We've all heard the saying, "that is just the tip of the iceberg"...right? I bet you believe that you know what the saying means...we are just seeing a small part of the bigger issue. The looming danger from an iceberg is not seen above the surface of the water, but from the massive subsurface ice structure that is unseen. You may be wondering to yourself...OK, I'll read on BUT what on Earth does this have to do with commercial real estate? Indulge me while I try to explain.
We encounter many "iceberg tips" in our daily practice of commercial real estate. I would offer (sorry) that owners and occupants of commercial real estate hire us to navigate around these "iceberg tips" and avoid a Titanic transaction collision. So how exactly, you may ask.
Here are five ways that came to mind:
1. The building amenities are right but the ownership is wrong. Your client is a startup, the building fits your client's requirement but the ownership is institutional, credit conscious, and only willing to lease to large established companies.
2. The building appears to be right but actually won't work. Your client stacks and distributes. The building has the proper truck loading and warehouse clearance...but the sprinkler calculation will not accommodate a "high pile" storage use.
3. The motivation is too good to be true. Why is the owner so motivated? The building is in the path of an underpass construction project that will commence in two months and limit access to the building. An occupant "must move" by the end of the month...is the company financially stable OR are they being evicted?
4. The silence is deafening. You make what your client believes is a great offer and all you hear is crickets from the owner...another offer? A change in decision makers? Something else?
5. The market doesn't matter. The market is X but the building is priced at X + 5. It's not because the owner doesn't understand the market...it's because he doesn't want to meet the market, OR because he can't meet the market...a loan, an emotional attraction to the real estate, etc.
Remind your owners and occupants that all great captains "anticipate and identify" the danger of unseen issues lurking beneath the surface and safely steer the ship back to port.
Signing off until next week...Bukester, out!
By: Allen Buchanan
Principal | Lee & Associates
Follow Allen on Twitter @allencbuchanan
Be sure to follow Allen's blog as well, featuring his well-known Tuesday Traffic Tips