Asking prices. Pay me this and we’ll make a deal. Easy? Not so fast.
In our hyper-inflated industrial real estate market, every COMP is a new high watermark. Demand for manufacturing and logistics buildings outstrips supply. Read: There is approximately three to four times the number of buyers than there are sellers. Is this scientific? No. Strictly anecdotal from my experience this year and the last six months of 2020.
Therefore, sellers are counseled to proceed cautiously lest they leave shekels on the sideboard. One way to accomplish this is to enter the market un-priced. The traditional back and forth of a negotiation – offer, counter, counter, strike – is history. What’s replaced it is akin to the old adage of “bring me a rock.” Yes, that’s indeed a rock. Now, bring me another rock. Once referred to as “countering oneself” – a no-no – is now quite common.
Here is the typical cadence these days while representing a buyer. We scan available inventory that meets the buyer’s parameters. If there is one match, you’re lucky. Two or three? Jackpot! You then check with the seller’s broker to confirm availability and touring protocol. Ooops. Sorry, we’re under contract. No, that sold last week. Nope, the tenant renewed.
Our system is quite archaic compared with our brethren in residential sales. Yes, we must call – quite inefficient – brokers to verify info. Realty boards streamline this with their levels of availability – active, active pending, active, contingent, etc. But there’s no such luck in our world. Commercial real estate is not under the same purview.
But, I digress. Back to the search. Faced with limited or no avails – now what? Well, we then scan the list of buildings available for lease. There might just be a seller hiding among the lease listings. You must filter out the “portions” of larger buildings as a buyer would have to buy something much bigger and factor out the owners who are atypically sellers. Hop on that phone and dial your fellow agents. Ok, cool. You found a possibility.
A proposal must check ALL the boxes – price north of where the last sale traded, superior financial qualifications, very few – if any – contingencies, quick close, large deposits, a bit of pixie dust, a hope and a prayer. Frequently, the off-market Hail Marys are dropped in the end zone. No score as the time expires.
But, you still have the buyer. Now what? Hand to hand combat. You pull a list of everything – vacant or occupied. Put together a nice letter outlining your need and be very specific. Send them to the owners. You might just hit pay dirt.
So, are asking prices obsolete? It would certainly appear so!
Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at email@example.com or 714.564.7104.