I am spending day # 2 taking my MCE courses, Commercial Investments and Legal/Ethics this week.  I have to say that it is quite enjoyable to sit with so many other professionals and talk about the industry.  Another day of learning how to master the craft.  Let’s bring it!

Even though I am a tenant rep broker, roughly 10% – 25% of my clients request me to list or sublease space.  I am currently listing an space near downtown Houston and I connected with a prospect who was interested in getting a deal done.  During my initial conversation with the prospect I notice that he was very abrupt on the phone just wanted to “see the space”.  Several times he ask to see the space “today, like right now, like in 15 minutes!”

Respectfully, I asked if he would not mind telling me more about his business so that I could qualify him for my client.  He quickly told me the following, “Look buddy, in this market I can get whatever I want.  My company has millions of dollars and I don’t have time to talk, there are lots of spaces out here so if your client knows what is good for him he will give me what I want.”

When I sub-lease or lease spaces, my clients expect the same expertise to represent them.  A good broker knows what the local market will bear.  They are confident in where the market is because they live it every day.  Many of us have been burned by “forcing a deal” or making a deal work that maybe should have been passed up.  Make no mistake about it, the market is softer now than it was 2 years ago in retail and office in the Houston market,  but stating that fact in the hopes of getting a better deal is not as effective as experience combined with sound market knowledge.  Negotiations works best when brokers and tenants come together based on reliable local market information.  When the conversation is based on hard numbers there is usually a much more productive conversation.  When negotiations begin on incorrect assumptions, inexperienced brokers or tenants can very easily shoot themselves in the foot.

This prospect assumed that my client was “desperate” and had to close a deal tomorrow.  The prospect also made several inaccurate statements about the market during his “bluff” that highlighted his inexperience in this part of the Houston market.  Without realizing it, the prospect was revealing his financial position, his level of market knowledge, and timing within his bluff.

In Houston, we are blessed with so many great professionals within our industry.  From time to time you will run into people that have a “churn em and burn em” approach to getting deals done, but they don’t seem to be as successful as the professions that really understand the market.  If you have any questions about a lease or purchase in the office or retail market feel free to give my office a call anytime!  (832) 493-3377 JR.

If you are driving around town and you see churches in “Big Box” retail centers that is a clear sign that you are now driving in a soft retail market.  Fortunately for owners of large retail centers, there are several tenants that seek out these markets just waiting for the right opportunity to take advantage of lower rents, more flexible lease terms, ect.  If we continue to have strong population growth in Houston and the banks continue to lend conservatively with Faith based institutions, then we can expect to see demand for 2nd generation “Big Box” retail to increase. Here are some of the challenges that churches face in retail centers:

- Tenant Improvement Dollars

Unless the space is 1st Generation (slab space), changes need to be made to accommodate a church and it’s congregation.  Increased # of bathrooms, open areas, higher ceilings, acoustics, lighting, are just a few of the things needed for a church to call a retail space home.  Depending on the landlord, the church may pay none, some, or all of the cost for build out.  This can run from range from a few thousand dollars to the millions depending on the size of the space.

- Lease Term

Short term leases have a much smaller impact on commercial property values.  Because of this, landlords and banks frown upon short term leases.  Expect to sign at lease a 3-5 year deal or longer for a decent strip center.

- Expansion

Many times a church may have to lease a large contiguous block of space immediately to ensure that they will have enough space to accommodate a growing congregation.  Otherwise other tenants may end up leasing open spaces and boxing the church in, limiting future growth.  The landlord can relocate tenants, but this cost additional time, money and resources for the landlord.  That extra cost will be considered when looking at any future church expansions potentially driving rents higher.

There are a few other issues that need to be addressed as well during negotiations like personal guaranty, certificate of occupancy,ect.

If you want to know more about this topic, whether you are a Pastor or Landlord just give me a call and we can talk shop or send me an email anytime.