The Conference Round-Up
Exuberant is the word I would use to capture the mood on the recent real estate conference circuit that took me from New York to Houston for the Urban Land Institute Spring Meeting and then to Las Vegas for the International Council of Shopping Centers’ annual RECon convention. The reasons for this optimism are straightforward: increased transactional activity, occupancy levels, rental rates and asset valuations.
Keeping the inner workings of the black box — the little understood and often dreaded legal process of commercial leasing — top of mind (see our recent Black Box series of blog posts), here are some interesting takeaways from my conversations with some of the thousands of global real estate leaders that attended each conference.
Precision vs Urgency
Harkening back to our conviction that in negotiating a commercial lease, the urgency mandate must ultimately trump the desire for precision insurance, almost everyone I spoke to at each of the conferences complained about the time it takes to get a lease over the finish line and the painful opportunity costs of long, drawn out legal lease negotiations.
The CEO of a publicly traded landlord shared two strategies that his company is resorting to in order to reduce the time it takes to complete lease negotiations. First, they are negotiating multiple leases (with the same tenant) at one time whenever they can. Second, they are short-circuiting the entire lease negotiation by agreeing, almost sight unseen, to accept the last lease a prospective tenant negotiated with a different landlord.
Getting It All vs Accommodating the Other Side
The willingness to be flexible (a buzzword for accommodating the other side) on the part of both landlords and tenants came up often in conversations with office, industrial and retail professionals. This reflects two trends that were evident at both conferences.
The first is the eagerness to make hay while the sun shines. While practically everyone in the real estate industry is enjoying the uptick in transactional activity, none of us has forgotten the dark days of the recent great recession.
The second is that flexibility is being demanded of the actual real estate product itself. To stave off obsolescence, office, retail and industrial properties are evolving to meet the changing needs of tenants/occupants. Examples include former Kmarts that are now urgent care centers and office buildings that are being designed to accommodate coworking spaces, such as those operated by We Work, said to be the fastest growing office tenant in the US.
Managing the Red Zone
Remembrance of things past, including the busted deals and lost opportunities that result from carelessness in the Red Zone (that point in time when the lease is just about ready to be finalized), has not yielded any improvements in red zone management that were evident at either conference.
In fact, I spoke with a national tenant who expressed significant frustration because a key lease transaction was held up in the red zone as a result of the landlord’s inability to locate their ground lease site on the shopping center site plan. I kid you not!
The Sinreich Group can help your company get its leasing transactions over the finish line quickly and cost-effectively. Call us today, you can’t afford not to.