five tips to get the best deal possible.
Now that the election is behind us, the inevitable difficulty of turning campaign rhetoric into new legislation has become reality.
Promises of tax reform, a repeal of the Affordable Care Act and a massive infrastructure spending bill are still just in the talking stages, and finding the votes to pass any meaningful legislation is anything but a sure thing.
So, the wait for substantive change coming from Washington DC is likely to be a long one and we are left with a “more-of-the-same” scenario. That means vacancy is likely to remain under 2%, construction of new industrial inventory will remain at a trickle, lease rates will rise further and demand for space will continue to run ahead of supply. Sound familiar? We took a look at our first post back in September of 2015 and found that things have not really changed much. This is what we had to say that we think still rings true today…
It’s natural for all of us to fight for the best deal no matter what it is we are trying to acquire. Landlords want as much as they can get and tenants battle to pay less. It’s in our DNA to negotiate in our own interests and come away with a win. However, in today’s challenging market, what constitutes a win is quite different than it was just a couple years ago.
The pendulum has swung in favor of landlords as the supply of available space has been drying up and prices have been moving higher in a hurry. The basic laws of supply and demand have never been more apparent. Those looking to lease an industrial building in Southern California are shocked to discover that they may have to pay as much as 50% more than their current lease rate and be forced to settle for a property that falls short of meeting their needs.
To be sure, you will be paying more for your next building. However, there are other ways to get that all-important win as you secure a new home for your business. Let’s take a quick look at a few ways for you to get the best deal:
Finding the Best Deal
- Establish your priorities, those things that you just have to have operate efficiently. That could be the physical characteristics of the building itself, the term of the lease, options to renew, help with tenant improvements, etc. Make sure your broker knows what to fight the hardest for.
- Before you start looking for space, take a detailed look at the way your business operates as a way of finding new ways to become more efficient. You might not need as much space if you can leverage new technologies, materials handling systems or a more efficient layout. At today’s prices, every square foot you don’t need is money in your pocket.
- Be ready to act quickly and aggressively if a building that suits your needs becomes available. Competition for quality space is intense and time is of the essence if you want secure the best property.
- Don’t sweat the little stuff. Too many tenants insist on making major modifications to standard lease documents, even on issues that have a low likelihood of surfacing as a problem. While it is important to protect your own interests, be careful not to negotiate your way out of a deal. If negotiations break down on the building that fulfills your highest priorities, there may not be another alternative to turn to.
- Choose the right broker who knows the specifics of the market you want to be in. The real pros know the landlords, follow the trends and track the metrics that will help you make the most informed decision. Make sure the broker you choose has the relationships, transaction history and market knowledge to help you make the most informed decisions.
How We Fit In
Our team has completed more transactions than any other brokers in the markets we serve.
We put our 30 years of experience and the knowledge that comes from completing over 4,000 transactions to work for each and every one of our clients. For a complete briefing on market conditions in your area, give us a call.
We are here to help.