Commercial Real Estate Is Not a Commodity, Damn it
The reality of commercial real estate.It’s not who you know, it’s WHAT you know
Guest Blogger – Andrew Maletich
Being relatively new to the Industrial Real Estate Brokerage business, it’s taken some time to figure out how this industry works. Before I decided to get into this business, I thought, I can do that, it doesn’t sound too difficult. All you have to do is help some people negotiate a lease or sale price. But, it didn’t take long before I realized that it is much more involved that that!
First off, you have to find client’s before you can help them negotiate anything. And, that is a lot more difficult than it sounds. You also have to learn what seems to be a never ending stream of acronyms such as TI’s, DID’s and REIT’s, just to name a few. But, one of the most important things I’ve learned so far is that it’s not who you know, it’s what you know! Your submarket that is. It seems most of the really successful Brokers are successful for predominately one reason; they know their individual submarkets better than any of their competitors. Now, I’m sure there are a lot of other reasons why they are successful as well. Maybe some are great communicators. Maybe some are really organized and maybe even some of them just get a bit lucky. But the one thing that I can assure you these successful Brokers do is learn their submarket like the back of their hand. They know every comp and have all the details surrounding every deal that is getting done and even know why certain deals didn’t get done. They know who all the major companies are and have formed relationships with the decision makers in those companies. There’s not a single vacant unit that they don’t know about or haven’t walked through. Obtaining this wealth of knowledge takes years of time and hard work to develop and hone into a skill that becomes a useful tool for these Brokers to deploy to any and all developers, institutional owners and even private owners and allows them to create new deals in their respective submarkets.
So, for all of you new Brokers out there, learn your submarket backwards and forwards and success is sure to follow.
It’s not who you know, it’s WHAT you know
Guest Blogger – Andrew Maletich
Being relatively new to the Industrial Real Estate Brokerage business, it’s taken some time to figure out how this industry works. Before I decided to get into this business, I thought, I can do that, it doesn’t sound too difficult. All you have to do is help some people negotiate a lease or sale price. But, it didn’t take long before I realized that it is much more involved that that!
First off, you have to find client’s before you can help them negotiate anything. And, that is a lot more difficult than it sounds. You also have to learn what seems to be a never ending stream of acronyms such as TI’s, DID’s and REIT’s, just to name a few. But, one of the most important things I’ve learned so far is that it’s not who you know, it’s what you know! Your submarket that is. It seems most of the really successful Brokers are successful for predominately one reason; they know their individual submarkets better than any of their competitors. Now, I’m sure there are a lot of other reasons why they are successful as well. Maybe some are great communicators. Maybe some are really organized and maybe even some of them just get a bit lucky. But the one thing that I can assure you these successful Brokers do is learn their submarket like the back of their hand. They know every comp and have all the details surrounding every deal that is getting done and even know why certain deals didn’t get done. They know who all the major companies are and have formed relationships with the decision makers in those companies. There’s not a single vacant unit that they don’t know about or haven’t walked through. Obtaining this wealth of knowledge takes years of time and hard work to develop and hone into a skill that becomes a useful tool for these Brokers to deploy to any and all developers, institutional owners and even private owners and allows them to create new deals in their respective submarkets.
So, for all of you new Brokers out there, learn your submarket backwards and forwards and success is sure to follow.
Drastic Leasing Improvement – I-55 Industrial Corridor
Guest Blogger - Terry Grapenthin
Chicago’s south I-55 corridor has seen some drastic improvement in industrial leasing since the beginning of 2011. With all submarkets in Chicago there are certain pockets of size ranges that seem to be attracting the most activity. The market’s smaller product (Under 50,000 SF) seems to have the highest volume of transactions and most tenants and deals are being made in core, class A product. 2011 lease deals from 15-50,000 SF exceeded all of the lease deals in that same size range from 2008-2010. We are seeing continued velocity in that size range and expect rent growth due to a diminishing supply to accommodate. The larger sites and spaces are not being ignored either as I-55 saw improving companies absorbing more space and a lack of supply in some demanded some BTS activity. There were multiple long-term lease deals done with Samsung (650,000 SF), Scotts Lawn (350,000 SF), and a build-to-suit for Edward Don (362,500 SF). There were 2 land sales exceeding 40 acres with both FedEx Ground and Dayton Freight in which both will be constructing facilities in 2012. Finally, (and probably the most exciting thing that 2011’s success has resulted in) is I-55 developers are discussing executing some spec development to service these holes in the market. It is expected that Ryan Companies will be going up with a 500,000 SF industrial building in Boldt Park, and Pizzuti is in deep discussions to go spec with another 650,000 SF cross docked facility in Pinnacle, both in Romeoville, IL. If the leasing activity continues and we see the rent growth we all expect to see in these size ranges, more spec development will follow at the end of 2012/early 2013.
Thanks to Terry Grapenthin at my company for participating as my guest blogger!
Experts optimistic on outlook for suburban market
Check out this article from dhbusinessledger.com
Some activity includes businesses seeking to take advantage of the depressed rental rates by seeking more top-of-the line locations, which may not cost much more than what they are currently paying. Leasing activity has spiked about 40 percent in the suburbs over the last two years, said Daniel P. Cawley, president of Cawley Chicago Real Estate in Downers Grove…Read More
Thinking about re-tenanting your high vacancy office property? First Consider this…
Many landlords go full throttle into leasing a high vacancy property that was once full without considering tenant improvement and commission costs. In office deals these costs can run thirty five dollars ($35) per square foot. If you spend that money you may not recapture it when you sell it. You would have been better selling it with a high vacancy and moving on to better deals. You could waste years of time and sweat on what you could achieve now.
Sometimes it’s hard to let go but why prolong the agony on what you can remedy today!
Does this sound familiar? Please call for a full property analysis.
Senior Vice President
Cawley Chicago Commercial Real Estate
630.729.7937
Thanks to Dan O’Neill my Investment expert at my company for participating as my guest blogger!
Cawley Chicago Sells a 10,000 SF Industrial Building
Cawley Chicago Commercial Real Estate is pleased to announce the recent sale of a 10,000 SF industrial building in Warrenville at 3S320 Rockwell. Cawley represented the owners in the transaction which was on the market for 1 plus years. The purchaser was a user who lives in the geographic area, looking to reduce his commute time by relocating from the O’Hare area. The contract was executed in 30 days and closed 30 days later with bank financing through American Chartered Bank. The sellers like the buyer live in the area used the property to operate their business for the past 8 years. The recession of 2009 and 2010 eroded their business to the point the property size was more than they required.
Cawley closes a $9.8 Million Investment Deal
See story at REJournal.com: http://bit.ly/ovEFFy
Joseph Castrogiovanni, Jr., John A. Castrogiovanni, and Fran Knutson of JTJ, LLC sold the 122,092-Square-Foot Brynwood Square Neighborhood Shopping Center located at 2615 Mulford Rd, Rockford, Ill to Midland Atlantic out of Cincinnati, Ohio for $9,850,000 or $80.68 per square foot; and a CAP rate of about nine percent.
The buyer took legal title as “MO Brynwood, LLC.” John I. Silverman of Midland Atlantic took out a mortgage for $7,530,000 to finance the purchase of this shopping center. Dan O’Neill, senior vice president, from Cawley Chicago confirmed that he represented both the seller and the buyer. Marifran Georgis, the attorney for the sellers, verified the sale of the shopping center and also explained that the sellers are all in their eighties, and that retirement was the motivation for selling the property. Since the property was in excellent condition, the due diligence period took sixty days, and escrow took only thirty days.
Clayton Riney, who is in charge of leasing for all of Midland Atlantic properties, verified that Midland purchase.
Brynwood Square contains 122,092 square feet of leasable area and is situated on approximately 10+/- acres of land. The subject property is divided into sixteen inline tenant spaces which are anchored by a Hilander Food Store (Kroger). Hilander accounts for approximately 60 percent of the net rentable area of the center and is locked in a 15-year lease. At the time of sale, Brynwood Square was 96 percent leased.
The owners of Brynwood had been trying to sell this property since 2008. During that year, the property was listed with Marcus & Millichap for $10,750,000. In 2009, Brynwood Square was listed with Mid-America. Dan O’Neill had the property on the market for about a year since October of 2010.
http://bit.ly/ovEFFy
Terry Grapenthin of Cawley Chicago Commercial Real Estate, along with other industry leaders discuss the activity and market of the I-55 industrial corridor.
Read more, http://bit.ly/peBBat
Real Estate TEAM?
Does Team really apply in the ultra competitive cutthroat real estate industry? The common belief is real estate brokers have to develop a drive to perfect their “style” which suggests they have to be a one person band. Yet many firms are marketing teams to meet the demands of the new consumers who want more attention. Most teams are senior and new or junior teams to free up the senior member to develop more business. Note there is little attention to the existing client.
We think teams are necessary to better serve clients. But if they are not established for the right purpose nothing changes for the client.
Competition is stronger, client loyalty is weaker and technology is leveling the playing field and companies are fighting for the reduced piece of the pie.
So is teaming working? Are teams actually teams? Successful teams must have individuals whose strengths and weaknesses compliment not overlap one another. Things like temperament, skill, experience, product types, organizational habits and business development and transactional completion abilities. Then there is the leadership quotient and who and when takes the lead and the ego babysitting to allow for the team concept to provide the intended results.
In our view teams cannot be assembled; they must evolve and that is where the true test of team comes into play. There has to be a clear set of guidelines and rules and minimum levels established and they have to practice, practice, practice before they can perform.
We think team concepts starts with company culture. It comes down to the money in the lives of many. The past 2 years the world change. If it’s about the money then it won’t work long-term.
We believe the team can only function if the cooperative strengths are greater than individuals and committed to the benefit the service levles and knowledge to the client. It is also critical that internal competition is eliminated. This allows free flow of information through the entire organization. This kind of team has an ever-changing dynamic just as each transaction requires flexibility and fluid strategies. These teams commit first to the client then work backwards to the individual skill sets constantly re-evaluating the teams strengths and weaknesses to find a customized method to complete the transaction. This client first commitment will elevate any Company.
A sports comparison in inevitable right? Think about teams in any sport where the best players are committed to statistics and not the outcome! Client first is the outcome and we all know what the stats focused teammate gets.
How do you know if a team is stats driven or relationship driven? When you interview them notice how the first meeting goes. If they are talking about themselves and their company that is a stats driven team. If they ask good questions with the intent to understand your situation and requirements they are thinking about the outcome. Hire that team!
Evolution Revolution-Ball of Confusion
Click here to listen to Ball of Confusion by The Temptations
Somehow seems like our world is a ball of confusion. When you hear the lyrics they apply more today than back in the 60′s. Whats the old saying… “the more things change the more they stay the same.”
The past few months I have been writing about the evolution/revolution (or lack thereof) across most businesses. There are some industries (banking/finance) who don’t change and we continue to be bail them out. Hard to get people to change when there is no incentive.
Pressure causes each of us to react differently and in our company the reactions were varied. For us there was doubt and this ball of confusion about strategy and long-term survivability. One of the benefits of our forced evolution the past 2 years (as a result of the economic melt down) was figuring out how to measure everything from expenses to income opportunities and the earning process. Measuring adds an accountability principle (pressure) t0 into an industry known for its cowboys and shows up as pressure to perform. We actually created 4 new business lines, tightened our fiscal belt like every other company and added accountability as part of the evolution/revolution process.
Today I write about the evolution/revolution at my company. This week we had 2 brokers leave the company which puts the total in the past 6 months at 5 (out of 14). There is always movement of brokers in our industry from one company to another and I’ve never really paid attention to that sort of thing until now. To clarify; 3 brokers and the focus of this rant left for other companies and the other 2 left the industry which was the right choice. On the surface and to the outside world including our competition it could appear as though my company is coming apart at the seams (it’s not) and there “must be something wrong”. I don’t really care about our competition but I do care about our clients and the remaining folks.
I’m losing good people for what I believe are the wrong reasons. There is no barrier to entry to this fabulous industry but there are severe longevity barriers. The good news is those not properly equipped for the industry recognize that fact and find something else to do. Most people however look outside themselves as to the reason for their lack of success. I’d love to do a study to determine if moving to another company actually changes the income long term. In the short-term many benefit in the short term as many brokerage companies are offering signing bonuses and/or preferred commission splits but what about the long-term benefits and success?
In real estate; like most service industry’s consistent income-creation activities are basic required functions. The interesting point; it seems to me; is this habit is an individual change and not contingent on the name of your company. However if changing companies causes the individual to change something other than the name on his business card then it works and was the right thing to do. Maybe changing companoies increases confidence and causes individual change.
I wish all sales people in the industry well in all that they do but in particular I wish them the courage to seek and embrace change. Self change (evolution) is the hardest and often the last and typically forced. I regret losing people because I feel like I failed but cannot control a humans reaction to change and pressures.
