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Wednesday, November 11, 2015
All Signs Point to Yes (But the Answer is Still No…)
We have all been there.
A deal that seemed prime for the taking.
Your property was clearly the best fit for the client.
After all, the location was great, your pricing was competitive and the tour seemed to go perfect.
You started talking seriously with the other side and were told by representatives that a deal would be made.
Then, you hear back from the other party’s representatives. Something changed and your client opted for another property.
Hopefully, you did not hold the property or miss out on any other potential prospects because you had a “live one.”
If you have been in commercial real estate for long enough (or any business, for that matter), some variation of this scenario has happened to you.
Our story goes something like this: (Note that the details have been changed slightly to avoid divulging company names.)
AquaCompany does environmental testing of the city’s water supply. AquaCompany is a national company that has 350 locations. The local office has a small staff and needs about 6,000 square feet of industrial space, with about 10% office.
AquaCompany enlists brokerage company Brokers 4 Us to find a suitable office/warehouse space.
Brokers 4 Us contacts our office to see if we have anything that will suit its clients specifications. We tell Brokers 4 Us that we have an as-built space nearly identical to their client's requirements.
Brokers 4 Us sets up a time to view the space with its client. The tour goes very well. AquaCompany appears to like the location and says the space works perfect for what their long term needs are.
Our office meets with Brokers 4 Us right after the tour to discuss a proposal. We price the space competitively. After all, this is a national company and we would be thrilled to advertise AquaCompany as one of our tenants.
Brokers 4 Us tells us that there are only 2 properties that AquaCompany is considering. The other location is a dilapidated building that needs renovations and while it is in a retail area with high traffic counts, AquaCompany does not need to market to the public, as they do environmental testing for water.
Two weeks pass. We call Brokers 4 Us for an update.
We are told AquaCompany has not yet made a final decision. There are still only 2 properties (ours included) that AquaCompany is considering.
Our office asks Brokers 4 Us if we should cut the price. This was during the market crash and the space had been vacant for several months. We were thrilled to have the space occupied by anyone, especially a national credit tenant.
“No need,” we are told by Brokers 4 Us. The other property’s landlord has refused to pay any sort of commission to Brokers 4 Us. AquaCompany must pay the brokerage fees, making the monthly rental rate significantly higher than what our company was quoting. “Just sit back and wait for them to make a decision,” Brokers 4 Us says.
Another week passes with no phone call.
Again, we reach out to Brokers 4 Us. AquaCompany went with the other property. “It makes no sense!” Brokers 4 Us tells us. The rent is a good 20% higher with the other property, the building is in bad shape and they have to fight retail traffic for a business that has zero walk-in traffic.
All signs pointed to yes, but the answer was still no.
You can never bank on something until it is signed on the dotted line. Thankfully, we did not pass up on any prospects. As a general rule, we never take a space off the market unless a letter of intent is signed.
Remember, it’s just business and anything can happen.
Please feel free to leave comments. We promise to read them all. You can also email us with any questions/comments at firstname.lastname@example.org. As a reminder, we provide office space for rent and office/warehouse space for rent in Gulfport, Mississippi. For more information, visit our website at www.seawaybusinesspark.com or call us at (228) 575-7731.