Update to a post earlier this month.
Alabama-based construction firm is developing "green" buildings. An article published by the Birmingham Business Journal states that BL Harbert International constructed $260 million in green buildings.
Wednesday, March 26, 2008
Thursday, March 20, 2008
Negotiating 101
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.
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.
Monday, March 17, 2008
Retail Cap Rates Headed Down?
Over the past few weeks I have been having discussions with clients who own retail properties about the forecast for their properties. It seems that the supply and demand dynamics of retail space has taken a turn toward over supply. Due to the construction lag in expected supply the market now seems to have experienced a gap between tenant demand and vacant space. This it typical and temporary in each property type and in most any market. It's just a part of the real estate cycle that occurs as investors react to the demand from tenants.
What does that mean? Well, the supply and demand of tenants in relation to properties has a correlating effect on values of such properties. As mentioned in previous posts there are MANY factors that affect property value, and I merely attempt to highlight one at a time. Anyway, as vacancy rates increase, investor confidence tends to wane therefore leading investors to reduce holdings or at least hold off new construction projects. If you subscribe the supply and demand theme , two events can occur. (1) Retail spaces can be converted to alternative uses thus taking retail space off the market and reducing supply, or (2) the market can wait in anticipation that, in time, tenant demand will increase and fill vacant spaces to a comfortable level. While a prudent investor should consider all options, we tend to believe that over the long run the market will perform in a somewhat expected trend. Therefore, most will believe that there is no need to have a fire-sale of retail properties, however, you might want to consider other property types in the short term.
UPDATE: since I completed the rough draft of this post, an article written by Matt Hudgins hit on some of the points above.
What does that mean? Well, the supply and demand of tenants in relation to properties has a correlating effect on values of such properties. As mentioned in previous posts there are MANY factors that affect property value, and I merely attempt to highlight one at a time. Anyway, as vacancy rates increase, investor confidence tends to wane therefore leading investors to reduce holdings or at least hold off new construction projects. If you subscribe the supply and demand theme , two events can occur. (1) Retail spaces can be converted to alternative uses thus taking retail space off the market and reducing supply, or (2) the market can wait in anticipation that, in time, tenant demand will increase and fill vacant spaces to a comfortable level. While a prudent investor should consider all options, we tend to believe that over the long run the market will perform in a somewhat expected trend. Therefore, most will believe that there is no need to have a fire-sale of retail properties, however, you might want to consider other property types in the short term.
UPDATE: since I completed the rough draft of this post, an article written by Matt Hudgins hit on some of the points above.
Wednesday, March 12, 2008
Birmingham... A City with Opportunity
It's easy to get down these days. With the economy being so tough and stock market volatile at best it's hard to tell if American is on the cusp of greatness or despair.
I was reading the monthly publication, Commercial Investment Real Estate, and there is was, a glimmer of hope buried in the mix of big deals and market trends. In a survey sourced from MarketWatch, Birmingham, Alabama, made the top ten list of MSA's based on large and small companies per capita, unemployment, population, and job growth. At number nine we joined the group of Minneapolis-St. Paul (1), Denver (2), Richmond, Va. (3), Boston (4), Charlotte, NC (5), Nashville, Tenn. (6), Washington D.C. (7), New York (8), and San Fran. (10).
Just FYI the worst fifty MSA's may surprise you. They are, New Orleans (50), Rochester, NY (49), Tucson (48), Buffalo (47), Sacramento (46), Los Angeles (45), Detroit (44), San Antonio (43), Virginia Beach-Norfolk, Va. (42), Las Vegas (41).
As for population I find it hard for us to beat out Atlanta, New York, Chicago and the like. There fore, it must be the other attributes surveyed that keep us competitive, number of businesses, unemployment and job growth.
I've always felt like Birmingham is a great place to do business -- especially starting a small business. As have conduct my work, I get to know many businesspeople. They seem to be able to navigate the market in a manner that is congruent to the American Dream of entrepreneurship. Also we can thank most of our area governments for supporting business growth.
This ought to keep Birmingham as a desirable market to buy, sell, and use real estate.
I was reading the monthly publication, Commercial Investment Real Estate, and there is was, a glimmer of hope buried in the mix of big deals and market trends. In a survey sourced from MarketWatch, Birmingham, Alabama, made the top ten list of MSA's based on large and small companies per capita, unemployment, population, and job growth. At number nine we joined the group of Minneapolis-St. Paul (1), Denver (2), Richmond, Va. (3), Boston (4), Charlotte, NC (5), Nashville, Tenn. (6), Washington D.C. (7), New York (8), and San Fran. (10).
Just FYI the worst fifty MSA's may surprise you. They are, New Orleans (50), Rochester, NY (49), Tucson (48), Buffalo (47), Sacramento (46), Los Angeles (45), Detroit (44), San Antonio (43), Virginia Beach-Norfolk, Va. (42), Las Vegas (41).
As for population I find it hard for us to beat out Atlanta, New York, Chicago and the like. There fore, it must be the other attributes surveyed that keep us competitive, number of businesses, unemployment and job growth.
I've always felt like Birmingham is a great place to do business -- especially starting a small business. As have conduct my work, I get to know many businesspeople. They seem to be able to navigate the market in a manner that is congruent to the American Dream of entrepreneurship. Also we can thank most of our area governments for supporting business growth.
This ought to keep Birmingham as a desirable market to buy, sell, and use real estate.
Friday, March 7, 2008
Is your building green?
Whether you are a user or investor of real estate you might want to know if your building is qualified "green" or can be reasonable converted to "green". Green buildings are usually certified by LEED or STAR standards. What is the benefit? I understand that some lending institutions have programs to encourage environmentally sustainable development and have designated funds to help.
If you are interested in the idea of a green building, we are too. We can help you identify opportunities.
** supplemental article about the demand for green buildings.
If you are interested in the idea of a green building, we are too. We can help you identify opportunities.
** supplemental article about the demand for green buildings.
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