Buying a House vs Leasing CRE Space, the Same or Different?

Just how different is the concept of buying a house vs. leasing commercial real estate space?  Let’s take a gander.

Location, Location, Location

Buying a House: When buying a house, factors to consider include location, school district, proximity to work, friends and family, away from busy streets, etc.

Leasing Space: Location is also very important when leasing space.  Nearness to highway, public transportation, street view (for retail space), drive-time for employees, and ease of access to clients are all factors when deciding where to locate.

Touring Properties

Buying a Home: Sometimes you have to tour 10-15 houses before finding the right fit for your family. You work with your agent, who has the keys or codes to the lock boxes so you can tour a house. You see a lot of ‘interesting’ decorating styles through the various houses. Your agent guides the tour and you never see the agent that represents the house.  Sometimes, the family that currently lives there is in the house while you tour it. It can be uncomfortable when you are trying decide if a house is right for you while there’s a child from the existing family running around with his head stuck in his shirt!

Leasing Space: When you are ready to lease space, you also have to tour relevant properties that may be a fit. Sometimes the existing tenant is still in the space and you are walking through while they go about their business, typing while you are trying to focus on the amenities you are being told about. Sounds similar, however, it gets a little different. There usually isn’t a lock box for the agent to open, rather they have to contact the landlord or their representation to allow you into the space.  Oftentimes, it is the landlord or the landlord’s agent guiding the tour.  After all, they know the building (or should know the building) better than anyone else.

Neighbors

Buying a Home: When you are looking for a new home, who your neighbors are will be an important factor. However, they aren’t always out trimming their hedges when you tour the house. Thus, you may not get to know your neighbors prior to actually buying.

Leasing Space: This is where the two differ. When leasing commercial space, you have the advantage of being able to do some research on your neighbors. More than likely, they are businesses and have a website. You can search for them to see if they are a good fit to locate next to, or if they will be direct competitors. It doesn’t hurt to check up on them prior to moving next to them. In both buying a home and leasing space, who knows what part neighbors will play after the transaction!

Contracts

Buying a Home: If you’ve ever purchased a home, you know that the day of contract signing, your wrist is going to get sore. You have to put your John Hancock down at least 100 times on various forms. The contract signing process differs per state; sometimes your agent is present and the sellers are present, sometimes you do it in a room with legal counsel.  For the most part, you can read through the contract and understand what you are getting into.

Leasing Space: For commercial leases, the contracts are not that simple.  Here are some of the distinctions between residential and commercial contracts:

No standard forms. Many commercial leases are not based on a standard form or agreement; each commercial lease is customized to the landlord’s and tenant’s needs. As a result, you need to carefully examine all the aspects of the lease including term, payments, improvements, etc.

Long-term and binding. You cannot easily break or change a commercial lease. It is a legally binding contract.  Plus, commercial leases usually entail a good deal of money.

Negotiability and flexibility. Commercial leases are generally subject to much more negotiation between the business owners and the landlord, since businesses often need special features in their spaces, and landlords are often eager for tenants and willing to extend special offers. This is where a good commercial agent comes into play.  They will be able to assist you with the leasing process and negotiate on your behalf.

As you can see, there are some similarities between buying a house and leasing commercial space; the basic needs are the same, but when you get down to the nitty-gritty, commercial real estate is much more complex.  A great agent can help with either process. To find a qualified agent, visit www.cbcworldwide.com

By John Boyer, Director of Marketing, Coldwell Banker Commercial Affiliates 


Featured Listing Friday

October 17, 2014

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Amelia Island Waterfront
325 Pogy Pl.
Fernandina Beach, FL 32034

Listing Type:       Land
Sale or Lease:      Sale
Subtype:              Vacant Land (10+ Acres)
Price:                   $7,000,000
Agent:                  A. John Richwine, Coldwell Banker Commercial Benchmark

Details:

  • Intra-coastal waterfront property with proposed plans for a resort/hotel with 100 full-service dock slips and a rack-and-launch marina with yacht club development parcel.
  • Deep Water Frontage
  • 1.5 miles from the ocean; to the east is 1,100 acre Fort Clinch State Park
  • Walk along the state park beach to the ocean or take a short drive.
  • Marine engineer, environmental and land entitlement attorney ready to be retained for project. 

Click here to view all property listings.

This is a weekly feature published each Friday, where the Coldwell Banker Commercial organization highlights a particular property.

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October 10, 2014

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Wicked Stick Golf Course
1051 Coventry Road
Myrtle Beach, SC 29575

Listing Type:      Special Purpose
Sale or Lease:    Sale
Subtype:              Golf Course
Size:                      10,000 SF
Price:                    $6,548,500
Agent:                  Don Smith, Gary Roberts, & John Draughn
                             Coldwell Banker Commercial Chicora Real Estate

Details:

  • 74.1 Acres in the heart of Myrtle Beach at 17 Bypass and 544 directly south of Wal-Mart Superstore and just across the Bypass from Lowes Home Improvement, and Kohls.
  • Great site as all is zoned outside of city limits. Horry County zoning is as follows; 35.3 acres zoned highway commercial, 27.3 zoned professional office and 11.3 zoned single family.
  • Incredible opportunity for quality high exposure mixed use development with some design and storm water plans already in place.
  • Partial take-down available for sale of 52% of site (dependent on price and terms).

Click here to view all property listings.

This is a weekly feature published each Friday, where the Coldwell Banker Commercial organization highlights a particular property.


Summary of REIS Q3 Preliminary Trends Report

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REIS has recently released its Preliminary Trends Announcement for Third Quarter 2014 Findings in the National Office, Apartment, and Retail Sectors. The findings are consistent with what was presented at the 2014 CBC Global conference three weeks ago. Listed below is a brief summary of the report.

Tailwinds – According to REIS, the end of 2014 remains optimistic in three of the last four quarters. GDP has grown between 3.5% and 4.5% overcoming the slow start.

Average monthly job gains are 220,000 per month, which is well ahead of last year’s pace.

Office – Vacancy remains the same at 16.8%. Asking and effective rents have grown over the past year at 2.5% +/-. If employment continues to decrease, a downward pressure on vacancy will be seen.

Apartment Sector – Vacancy increased 10 basis points to 4.2%. This is due to new units coming on line to meet demand. REIS does not expect the vacancy to rise above 5% before 2018. Rent increases have averaged 3.2% YOY. Demand will continue to absorb units and therefore the rate of vacancy increase will be slow.

Retail – Vacancy has remained unchanged at 10.3% for neighborhood and community centers.

The same holds for regional malls which holds at 7.9%. Reflecting the supply situation asking and effective rents have increased an average of 1.8%.

Industrial – Vacancy on Warehouse and Distribution through Q2 is down 2 basis points to 11.2%. Demand continues to improve, driven by supply chain and order fulfillment.

By Fred Schmidt, President & COO, Coldwell Banker Commercial Affiliates 


Top 5 Reasons to Attend a Conference

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Attending a conference is a great way to get more involved in your community and the commercial real estate industry.  I do get the occasional chuckle when I hear from many sales professionals that they simply have no time or do not see the benefit of attending an event, especially if the event is greater than 45 minutes from their office.

This topic is very relevant as many CBC team members have been attending several events in the past month including Real Share New Jersey, the CBC Global Conference and the San Diego ICSC meeting that kicks-off today.  These are all great opportunities to expand your mind and business.

While out in Las Vegas last week for the 2014 CBC Global Conference I noticed one common trait from all of the attendees, a strong desire to succeed.  This is similar with my impressions after attending 10 ICSC Recon conferences, all attendees, regardless of their short-term objective for attending an event have the same long-term plan - success!

Still need some additional reasons? Here are the top 5 reasons to attend a conference:

5. Learn new ideas – it’s amazing how many really smart and talented commercial speakers and professionals there are in the industry.  I almost always learn at least one new idea by just listening.

4. Exhibitors – there are many technology products that are entering into the commercial real estate market that it becomes difficult to navigate.  I mean, how well can you really evaluate a product or program by just reading a press release on the internet? Many companies attend as exhibitors to showcase their products and to give you a hands on demonstration. 

Most recently at the CBC Global Conference one of the most popular exhibitors was Microsoft.  Microsoft came with a full arsenal of tablets, laptops and smartphones all designed to engage the attendee. 

3. Get away from your office – it’s always said that the most successful professionals are not those that work 12 hour days in their office but rather they are out of their office with their feet on the street. 

2. Educational Sessions – Invest in your mind.

1. Network, Network, Network - networking is a key activity that is critical to your personal growth and business development.  This is a great way to share knowledge and raise your profile in the industry. 

By Jason Silfies, VP Marketing, Coldwell Banker Commercial Affiliates


Millennials are the Most Flexible Generation in Today’s Workforce

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Today, Coldwell Banker Commercial Affiliates released a survey on the differences and similarities of where and how Millennials (ages 18-34), Gen Xers (ages 35-49) and Baby Boomers (ages 50-69) prefer to work.  Despite the many assumptions about Millennials, the survey of more than 2,000 U.S. adults reveals this generation to be more flexible than both their Gen X and Boomer colleagues when it comes to office layout, the length of their daily commute, their willingness to forgo working from home and their ability to work remotely from mobile devices.

“Commercial real estate, and particularly the office sector, has entered a unique era of servicing three distinct generations,” said Fred Schmidt, president and chief operating officer of Coldwell Banker Commercial Affiliates. “Where and how people work is changing. The Millennial generation and shifting economy are a big part of that. It’s important for commercial real estate professionals to understand these trends and be able to provide solutions for today’s evolving marketplace.”

4 surprising truths about millennial workers:

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Read the survey press release, including a link to additional findings, and be sure to check out Fred Schmidt’s interview with The Wall Street Journal Radio. The results of the survey are also featured on MarketWatch.


The Benefits of a Broker in Commercial Real Estate (Part 2 of 2)

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In the first part of this two-part series I wrote about the advantages of leveraging the expertise and resources of a commercial real estate broker for sellers. In this second article I’m going to shift perspective and look at the benefits of a commercial broker for buyers.

In my experience, a lot of commercial real-estate buyers (and even some inexperienced brokers) have the misguided notion that buying commercial real estate is a very simple process, and that there are only a couple of pieces of information needed to find a “good buy.” If a broker only asks, “What type of business is it and how much square footage do you need?’’… then go find another broker. That’s like a doctor asking you what medicines you need. If a buyer is telling the broker what he or she needs, then that broker isn’t offering much value. A good broker will serve as a proactive consultant and guide the buyer to the best possible options – and the way to reveal the best possible options is with a thorough investigation fueled by questions. A broker should be asking many questions to learn as much as possible about the buyer’s business and needs.

While the “right” questions will differ depending on a wide range of variables, I’m going to use this article to highlight many of the most common and necessary questions to give you an idea of how many factors and details go into a quality buyer analysis.

A few buyer/tenant analysis questions:

  • What type of business will you operate in this location? More specifically, how will you be using the space?
  • Do you need separated spaces to perform different operations?
  • Is this a new business or do you have a good sense of gross annual income so we can determine a range of affordability?
  • How many staff members do you have and expect to have going forward
  • Where does your staff live?
  • Will you or your staff be traveling often? Will you host many out-of-town clients?
  • Will you need easy access to the airport or main highways?
  • Are you planning to expand? Do we need to plan for growth?
  • Will you and your staff be in the office every day?
  • Will customers come to your physical location?
  • Do you need to be in a high visibility location?
  • Are area demographics important to your success?
  • Are aesthetics important for the exterior and interior?
  • How much parking will you need?
  • Will you be running computers and copiers that generate heat?
  • Will you need conference rooms?
  • Are there industrial and warehousing needs? 
  • Will there be noise concerns with your production process?
  • Will you need special access roads and loading docks for large delivery vehicles?
  • How will you move your products?
  • Are there special transportation needs – roads, railway or river?
  • What are your communication and Internet requirements? 
  • What are your power requirements?
  • Are there waste disposal concerns?
  • Is it a volatile business that might experience rapid fluctuations in business and staffing?
  • Can we find you tax incentives to locate in specific areas?


This short list represents the tip of the iceberg. Depending on the type, size and requirements of a business, there could be hundreds of questions to answer before the actual search begins. Remember, effective brokers are not trying to sell you on a location, they are trying to get a clear understanding of your business and match your needs with the best “win-win” solution.

By Grayson Powell, Managing Partner, Coldwell Banker Commercial Sun Coast Partners (CBCSCP). CBCSCP leverages the vast experience of highly-skilled real estate professionals and developers and specialize in selling, leasing and managing retail, commercial, and investment property. To learn more about CBCSCP, visit www.cbcwilmington.com or call 910-350-1200.


Ranking Buildings: Fantasy Football Style

A, B, C, D -  this is the traditional way buildings are classed.  What does it all mean? Sure, there some guidelines that are vague. Sometimes people say a building is Class A when really it is Class B. I say we come up with a more aggressive way to rank buildings. I am an avid Fantasy Football player and have been doing it for years. When I’m drafting my team, there are certain criteria I consider for each player. These methods can be used to rank buildings.  

Return on investment (ROI) – In fantasy, the return on investment is deciding what round to draft someone and having them perform to that draft value. For buildings, the return on investment is simple; what I paid vs. what I make on it or what I can potentially sell it for.

Prone to Injury – If a player is prone to injuries, I tend to stay away from them. For buildings, I relate vacancy to injury. Buildings should be judged on their three-year vacancy rate. If a building consistently has vacancy, there has to be some reason why.

Quality of Team – A player is only as good as the team he is on. If a team struggles on offense, than that star running back will usually struggle.  When I think about the concept of a team for a building, I think about the quality of the existing tenants in that building. It seems like strong tenants flock together in good buildings. If there is a lesser quality tenant, others may not want to join the mix.

Demand – Your draft is sometimes dictated by demand. If there isn’t a plethora of quality running backs, naturally, you will try to draft one first.  Buildings should also be ranked on demand. If there isn’t a lot of ‘like space’ available, the building should get a higher ranking.

Price – How much are you willing to pay for that top quality pick? If you reach for someone above their draft value, will it pan out? For buildings, price doesn’t always equal quality of the space. There are other factors that drive cost of space, such as location or building amenities. Are you willing to reach for an overpriced building? If a building is priced too high, it’s ranking should be lowered.

Surroundings – It’s important to understand the quality of the NFL division the player is in when drafting for fantasy. If a running back is in a division with weak defenses, they will play those weak defenses twice in the year, thus improving their draft rank. The surroundings of a building should also be considered. A trophy building placed between two tear-downs should be worth less.

Location – About mid-season, you start to think about where a player plays. Weather can be a huge factor in a player’s performance. Rain, snow, playing in a dome or on turf can all be factors when deciding what players to start. Obviously, in commercial real estate, location should be a huge factor in ranking buildings. Proximity to highways, public transportation, and surrounding amenities should all be considered in ranking buildings.

Owner/Coach – A new coach can affect a player in fantasy. The new coach may have a different style that doesn’t fit with the player’s skills and they may be underutilized. Who owns a building should also be considered when ranking buildings. How much will they upkeep the building? Do they have the proper budget for improvements? How do they treat tenants? Also, who manages the property should be considered. An NFL owner can be the smartest person in the world, but a poor coach can drive the team into a losing season. If the property manager isn’t doing their job properly, it doesn’t matter who the owner is.

Therefore, in my opinion, the new proposed ranking system should be:

  1. Return of investment
  2. Three Year Vacancy Rate
  3. Quality of Existing Tenants
  4. Like Space Available
  5. Value of the Building
  6. Surrounding Buildings
  7. Location
  8. Owner/Property Manager

By John Boyer, Director of Marketing, Coldwell Banker Commercial Affiliates


College Football Conferences Ranked by Size of Office Market (Part 3)

August 29, 2014

America’s favorite time of the year is finally here, football season. This year college football gives us a lot to look forward to. The 2014-2015 season will be the first season a playoff system is used to decide the champion and as if that doesn’t bring enough excitement, the AP Preseason Football Rankings being released surely did so. CBC corporate wanted to join in on all the excitement by creating rankings of its very own. This year’s rankings consist of three of the top college conferences, the ACC, Big 10 and SEC. However, rather than rank these schools based on their sporting capabilities, CBC took a commercial real estate approach. Each school was ranked based on the rentable building area (RBA) in the Office sector of the CoStar market the school is located in. 

We’ve already ranked the ACC and the Big 10, so here are the SEC Office Market Rankings:

  1. Vanderbilt
  2. Alabama
  3. Tennessee
  4. South Carolina
  5. Louisiana State
  6. Kentucky
  7. Arkansas

Auburn, Florida, Georgia, Mississippi, Mississippi State, Missouri and Texas A&M did not rank because there were no CoStar markets available in their locations.

Vanderbilt’s location in Nashville, the capital of Tennessee places the university in a big Southern market. The highest office market square footage in the SEC is 76,591,214, which is significantly lower than the top ACC and Big 10 schools.

Many of the SEC schools did not appear to be in a market on CoStar. Therefore, the results were among seven schools, most located in bigger Southern cities. 

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By Julie Allison, Intern, Coldwell Banker Commercial Affiliates 


College Football Conferences Ranked by Size of Office Market (Part 2)

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America’s favorite time of the year is finally here, football season. This year college football gives us a lot to look forward to. The 2014-2015 season will be the first season a playoff system is used to decide the champion and as if that doesn’t bring enough excitement, the AP Preseason Football Rankings being released surely did so. CBC corporate wanted to join in on all the excitement by creating rankings of its very own. This year’s rankings consist of three of the top college conferences, the ACC, Big 10 and SEC. However, rather than rank these schools based on their sporting capabilities, CBC took a commercial real estate approach. Each school was ranked based on the rentable building area (RBA) in the Office sector of the CoStar market the school is located in. 

Last week we ranked the ACC. Here are the Big 10 Office Market Rankings:

  1. Maryland
  2. Northwestern
  3. Rutgers
  4. Michigan
  5. Minnesota
  6. Ohio State
  7. Michigan State
  8. Wisconsin
  9. Nebraska

Indiana, Purdue, Illinois, Iowa, Penn State did not rank because there were no CoStar markets available in their locations.

The Big 10 rankings show a similar pattern to the ACC’s. In a conference where Maryland could only dream about being number one due to many factors, one of them being their smaller size in a conference among larger schools, did not apply here. Conversely, in CBC’s office market rankings, Maryland’s “disadvantages” work to its advantage. The University of Maryland is located in the Washington, D.C area market explaining the large number of office square footage. CBC’s rankings using CoStar markets data show that universities in or nearby big metro cities like Maryland and Northwestern come out clear in these rankings both with RBA’s over 460,000,000.

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By Julie Allison, Intern, Coldwell Banker Commercial Affiliates 


Featured Listing Friday

September 5, 2014

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1201 Barnesville Highway
Thomaston, GA 30286

Listing Type:       Industrial
Sale or Lease:    Sale
Style:                     Industrial Bldg – Manufacturing
Size:                       433,000 SF
Price:                     $4,950,000
Agent:                  Arthur Barry, Coldwell Banker Commercial Eberhardt & Barry

Details:

  • 433,000 ± SF Industrial Facility (663’ X 451’ )
  • Expandable to 536,237 ± SF
  • 10,21 ± SF office area
  • 33,456 ± SF second floor available for heavy storage or manufacturing with 30’ ceilings
  • 3,000 ± SF employee canteen
  • Partially air conditioned
  • 12,150 ± SF free standing metal insulated storage building;1 roll-up door; built in 2002.
  • Built in 1994 with expansion in 1995 & 1997
  • Insulated, built-up tar and gravel roof
  • 232 parking spaces
  • 28 (8’ X 10’ ) tailgate high truck doors with automatic levelers, weather seals, and trailer lights
  • 2 (10’ X 15’ ) drive-in doors Graveled trailer storage area for approx. 100 trailers
  • Norfolk Southern borders the property

Click here to view all property listings.

This is a weekly feature published each Friday, where the Coldwell Banker Commercial organization highlights a particular property.

August 29, 2014

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Lujan Plaza
1520 Deborah Rad SE
Rio Rancho, New Mexico

Listing Type:      Investment
Sale or Lease:    Sale
Style:                    Local Strip Center
Size:                      +/- 14,388 SF
Price:                    $2,275,000
Agent:                  Carrie Mellenbruch, Coldwell Banker Commercial – Las Colinas

Details:

  • Mixed use strip mall, consists of 14 suites with local vendors
  • Local vendors include Ahh Sushi & Namaste India & Nepal Cuisine
  • Consistently high occupancy rate
  • Approx. 89 Parking Spaces available
  • 7.0% Cap Rate, Contact Broker for Financials
  • Loan is Assumable

Click here to view all property listings.

This is a weekly feature published each Friday, where the Coldwell Banker Commercial organization highlights a particular property.

August 22, 2014

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303 Arvada Ave.
Albuquerque, NM

Listing Type:       Industrial
Sale or Lease:      Sale
Style:                    Warehouse/Distribution
Size:                      +/- 42,000 SF
Price:                     $2,500,000
Agent:                  April Ager, Coldwell Banker Commercial – Las Colinas

Details:

  • Secure Gated Property with Building Alarm System
  • Seven Loading Docks with Several Ramps
  • Approximately 62 Parking Spaces with Loading Docks (79 spaces without loading docks)
  • HubZone Qualified
  • Owner Financing Available to Qualified Buyer
  • Sale-Lease Back Option Available
  • Garcia’s Tents Business NOT FOR SALE

Click here to view all property listings.

This is a weekly feature published each Friday, where the Coldwell Banker Commercial organization highlights a particular property.