Tuesday, December 29, 2015

BATNA + CRE (Acronym Overload!)

In case you were wondering, this is not an anagram contest!  BAT CRANE is not an answer!

First, some definitions:

BATNA = Best Alternative To a Negotiated Agreement

CRE = Commercial Real Estate

+ = Plus (Sorry, we couldn’t help ourselves…)

BATNA was introduced in Getting to Yes: Negotiating Without Giving In, a book still used in business schools and negotiation classes around the world.

So, what exactly is BATNA? 

BATNA is basically where you stand if you fail to reach an agreement.  Each person's BATNA is unique and varies depending on the situation.

If you are negotiating with a new supplier and fail to reach an agreement, maybe you continue using your existing supplier or find a third one.

If you own stock in Company XYZ and wish to sell it for $30,000 in order to pay all cash for a new car, your BATNA could be any of the following if you fail to sell the stock for $30,000:

  1. You sell $30,000 of Company ABC, another stock you own.
  2. You do not sell any stock and lease the car instead.
  3. You dip into your retirement savings to pay for the car.
  4. You decide to wait another 6 months before you purchase the car.
  5. You buy a less expensive car.

As landlords of commercial real estate, our most common example of this principle is what happens if we cannot come to terms on a lease agreement with a prospective tenant.

Most of the time, this means our vacant space remains vacant. 

Pretty simple, right?

So the question often becomes: Is a vacancy worthwhile?

Sometimes, the answer is easy.

If you are offering an office space for $5,000/month (and let’s assume it is actually worth $5,000/month), and an offer comes in at $2,000/month, you are better served to keep the vacant space and hold out for a tenant who will pay you the true market value.

An example not involving a vacancy is if you have a tenant in your space paying you $5,000/month with its lease term about to expire.  Your existing tenant wants to renew at $5,000/month and another prospect wants the exact same space.  You would obviously want a premium for the space to allow the new tenant to move in so if that tenant does not agree to, say $5,100/month, your best alternative is your existing tenant at $5,000/month.

In the previous example, you have a clear line for how to negotiate.  If the new tenant will not pay anything over $5,000/month, you should walk away from the deal.

However, as is usually the case, the real life scenarios are often much more complicated.

There are literally dozens and dozens of factors in every lease agreement and many are intensely negotiated.

The most important factor that is always negotiated, though, is the price.  And we have heard stories of miniscule amounts that are quibbled over that make the parties go their separate ways.

This is rarely the best case scenario. 

As a landlord, if your BATNA is a vacancy for an indefinite amount of time, how is this good for your business (which involves, you know, actually collecting rent!)?

And as a tenant, if your BATNA is to seek another space, which may or may not fit your budget and which takes even more time away from what you do best (actually running your company!), how is this good for your business?

Before you draw your final line in the sand, take the following into consideration:

Landlord Questions

  • Do you have any other pending offers or interested parties?
  • Have you received any offers since your space became vacant that you have already turned down (i.e., are you offering your space for the market value)?
  • How much does you vacancy cost each month (utilities, janitorial, maintenance, taxes, insurance, marketing)?
  • How is your local commercial real estate market performing?
  • Is your prospect agreeing to everything other than the price? (If the prospect will use your lease form and will go along with all other terms/conditions, the price might not be as big of a deal.)
  • Is this a credit tenant?
  • Is this tenant a good fit for your building or business park?

Tenant Questions

  • Can you remain at your current location or will you be forced out?
  • How much will you pay in holdover rent if you have to remain in your existing location for a few months?
  • When does your current lease expire?
  • Are there any other vacant buildings in the market?
  • How much is the space worth to you? (Note, this is different from the market value of the space – if the space is in your ideal location, it should be worth more to you than the market might dictate.)
  • How long will it take you to find another alternative?
  • And if you find another alternative, what is the market rate for it?

All of these questions must be asked. 

Sometimes, it is worthwhile to take less (or pay more) than what is expected to satisfy the other party. 

As landlords, we are pro-agreement.  (Obviously!)

But sometimes, that means we must take less than what we think a space is worth.

We always try to obtain the market value for our spaces.

It is important to remember though, that the market value is what someone is willing to pay.

That does not mean you should accept a ridiculous offer, but it does mean you need to think twice about saying no.

Please feel free to leave comments.  We promise to read them all.  You can also email us with any questions at leasing@seawaybusinesspark.com.  As a reminder, we provide office space for rent and office/warehouse space for rent in Gulfport, Mississippi.  Please keep us in mind if you are looking for a space in our area.  If you want more information about our available office space or warehouse space, visit our website at www.seawaybusinesspark.com or give us a call at (228) 575-7731.

Online Paid Ads or SEO?

Okay, so this post is a little bit different from our previous posts since we usually post about our experience with commercial real estate.

But running our commercial real estate company involves running a small business.

And running a small business means we have non-commercial real estate decisions to make on a daily basis.

The question of using online paid ads or SEO is a classic chicken or the egg question that many small businesses face today - you must decide which to use first.

Not all businesses have the time, money and resources to invest in both paid online ads and SEO.  What follows is how we made the decision for our company.

For starters, let’s define exactly what we are talking about.

Paid Online Ads:

Paid online ads encompass everything from the links you see at the top of Google/Bing when performing a search to the sidebar display ads showing you a pair of shoes you viewed a couple days ago on Amazon.


SEO, for non-tech savvy readers, is search engine optimization, i.e., where you appear in Google/Bing searches when someone is looking for your product or service.

The argument for paid online ads vs. SEO is as follows:

  • If we pay for online ads, we do not need to worry about optimizing our website.  We can pay for people to go straight to our website.
  • If we pay for SEO, (or spend the time to find out how to do it ourselves) the clicks to our website will come in for free. (the best clicks!)  If our website is at the top of Google and Bing for our keywords, we will save on future online ad costs.

So, which route did our company take? (Spoiler: SEO)

The story below tells the story of why our company felt like SEO was the best choice.  In hindsight, we feel that we made the correct decision.

A few years ago, our company website was very poorly designed.  Thus, our website did not perform well.

Our Google Analytics looked horrific.

We were excited when a user even found our site and 99% of the time, it was direct traffic from someone we told to visit our website (or spam).

Our pictures were dated.

Our content was poorly written.

Our design looked boxy and dated.

In a nutshell, the user experience was just bad.  You know a bad website when you visit one, and our website was certainly a bad website.

Around this same time, our company was looking to beef up our marketing.  Inbound calls were slowing, and we wanted to explore other marketing avenues.

For years, the sole advertising we used was an ad in the local newspaper, a paid listing in the Yellow Pages and signs outside our complex.

As you can imagine, we were getting no calls from either the newspaper ad or the Yellow Pages ad.  The last year that we ran a newspaper ad in the classified section, out of all of our inbound calls for office space or warehouse space, only one call came from the newspaper ad.  One!  And that ad was not cheap!

And no, that one caller did not convert.  So you can imagine what the cost of conversion was from the newspaper ads. (Hint: HIGH!)

So, our company was looking for a new way to market to prospective tenants.

At the time, we felt like everything was moving to online search so we narrowed down the list to either SEO or Google ads.

Enter our dilemma – paid online ads or SEO?

Before we jumped into either paid online ads or SEO, we researched each.

We originally thought SEO was some highly technical process that only experts could perform.  (Don’t get us wrong – SEO can get extremely technical but you can find free resources online everywhere to get a good knowledge base).

However, as we learned more and more about SEO, the answer to a better performing website was a better user experience.  You see, if you optimize your website, you are really just creating a better user experience.  Google and Bing recognize a good user experience and reward you with higher search rankings as a result.

So, once we made the decision to go the SEO route, we necessarily had to redesign the website.

We needed more pictures, better text, resources to help the reader, etc.

So, over the course of several weeks, we took pictures of our office spaces and warehouse spaces.  We researched good SEO practices.  We learned about things like title tags, meta descriptions and keyword density.

At last, our website was redesigned and live.

Within a few weeks, we were receiving daily traffic.  The days of non-existent clicks were gone.

Had we gone the paid online ads route, users who came to our website would have never converted because of the poor user experience.  Using best practices for SEO ensured that however a user arrived at our site, whether from paid search or not, that user would understand exactly what we offered with better text and pictures.

So if you are trying to decide if you should use paid ads or optimize your website, we think the answer is clear: Go with SEO first.

You can always use paid ads in the future.  And if you decide to use paid ads, you can be sure that the user will have a great experience and have a better chance of converting into a customer.

Please feel free to leave comments.  We promise to read them all.  You can also email us with any questions/comments at leasing@seawaybusinesspark.com.  As a reminder, we provide office space for rent and warehouse space for rent in Gulfport, Mississippi.  For more information, visit our website at www.seawaybusinesspark.com or call us at (228) 575-7731.

Thursday, December 3, 2015

Does it Always Pay to be Nice?

Image courtesy of cooldesign at FreeDigitalPhotos.net

Does it always pay to be nice?

Short answer: Yes.

Long answer: Yes, it always pays to be nice.


You never know what opportunities will come up in the future.

Why would you burn any bridges?  What are you accomplishing by doing this?

Although this post could be geared towards business in general, personal relationships, etc., we will highlight how this affects commercial real estate.

As landlords of commercial real estate, having “repeat business” is not something very common.  Sure, brokers routinely score repeat business as people’s business needs constantly change and so to will their commercial real estate needs.

In our experience, however, when a tenant leaves, they have left for irreconcilable differences.  The price was too high, the location was not right, they closed the business, they relocated to a new city, the space was too small, the space was too large, etc.

We are never happy when a tenant chooses to leave our property but we understand that these are business decisions and are not personal.  Thus, we treat former tenants with the same level of respect as prospective and current tenants.

Because we choose not to alienate our existing tenants, we have been fortunate enough to secure repeat business on two occasions:

Occasion #1

About 15 years ago, a tenant was leasing an office space to train door to door salesmen.  They held daily meetings in the morning and then hardly used the space.

They would have 20-30 cars on a daily basis.  This caused a parking issue.

Several neighboring tenants complained, and we did our best to play referee.

After the initial lease term ended, both sides decided to part ways amicably.  This was the best decision for both parties.

About 8 years ago, this tenant came back to us with a different business.

They have been with us ever since.

Occasion #2

Roughly 6 years ago, one of our tenants informed us they would not be renewing their lease.  They had been with us for two lease terms, and we were shocked that they were planning to leave.

They told us that they needed a nicer space, new paint, new carpet and a lease to purchase option.  We were able to accommodate their first 3 requests but could not provide them with a lease to purchase option.

A couple of years ago, we heard back from this same tenant.

Their new location was not working for them and they were ready to come back in an even larger space than they were previously.

They told us during lease negotiations that they enjoyed being a tenant so much and were pleased that we did not try to take advantage of their situation when they left our property before.

All signs point to this tenant being with us for a very long time now, as we performed a custom build-out and they have invested into the space heavily.

Hopefully, these 2 examples illustrate why it always pays to be nice.

And this does not just apply to former tenants, it also applies to prospects who choose another property as well.  We have had situations when a prospect chose another property and called us after their initial lease term ended at another commercial property.

It’s not easy to be told “no” – whether this is when a prospect chooses another property or an existing tenant tells you they won’t renew.  However, a "no" today is a potential "yes" in the future.

Remember, all tenants who do not lease from you are potential future tenants.  And it always pays to be nice to them.

Please feel free to leave comments.  We promise to read them all.  You can also email us with any questions/comments at leasing@seawaybusinesspark.com.  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.