Mythbusters: CRE Edition

Posted by Nick Gonzalez on January 17, 2019
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Every industry is rife with popular misconceptions, or myths, that professionals find themselves dispelling in countless meetings, phone conversations, and dinner parties. Commercial real estate is no different; it is a complex industry and has its fair share of popular myths. Below are a few myths that I will debunk for you! 

 

Myth #1: Investing in commercial real estate takes a lot of money

Contrary to popular belief, commercial real estate is fairly accessible and the price points don’t have to be daunting. My colleague, Jason Williams, wrote a great blog post debunking this myth. In a nutshell, a good broker can help you find an investment that fits your budget and goals. 

 
Myth #2: Amazon is killing brick and mortar

In-person sales still makes up 94% of the retail market ($5+ Trillion in total), but Amazon has been a tremendous catalyst for change in the industry. Although it might seem scary, this is a good thing! Amazon has reinvented the industry, challenging the complacency in the “traditional” retail experience. 

The in-person shopping experience is now moving towards experiential, luxury, upscale experiences rather than a simple “big-box” feel. Discount stores continue to expand, but Amazon’s biggest impact seems to be the move toward more of a “sensory experience”, which is great for both the industry and for shoppers. 

 
Myth #3: If a property has been listed for a long time, it is “stale”

This myth can affect the mindset of both Sellers & Landlords just as much as it can affect that of Buyers & Tenants. I believe that this myth often stems from clients being more familiar with residential real estate and assuming that many of the same tenets hold true in commercial real estate.

For Sellers/Landlords, a belief in this myth often makes them nervous thinking that if they don't get interest on their property immediately, then it either will never lease/sell or they assume they have chosen the wrong broker. These misconceptions ignore the many reasons why it may take a while to generate activity on a particular property. To begin with, more often than not, it takes a bit of time for listings to get the visibility and attention they need from local brokers or marketing websites. In residential real estate, 30 days can seem like an eternity for a property to not receive attention, but in commercial real estate it usually takes 20-30 days just for the brokerage community and general public to gain awareness of a new listing.

For Buyers/Tenants, believing in this myth often means that properties that have been on the market for an extended amount of time are discredited by the thought that something is wrong with them. This thought process, however, doesn't take into account what is going on behind the scenes. For example, a multi-tenant lease listing may be listed online for many months, which could make someone question why it has been online for so long. However, what a viewer may not realize that there is a lot of activity at the property, however because there is still availability there, the listing remains online. With sales, properties often go under contract for 30-180 days, during which they are still listed as “active” on the listing services, making them seem more “stale” than they really are. 

 

Myth #4: It’s about getting the cheapest rent

“Cheap rent” usually comes at a cost somewhere else. The best lease deals are a fair balance of rental rate, “free rent” period, tenant improvement allowance, and general lease/business terms in the lease. Striking a good balance across the board usually yields the best results; focusing only on “cheap rent” will likely leave you exposed to risk (or paying for it) somewhere else. 

 

Myth #5: Brokers are expensive

If you’re a buyer or tenant, having a broker represent your best interests doesn't cost you anything (the landlord pays them). So, think twice about calling the listing broker directly or ask them to refer someone else within their brokerage to ensure you receive fair/equal treatment and are given the best advice/guidance possible. And as for sellers and landlords, although the brokers' commissions come out of your pocket, this payment is often mitigated by help that can come from an experienced broker negotiating on your behalf and getting your property more exposure, hopefully leading to a quicker lease or sale, through the many resources and listing sites that brokers have access to.

 
Myth #6: I can find my own office/building/deal:

If you do your own taxes, and enjoy doing them, then yes, you can find your own space.

The potential to unintentionally make mistakes (and possibly incredibly expensive ones!) make using a broker a common sense decision. Brokers on the tenant-representation and buying side are some of the few professionals you can hire without having to pay them directly- we’re here to help; put us to good use!

 


"Good brokers care about their clients above the commission. In commercial real estate brokerage, and especially in a small market like the Triad, the success of your brokerage business is tied to your ability to create long-lasting relationships..."

 
Myth #7: Brokers only care about the commission

Brokers care about their commission (as you would, too) but good brokers don't only care about their commission. Good brokers care about their clients above the commission. In commercial real estate brokerage, and especially in a small market like the Triad, the success of your brokerage business is tied to your ability to create long-lasting relationships that should endure well past the transaction at hand (and create multiple transactions over the long term!). Plus, in smaller communities like the Triad, a broker’s reputation is paramount- those that have a reputation for prioritizing monetary gain over the best interests of their clients have a tendency to be weeded out over time as their clients find help elsewhere.

 


 

To summarize, any good broker can help dispel myths/misconceptions for you and give you the right guidance and answers you need. Furthermore, what might hold true in a different market or region may not be customary/standard in this area, opening the door to even more myths and conceptions. Please call/email if you have questions or drop a note if there are any myths you want the team to weigh in on!

 

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Nick Gonzalez

Written by Nick Gonzalez

Nick’s core focus is on investment property sales, working with investor and institutional clients in both acquisition and disposition of real property and businesses. Nick assists in all aspects of bank-owned and distressed sales, including initial asset evaluation, creating action plans and strategy for management, stabilization, and disposition.

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