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Commercial Real Estate

Death of the commercial real estate online salesman

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What, you may be asking, is a commercial real estate online salesman?  Good question. The word salesman in general may bring up all kinds of negative connotations and of course none of us in commercial real estate would ever want to be considered one.

Then what is it that we are really trying to do when we get online?  In my opinion I see a lot of “super sales” going on all the time.

The bad stuff?

No clue about the market whatsoever:  Statements that tout the wonderful investment opportunities in the suburban industrial market or fantastic urban infill land development just waiting for the right investor.  Do you think anyone with 2 cents in their pocket believes this glossed over BS?

Stats and number pushers:  Oh, they are so pretty and defining.  XYZ Company just got $500 million in funding from YZX Company to keep their behinds out of bankruptcy.  ABC gets special $$$ from QRS to fund out their portfolio.  I guess they all need free PR?

Market reports: I will keep this one short.  Everyone on the planet knows that the 2Q, 3Q, slow decline, retail, industrial outlook local market status, snapshot reports from your research staffs are…. BS from your market research staff.  Oh, and we have to register just to see the “true market data.”

Quotes:  If you want to quote Tony Robbins and or that Gary Vanderwine guy.  OK, does that really help?  Do you think that we all need that motivation or does it make you feel better about yourself?  This helps commercial real estate how?

News Aggregators: Do you really care what some company in Dubai just bought or lost?  Then why do you push it out to the whole world.  Wall Street Journal, Bloomberg, CNBC needs the help?  They are making millions doing the same thing you are doing for free.

Special note to lenders: Please just stay away.  How many more my rates are the greatest, lowest, we are lending to only the 50 mil plus market scam e-mail, DMs do I need to get?  Your theory of sending out 10,000 e-mails in hopes of catching 2 idiots is fine.  LinkedIn is not your personal posting playground.  The rest of us are working with people who already have financing.  Go find them on your own.

Noise: Repeating and repeating and repeating.  This is not the TV.  You are not ATT and do not have to hammer your stuff out there.  If I here that commercial with the guy mumbling behind the guitar with the orange stuff falling over everything …one more time!  If I want to get to your stuff I will…I promise.

Good Stuff?

There has to be some out there somewhere.  I am probably as guilty as anyone at committing some of the above transgressions.  I think that maybe we have made some baby steps forward online in commercial real estate.  

Are there any online things in commercial real estate that just drive you nuts? How about some positives?  Is the era of “Super Sales” going to go away?  There are some great people really trying to do some great things.  Please, let loose and let’s get the conversation started.

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Broker/Owner in Lafayette, IN, whose passion is Commercial Real Estate with focus on Technology, Social Media, and Networking.

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24 Comments

24 Comments

  1. Justin Bedecarré

    July 12, 2010 at 8:21 pm

    I recently went to a conference and people dubbed social media as “sales media.” There is a fine line between over-selling and persistence, between selfish proliferation of information and contribution.

    Keep in mind there are millions of people receiving this information, so the point of view that people don’t listen to cross market analysis is myopic. You are right, some of the retweets can be superfluous or unnecessary, but not all.

    Market reports can be repetitive, but speaking from someone who publishes these reports, they are aggregated from a plethora of information and information like this can be very useful. I get your frustration, but I think there is a lot of great information out there amid the chaos, and the people who can decipher through have a lot to gain.

    The good bloggers and tweeters out there give back as much or more than they take, across company lines, industry lines and competitive lines.

    • Duke Long

      July 13, 2010 at 10:22 am

      Justin,
      Agreed ! I wish more of the good stuff (and people) would show up!

      • John Lind

        July 13, 2010 at 2:57 pm

        I agree with both of you but I would add that in this information age we are very good a weeding out the disingenuous. Not only are they not fooling real estate professionals they are not fooling those who require our services.

  2. Larry R Martin

    July 13, 2010 at 11:56 am

    As real estate brokerage goes today, the author has some excellent points. I’m not perfect, and I could be wrong; but I think Mr. Long may not have had much real-time exposure alongside a bonefide #CRE pro, to know the degree to which the #CRE brokerage profession is highly specialized. My sense is, he may resent, as do I, the almost “movie star” status many commercial broker/agents love to project about themselves. It’s professional quality of service and value delivered that count, not ego projection.

    My entire 30+ year real estate career is securely tethered to commercial real estate brokereage as a profession, not a generator of commissions at any cost. First of all, #CRE brokerage does not happen sitting at the desk; It happens in the field. A successful #CRE professional must be in his market “farm” everyday. For this reason alone, Dan Kennedy’s assessment of electronic doodads being lazy distractions from the real requirements for success in #CRE, are accurate. It is not an online business. It is an “in your car driving your entire farm everyday before going to the office” kind of business. There is much walking, knocking on doors, climbing stairs in office buildings and industrial parks; meeting and getting to know every tenant, property manager, and building owner; their families, hobbies, politics, businesses, leases and property portfolios, in detail. It is keeping up with which business is expanding,or contracting, and being able to analyze why. It’s about knowing how to run the gamut of building, planning and local, municipal services bureaucratic catch 22’s. It’s about attending every local event, where #CRE is promoted or denegrated. It’s many, many hours spent away from from family, friends and activities much more fun. To me, it’s the difference one makes, first; the big paychecks are a by-product of how good you are at making a difference.

    The news/data thing, seeming repetitive, redundant, boring, un-original and looking kinda lazy, is actually a constant which when observed over time, produces a predictable view of market momentum, velocity and direction. Like a ship moving through the sea, it’s easy to guess where it will be next, if you watch it long enough. And, It’s like watching mushrooms grow; you can ignore them but more than likely you’ll be surprised by how fast they got way from you. I don’t relish reading the same articles over and over, everyday but I know that a meaningful change will occur, creating a significant opening for my clients or me. Because I’m always watching and assessing, I’ll see it when it appears, and I’ll know what it looks like; probably way before the guy who’s asking why should I read the news & statistics everyday? An example of significant emerging market events is General Growth since 1992.

    Anybody that tells you #CRE brokerage is casually done, without a lot of work through glossy, misleading presentations from behind $5,000 suits; fast, expensive European land yachts during $500.00 lunches, doesn’t know the business. They don’t know the dedication, cost, time investment, and expertise required to be competent, ethical, honest and exceptionally productive for their clients.

    I shudder at the lack of #professionalism demonstrated today by the largest percentage of brokers & agents from all sectors of the real estate industry; commercial, residential, investment, mortgage . . . all sectors! I read somewhere that the average time for all brokers and agents in real estate industry is 8 !/2 years. That won’t get you back to the previous, last major RE downturn. Not much chance of expertise to appear if you have no opportunity, or take no opportunity, to learn how to be an expert.

    Every market downturn weeds the “carpet baggers” out. If they aren’t sued or thrown in jail by now, this turn will see even greater numbers of them migrate to the next, “fast, big money” fad. But only after they’ve “broad stroke” discredited the truly gifted in our business with the setbacks of their misadventures. The gist of Mr. Long’s article extends to all sectors of the real estate industry, and will continue to be a valid assessment until the industry gets serious about policing itself by raising the bar #RTB several notches of required, benchmark standards. L. R. Martin

    • Kostas

      July 14, 2010 at 8:45 am

      Inspirational…that was well written Larry. Thank you for the truth and attention to detail concerning why we read the same news/stats day after day…

  3. Duke Long

    July 13, 2010 at 12:03 pm

    Larry,
    For your reference….started in CRE in 1996. CRE broker /owner since 2000. Also for your reference…way to let loose and tell it like you mean it. Thanks for taking the time to read and comment. Opinions and points of view always appreciated.

  4. Jason Sandquist

    July 13, 2010 at 12:32 pm

    ::fist bump::

    So what you’re saying is I can’t get rich by tweeting a firehose of bull shit #cre articles that nobody cares about besides other CRE professionals that like to see themselves get retweeted and claim to be cre socmed queens, I mean kings? 😉

    • Duke Long

      July 13, 2010 at 12:59 pm

      Jason…. I know that GGP is a significant player in CRE. Do I need to have it shoved down my throat by everyone who has a enter button? What value is created? I reference to your comment ” CRE professionals that like to see themselves get retweeted and claim to be cre socmed queens, I mean kings?” I have made a conscious effort to NOT be see as either…for several reasons.:):) SKOL Whitesox

      • Jason Sandquist

        July 13, 2010 at 6:46 pm

        I like the Vikings reference. If the team doesn’t underachieve like first half I still take them with a 4+ division lead. Look at the past decade for clues.

  5. Chris

    July 13, 2010 at 3:27 pm

    The reason you’re seeing so much “bad” stuff is because CRE agents, for the most part, are participating only because they hear they “should” be. Consequently, they have no idea what to post so you get these regurgitated/repetitive/endless listings posts.

    From my research (I’m not an agent – I work in info management primarily in CRE) the users reading CRE blogs/twitter/FB/LI tend to be the following:

    Co-workers/other agents
    Local competing brokers (ones you don’t know are too embarrassed to let you know they’re interested…)
    Friends
    Long-standing clients
    People met in a group/from another fan page/reciprocal follower – particularly other techie type agents
    “Investment” followers (mainly applies to Twitter, Facebook and specialty blogs – we see this type spike when we post an “investment opportunity”)

    There may be some potential new clients following/liking/linking/reading but I have yet to be able to confirm that with any CRE agent in the 10 offices I work with. And that is what any CRE agent wants out of this – relationships that lead to deals.

    As I see it, even if you are throwing out “bad” stuff, in the end, it’s still going to build your brand/increase SEO exposure – and the longer you do it, the more “authority” you gain (for SEO at least).

    What would “good” stuff look like? I don’t know. Occasionally I think it looks like a real conversation – providing advice/answering questions. But followers have to ask things they may not feel comfortable letting the whole world know about – and how long can an agent give away advice for free?

    • Duke Long

      July 13, 2010 at 3:44 pm

      Chris,
      Valid points…hopefully we are getting there. Your last paragraph should be copied,pasted and posted……. for more conversation.

  6. Jim McDonald, SIOR, BCCR

    July 13, 2010 at 5:53 pm

    Many truths have been spoken by all. I have discovered and re-discovered many times over that (industrial) brokerage is about relationships. Having said that, given our diverse personalities, there are numerous styles of relation building and relationship nurturing. For some, there may even be a digital form of doing that, at least in part.

  7. Miguel de Arcos

    July 14, 2010 at 1:28 pm

    Right you are on many counts…
    Social media should be used to establish a presence and “pull” in your audience, not “push” out everything your are trying to sell. It turns too many people off and ultimately you get “unfriended.” Develop a presence and when they are ready, they will come to you.

  8. Nadina Cole-Potter

    August 3, 2010 at 10:17 pm

    Duke — I agree with you wholly about the posters who selfishly waste bandwidth and my time (even to scroll) when they post off-topic, warmed-over news articles, mind-numbing statistics and done deals that happened in Vladavastok. I guess part of it is their seeding Google searches for numbers of times one’s name is posted. I hate it on LinkedIn when someone re-posts some inane, irrelevant commercial or lender pitch 6 or 8 times in a week and it then appears 6 or 8 times in a weekly digest. Oh, yeah, and they post the entire article in the title section so all of it appears on the email.

    I am also amused by the hourly “the bottom in CRE is deeper and wider than anyone will talk about!” vs. “the bottom in CRE has already been reached!” media, economist, and researcher hype. Again, it’s those dam Google search engines. Remember, they used to say there was no such thing as bad publicity? Well, evidently, there is no such thing as dumb and premature prognosticating. No one is held accountable because there is too much noise to track.

    Would you do business with someone so clueless? I wouldn’t. I also have not ever read a tweet that didn’t read as if it were written by a twit. Talk about wasted bandwidth!

    That being said, I have followed several business leads from LinkedIn links to articles that I wouldn’t have seen in publications I don’t have time to read regularly. Whether they turn into business remains to be worked on and tracked. I have also been pleasantly informed about several emerging issues and strategies by some real experts whose posts led to links to their personal blogs containing “white paper” quality articles.

    I hope you will re-post your article in every LinkedIn commercial real estate group you belong to. I know if Lafayette, California and I ever cross paths again (I lived in San Leandro for 15 years) this time for business, Duke, you will be the first person I contact.

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Commercial Real Estate

Pace of commercial real estate improvement is slowing

(Commercial Real Estate) The commercial real estate sector has improved substantially since the economy crashed, but is now showing signs of slowing, but data does not indicate lost ground.

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commercial real estate

Commercial real estate outlook is positive

According to the National Association of Realtors’ (NAR) quarterly forecast, commercial real estate is continuing to improve, but the pace is slowing.

Dr. Lawrence Yun, NAR chief economist, said that fundamentals are still on an uptrend. “Growth in commercial real estate sectors continues at a moderate pace from a very slow pace of absorption, despite job additions to the economy. Companies appear hesitant to add new space,” he said.

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“Office demand is expected to see only slow and gradual improvement,” Dr. Yun added. “Demand for retail space is benefiting from improved household wealth, while industrial real estate is stable with increasing international trade, which requires warehouse space. Of course, the apartment market fundamentals are the strongest, as nearly all of the new household formation in the past 10 years has come from renters, and not homeowners.”

Forecasting the future

Overall, national vacancy rates in the coming year are forecast to drop 0.2 percentage point in the office sector (the sector with the worst vacancy rates) to 15.6 percent in the first quarter of 2015.

Vacancy rates are projected to fall 0.1 point in industrial to 8.9 percent, and 0.3 point for retail real estate to 9.9 percent.

With rising apartment construction, the average multifamily vacancy rate will edge up 0.1 percent to 4.1 percent, but this sector continues to experience the tightest availability and strongest rent growth of all the commercial sectors.

Rental rates for various sectors

Office rents are projected to increase 2.3 percent in 2014 and 3.2 percent next year. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is likely to total 44.6 million square feet this year and 50.0 million in 2015.

Annual industrial rents should rise 2.4 percent this year and 2.6 percent in 2015. Net absorption of industrial space nationally is seen at 106.1 million square feet in 2014 and 110.6 million next year.

Average retail rents are forecast to rise 2.0 percent in 2014 and 2.3 percent next year. Net absorption of retail space is likely to total 14.6 million square feet this year and 20.9 million in 2015.

Average apartment rents are projected to rise 4.3 percent this year and 3.5 percent in 2015. Multifamily net absorption is expected to total 204,900 units in 2014 and 112,500 next year.

Regional performance varies

The markets with the lowest office vacancy rates in the first quarter are New York City, with a vacancy rate of 9.5 percent; Washington, D.C., at 10.2 percent; Little Rock, Ark., 11.6 percent; Birmingham, Ala., 12.7 percent; and San Francisco and Nashville, Tenn., at 12.8 percent each.

The areas with the lowest industrial vacancy rates currently are Orange County, Calif., with a vacancy rate of 3.7 percent; Los Angeles, 3.8 percent; Miami, 5.8 percent; Seattle at 5.9 percent; and San Riverside/Bernardino, Calif., at 6.1 percent.

Markets with the lowest retail vacancy rates include San Francisco, at 3.1 percent; Fairfield County, Conn., 3.8 percent; Long Island, N.Y., 4.8 percent; San Jose, Calif., 5.2 percent; and Northern New Jersey and Orange County, Calif., at 5.3 percent each.

Areas with the lowest multifamily vacancy rates currently are New Haven, Conn., at 2.1 percent; Minneapolis and New York City, 2.3 percent; and Oakland-East Bay, Calif., and San Diego, at 2.5 percent each.

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Commercial Real Estate

Should you buy or lease office space? 5 questions to consider

When considering whether you should lease your office space or buy, an industry expert outlines the questions you should ask yourself.

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office leadership

office leadership

Should you buy or lease an office space?

Many people set up shop and lease office space, assuming this is their best, and often only option, but there are some instances where buying office space is a better option. Many blindly make this decision based on a gut feeling, and we’re not saying that is a bad thing, we’re saying that in addition to that instinct, these five questions should be asked when considering whether you should lease or buy an office space.

Stan Snipes, senior advisor, Sperry Van Ness Investec Realty of Nashville notes that the two options depend on several variables, as he outlines below:

1. Is your business well-established?

If your business is still in the startup phase, I rarely recommend buying. During the next 5 to 10 years you’ll experience employee count fluctuations, client and customer oscillations and even business direction and strategy adjustments. That is, you’ll need to be flexible, not tied to a certain space. Additionally, any leftover capital should most likely be recycled back into your budding startup. You don’t want to stretch yourself too thin.

The only exception that applies some of the time — not every time — is if your startup is in the technology space. Oftentimes tech employees can work remotely, or the technology is automated and won’t require more employees in the future. Additionally, clients of many tech startups can successfully access the company’s offering without visiting a physical office space.

2. Will you endanger your business with a property purchase?

Yes, buying can be a great investment and add a source of revenue, but even well-established business owners need to think about the stress that buying a property can put on their bottom line. Oftentimes your time and money is best spent on what you do best, running your enterprise. If buying means you won’t be able to focus essential resources to your first priority, your business, then you might want to hold off on buying.

Further, because commercial real estate can be a great investment, business owners are sometimes so eager to get in the game that they sell off portions of their business to finance the purchase. This is a bad idea. You should not let real estate decisions determine how you run your business. You’ve worked long and hard to build a successful company — don’t give it away. Another deal with always come along.

3. Do you have heavy, difficult-to-move equipment?

If you have machinery or specialized equipment that make it difficult for you to move, buying may be a great option for you. Two primary reasons: 1.) Lugging dense equipment from leased space to leased space is annoying, cumbersome and costly.

Plus, you increase the chances of damaging it every time you move. 2.) When a landlord knows it’s difficult for you to relocate, he or she is holding the cards when it’s time to renew your lease. If your lease doesn’t have a stipulation to remediate this, leasing office space will cost you more money than it should. More often than not, buying a custom space for your specialized equipment is the way to go.

4. Does your location affect employees or clients?

If attracting and maintaining top-notch employees means securing office space in your city’s prime business district, finding the perfect space to buy may be difficult. Why? Prime business districts usually have lower vacancy rates, which typically means higher prices plus fewer properties to choose from. Anytime you’re limited to a narrow location, you risk not landing the best deal. This doesn’t mean don’t buy, just understand what you’re up against from the onset.

The other issue you may face in buying location-specific space is when your customers or clients depend on your position for convenience. This is a challenge when and if your city’s submarkets are in transition. The trendy spot of the last five years, may not be in vogue five years from now. A lease allows flexibility to move where your customer and clients need you to be.

5. Are you prepared to be a landlord?

There’s a lot of maintenance that goes along with owning a building. Will you have the ability to hire a maintenance crew or will you tend the bathrooms, burnt out light bulbs and overflowing trash bins yourself?

Furthermore, many landlords have easy access to financing that could benefit you in the form of a tenant improvement package. Even though you may have capital to buy your building, can you afford to build it out the way you want to? The cost of ownership is sometimes underestimated. Make sure you’ve considered all of the possible expenses that go along with buying your office space.

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Commercial Real Estate

Commercial real estate improving modestly, little change to come

As commercial real estate improves across all sectors, the gains have been modest and NAR predicts they will continue to inch forward.

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Commercial real estate sector is improving

According to the National Association of Realtors’ (NAR) quarterly commercial real estate forecast, commercial real estate is improving modestly, with little change seen for the near future. Dr. Lawrence Yun, NAR’s Chief Economist said in a statement, “Jobs are the key driver for commercial real estate, and the accumulation of 7 million net new jobs from the low point a few years ago is steadily showing up as demand for leasing and purchases of properties,” he said. “But the difficulty of accessing loans remains a hindrance to a faster recovery.”

NAR reports that leasing activity rose 2.0 percent in the third quarter compared to the second, and sales levels are higher than a year ago.

Yun said there have been some shifts in commercial purchases. “Investors have been looking for better yields, and have found good potential in smaller commercial properties, notably in secondary and tertiary markets. Sales of commercial properties costing less than $2.5 million in the third quarter were 11 percent above a year ago, while prices for smaller properties were 4 percent above the third quarter of 2012.”

Commercial investment in properties costing more than $2.5 million rose 26 percent from a year ago, while prices for large properties were 9 percent above the third quarter of 2012.

National vacancy rates over the coming year are forecast to decline 0.2 percentage point in the office market, 0.6 point in industrial, and 0.5 point for retail real estate. The average multifamily vacancy rate will edge up 0.1 percent, but that sector continues to see the tightest availability and biggest rent increases.

Retail vacancy rates should be going down

Retail vacancy rates are forecast to decline from 10.4 percent in the fourth quarter of this year to 9.9 percent in the fourth quarter of 2014. Average retail rents should increase 1.4 percent in 2013 and 2.2 percent next year. Net absorption of retail space is projected at 11.0 million square feet in 2013 and 18.1 million next year.

Multifamily construction will meet demand

Multifamily Markets
The apartment rental market – multifamily housing – is likely to see vacancy rates edge up 0.1 percentage point from 3.9 percent in the fourth quarter to 4.0 percent in the fourth quarter of 2014, with new construction helping to meet higher demand. Average apartment rents are forecast to rise 4.0 percent this year and 4.3 percent in 2014. Multifamily net absorption is projected to total 239,400 units in 2013 and 211,300 next year.

Office rents should be going up

Vacancy rates in the office sector are expected to decline from a projected 15.6 percent in the fourth quarter to 15.4 percent in the fourth quarter of 2014. Office rents should increase 2.4 percent this year and 2.5 percent in 2014. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is seen at 32.2 million square feet this year and 46.1 million in 2014.

Industrial vacancies on the decline

Industrial vacancy rates are likely to fall from 9.2 percent in the fourth quarter of this year to 8.6 percent in the fourth quarter of 2014. Annual industrial rents are expected to rise 2.3 percent this year and 2.5 percent in 2014. Net absorption of industrial space nationally is anticipated at 97.0 million square feet in 2013 and 104.9 million next year.

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