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Our company works hard to get every commercial
real estate lease that comes along.
These leases are a combination of new business, renewals,
expansions, downsizes, etc.
No matter the situation, we diligently work to “win” each
lease with an approved tenant.
However, you can’t get every commercial real estate deal.
We are all in business to make money. (Duh!)
Because we are in business to make money, some deals just
cannot be attained.
For example, we recently lost a long term national tenant
who chose to sign a new lease at another property.
Was it anything we did wrong? Nope.
Could we have put them in a similar building or built a
similar building? Yep.
Would we have made any money on the deal, short term or long
term? Nope and possibly.
Our tenant, let’s call them Widget Sales, was in a
multi-tenant building.
Widget Sales had a showroom, office and warehouse space and
was looking to expand. They needed a
showroom double the size, office 50% larger and warehouse space 150% larger
with high ceilings. Widget Sales also
wanted a standalone building.
Our company priced a new building for Widget Sales
competitively. Our contractor went back
to the drawing board a couple of times to get the price as low as possible.
However, Widget Sales was not interested in signing a long
term lease.
Our company told Widget Sales that we could not sign a short
term lease for a brand new build-to-suit building. To make matters worse, there were some specific details that would have made this building hard to retrofit for another tenant without spending a substantial amount of money.
The problem was that Widget Sales was not necessarily
looking for a brand new building. They
just wanted their wish list items met, whether this was in a new building or
not. And, Widget Sales had a budget
that was drastically lower than what we could offer for a build-to-suit.
Our company tried to make the numbers work every which way.
But, as mentioned above, we are in this business to make
money.
Sure, we would have made money had Widget Sales stayed for a
few renewal terms but the return on our initial investment would have been far
lower than any deal we have ever signed. Plus, if Widget Sales left our property, we would have been in a bad situation with a building nobody could use.
Our company offered existing space in another multi-tenant
building at prices comparable to what their budget was.
Widget Sales insisted on a
standalone building.
Finally, a standalone building came on the market with nearly
identical specifications to what Widget Sales required.
Our company could not compete with the pricing offered on this new building.
Widget Sales gave us the opportunity to match the price of
this other commercial property, but there was no way we could even come close.
The owner of the building Widget Sales was interested in was
from out of town and was only interested in keeping the building leased. Thus, the owner was willing to accept a less
than market value price to keep the building occupied.
We admire the owner for pricing the building below market
value – he was able to sign a national tenant to a space with minimal
renovations for what could be an indefinite landlord-tenant relationship.
The main problem was our company did not have what our
client was seeking.
When that happens, it is awfully hard to reach an agreement
where both parties can benefit.
Our company could not benefit so we had to pass on this tenant.
After all, our company can only stay in business by making
money. And sometimes, that means passing
on a commercial real estate deal.
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.
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