One statement...
Knowledge is power.
I noticed while acting as broker for a landlord this week that one of the most important ways to get or keep a competitive edge is knowing the facts. Yep, like the show Dragnet, "just the facts m'am".
The broker and his client were planning a visit to space I have offered. In a preliminary conversation to our first meeting at the site, the broker notified me that they were also looking at a building up the street it was "three times" larger and was only $8,500 per month compared to the space we're offering at $7,000 (5,000 sq.ft.) per month. Hmm. Sounds like the other space is a good deal. I followed up on the lead and the fact is; the competitor space is only 500 sq.ft. larger than our offered space. So the math is as follows:
Our space offered: $7,000 x 12 months = $84,000 annual rent / 5,000 sq.ft = $16.80/sq.ft.
Competitor space: $8,500 x 12 months = $102,000 annual rent / 5,500 sq.ft = $18.55/sq.ft.
So, the next day our conversation went:
Other broker: "the space up the street is only $8,500 per month and it's much larger"
Me: "I called about the space yesterday after we talked and they are only 500 square feet larger, by my calculations we are almost $2.00 per square foot less expensive than them"
Other broker: "I didn't know that"
Me: "okay, I'm glad I could help. I hope your customer likes the space - we would love to have them."
Now, the objection was averted and my client has retained value in his property. Knowing the market and being able to synthysize the information is critical to providing value to a client. It is also very important to know the intangables in the market. For instance, we have had a lot of activity on the property. Therefore, the owner is confident that his firm position on rental rate is appropriate at this time. If it were the other way and we were not getting much activity our strategy would likely change.
As always, what does it mean for you. Simple this time... Either know your stuff very well or hire someone who does. When dealing in all forms of real estate and it's associated financial functions such as lending, et.al. knowledge is critical.
UPDATE: Just a quick disclaimer. I will begin moderating comments now. Comments are encouraged, but must live up to the informational nature of this blog.
