A Landlord’s Market In Commercial Real Estate

A Landlord’s Market In Commercial Real EstateI started in the business in 1999, doing corporate tenant representation at Fischer & Company. I kept hearing at that time that it was a tenant’s market but with the cyclical nature of the business, it would soon be a Landlord’s market. It was easy to look like a hero while Representing tenants during this time period when landlords were offering incredible concessions to win a highly sought after tenant. In 2005, I ventured in to project leasing where it continued to be a tenant’s market and now I was on the wrong side of the table.    After fourteen years in the business, I am finally experiencing my first Landlord’s market: talk about a long cycle…. Las Colinas had been dead in the water for years. The economy was floundering, no new corporate relocation's, no expansions; the Landlords were “buying” deals just to get occupancy. Slowly the tides began to shift. At the end of first quarter 2012, the buzz was that more deals had been done in Las Colinas in the first three months of that year, than in the prior three years. Melanie Hughes and I happen to represent a lot of tenants in Las Colinas with very specialized needs so we were enjoying the uptick in activity as our clients were starting new businesses and expanding their current footprints. It became more and more challenging to locate space that met their needs but we continued to scour the market and were able to perform.  2013 has been a different story.  We began working with a new 10,000 square foot client with a need for generic office space so the task appeared easy. We created a market survey and began looking at options with our client.  To our surprise, we could only identify 10 Class “A” options that could accommodate 10,000 square feet and above! A year earlier this search would have turned up 3-4 times that number.  Our client shortlisted her options only to discover that one of them had been leased up by an existing expanding tenant.  We requested proposals and space planned at our final two options. Following several rounds of planning, we countered their proposals to discover that in one case, we received no movement in economics and in the other case; they actually increased their rate from their original offer. How can you explain to a new client that hired you for your expertise in securing the best deal, that the market has turned and that my ability to drive the best economics has diminished? Here is where the true test of a broker’s worth can emerge.  We always tell our prospective clients, when trying to win business that it’s about more than a good rental rate. When rates have firmed up, you shift your value proposition to other areas of low hanging fruit. This is where years in the business coupled with strong broker relationships can markedly pay off.  I was able to secure all free reserved parking, free visitor parking, (in a garage where all visitors pay), free rent later in the term, the best views and elevator exposure, just to name a few. In the end, I was able to capitalize on experience as both a tenant rep and a landlord rep, to deliver the best possible deal even during my first true encounter with a landlord’s market. Sharon Friedberg is a Senior Vice President for Bradford Commercial Real Estate Services specializing in the Office Leasing. 9400 NCX, Suite 500 Dallas, TX 75231 Ph: 972-776-7150
August 19, 2013

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