Wednesday, October 21, 2015

Separating Wants from Needs in CRE



Image courtesy of Stuart Miles at FreeDigitalPhotos.net

You want the beautiful office in the new high rise building downtown.  But does your business need this?

When you are leasing commercial real estate space, you need to separate your wants from your needs.

Let’s give an example to illustrate how to separate wants from needs:

Your favorite music star is playing a concert and tickets are about to go on sale.  Tickets cost $150, which doesn’t include parking, concessions, etc.
 
You obviously want to go to the concert.

But do you really need to go?

In the above example, there are 2 ways to look at the wants and needs of going to the concert:
  1. You want to go to the concert but the tickets are more than you can afford.  You need to be able to pay your bills.
  2. You want to go to the concert to get away for the night.  You need a break with a night off.  Because you can't afford the tickets, you could substitute dinner and a movie instead, which will give you the same break as going to the concert.
Some needs are easy to identify like food, clothing and shelter.

Other needs are harder to identify because they might involve your feelings or because you have a preconceived notion about how to satisfy that basic need.

So what does this have to do with CRE?

You have to make sure you are fulfilling your business’s needs in a commercial real estate space rather than your personal wants.

How do you accomplish this?

A good starting point is to sit down with your team and make a wish list.  This same analysis applies for tenants and landlords and whether you are buying, selling, expanding, downsizing, renewing, relocating, etc.

Once you make your wish list, analyze each item.

Wish List Item 1: Relocate to the high rise building downtown currently under construction.

Wish List Item 1 is obviously a want and not a need.  You want to move into this building but you don’t necessarily need to.  Maybe you need to expand, move to a new location, downsize, etc., but you don’t need to be in a specific high rise building in downtown.  Figure out what your business actually needs and go from there.

Wish List Item 2: Our office needs at least 10 private offices.

Wish List Item 2 is a bit more complicated.  Do you need 10 offices or do you just have 10 employees who need work space?  If you find a space with a large open area where cubicles can be set up, would this accomplish the same goal as 10 separate offices?

These are the types of questions that need to be asked in order to separate wants from needs.

Wish List Item 3: My warehouse space needs to be zoned for industrial to accommodate my business.

Wish List Item 3 is certainly a need.  Your business obviously cannot operate if it is zoned improperly.


Once you separate wants from needs on your wish list, shift your needs to the top of the list.  You will obviously need these items fulfilled before you get into your wants.


Although this post is geared more towards tenants, since it involves making a wish list when seeking a new space, landlords have much to learn from this practice as well.

If a prospective tenant or buyer tours your property, you should be listening to the requests and see if you can decide whether the requests are wants or needs.

A prospect may say they must have highway frontage when a slot on your sign would serve the same purpose.

An industrial client may say they need 20’ ceilings in the warehouse when 18’ ceilings with more square feet would suffice.

Separating wants from needs is important for all parties to a commercial real estate transaction.  This practice takes extra time and effort but is definitely worthwhile.  Once you separate wants from needs, you will be in a better position to succeed.

Please feel free to leave questions and/or comments.  We read all of them.  Feel free to drop us a line at leasing@seawaybusinesspark.com.  We provide office space for rent and office/warehouse space for rent in Gulfport, Mississippi.  If you need commercial real estate space in our area, please give us a call at (228) 575-7731 or visit our website at www.seawaybusinesspark.com.