• Wrath
• Greed
• Gluttony
• Sloth
• Pride
• Envy
• Lust

Don’t ask me why, but lately I’ve been reflecting on this classic understanding of human behavior. Regardless of your religious convictions, few among us would disagree on the gravity of the “Sins” and society’s interest in protecting its members from its worse side. Fortunately, for every sin there is a corresponding virtue that we can all aspire to and in the practical world of commercial real estate it may be best to reflect on this, especially during such challenging times for the industry and our economy as a whole.

Wrath is an apt description for the blinding rage that many of us experience at some point in our business lives. People don’t always have the capacity to “do the right thing”, and when the screws are turned on you it can be infuriating. Commercial real estate deals often develop some emotional baggage as they progress and it is not unusual for someone to lose his or her temper along the way. (Mea culpa – I am absolutely guilty of this.) But when your temper gets the best of you, chances are you just lost whatever it was you were trying to achieve. Better to embrace the virtue of Patience and keep your eyes on your objective.

Greed and Gluttony are sickening things to bear witness to and often go hand-in-hand. Greed, also referred to as Avarice (which sounds so much more damning) can be as blinding as wrath when it reveals itself in the deal process. If you believe that Gordon Gekko’s (portrayed by Michael Douglas in the 1987 movie “Wall Street”) famous line that “greed is…good”, you may want to think again. Too many times otherwise intelligent people will lose a deal because they held out for a perceived value that may not be attainable. Or, in the case of commercial tenants, were excessive in their requirements for leasing concessions or attempting to achieve an unworkable lease rate. Brokers too can be guilty of reaching beyond what is customary in a market, or worse, attempt to steer a prospect to a property with a more favorable commission structure. Gluttony, while typically associated with over-indulgence or excess, can be found in business situations where a party can be so over-the-top in their demands that their behavior becomes truly piggish.. Dealing with greedy gluttons is no fun in business or elsewhere. Perhaps recognizing and acknowledging these damaging traits in ourselves will lead us to embrace the virtues of Charity and Temperance in our everyday lives.

Sloth is a sin that one typically wouldn’t associate with a commercial real estate professional, or frankly any business person in today’s economy. With every business fighting for scraps of market share for the past several years, anyone that had a slothful disposition is probably no longer around. The interesting thing about Sloth is that the corresponding virtue is Diligence. Diligence comes in varying degrees, and while very few business people can be accused of laziness, it is hard to deny that some are more diligent than others. Are your people and your representatives working as hard and as well as they could?

Pride and Envy often go together, especially in real estate. Oftentimes we’ll hear the comment that so-and-so was pretty proud of his building. This is never a good thing. Much like Greed, Pride can move us away from a realistic value e.g. my building is better than the building next door or my kid can beat up your honor student. Likewise, Envy can reveal itself in a number of different ways. We typically encounter envy when a building owner relays to us what a comparable property on his street sold for in, say, 2006. That number is forever burned into his brain and despite the fact that the entire world has been in a financial crisis ever since is immaterial. His building is exceptional. Envy can also be witnessed amongst tenants, particularly tenants in the same complex. When one tenant brags to others about the drop-dead deal he achieved, misunderstandings sprout like weeds. Lease deals are like snowflakes, no two are alike, and timing, market conditions and underlying financial risk change with each transaction. Being envious of the last sale or someone else’s lease deal is damaging and unproductive. The corresponding virtues for Pride and Envy are Humility and Kindness. Frankly, it’s not too hard to be humble in today’s economic environment and kindly congratulating your neighbor for their good fortune is a lot better than harboring jealousy and resentment.

Finally, there is Lust. If you are encountering Lust in your business activities and commercial real estate deals you either:
       a). have watched too many recent episodes of Mad Men, or
       b). you work in a much more interesting office than I do.
      And that is all I have to say about that.

If you’ve taken the time to read this, I wish you the best in your business and personal life. By recognizing the inherent weaknesses of human nature in ourselves, and striving to do the right thing, we can all work together to build better lives in our neighborhoods, cities, and our nation.

by:
Tim Bahr
704-375-1000
Email Tim

NAI Southern Real Estate

NAI’s offices around the country worked together to get this done. We truly believe there is no other commercial real estate organization in the nation that could accomplish this job. On May 28, NAI Global delivered 101 BOVs and a master spreadsheet amounting to 380 pages of work product to the customer.

Do you need assistance with commercial real estate in your market or a market somewhere else in the world? If so, give NAI Southern Real Estate a call today at 704-375-1000.

Instead of “Love at first sight”, perhaps “Acceptance at first sight” should be the initial goal of the very first contact with a person or group for whom you desire to provide real estate services.  Forget trying to present a visual image of the most knowledgeable and successful real estate broker known to mankind because that image does not exist.  That is an “earned” image and takes time for that honor to evolve.  Well, what then can one do to foster “acceptance” from a perfect stranger, particularly in these down economic times when everyone has felt the effects of recession, falling property values and a volatile stock market? 

Your personal attitude is the most noticeable sign a person displays at a first meeting, second meeting or at any meeting.  In a glance or in a 30 second analysis or evaluation, your attitude very accurately summarizes your entire being.  It shows what you have decided to be that day because each of us controls our personal outlook each day when we arise and look into the mirror to shave or comb our hair.  We can determine if we want to be sad or happy, bright or dark and gloomy, flat or bubbly – any type is at our disposal if we will only choose it. 

The really neat thing about “attitude” is that your personal choice will actually transform itself into an action or a look or a mood – all of which is observable by others. 

Earl Nightingale put it this way, “A great attitude is not the result of success.  Success is the result of a great attitude.”

So tomorrow morning when you look into the mirror, visualize what you want others to see in you.  Dress the part, look the part and act the part – this day is yours!

Quincy Collins, SIOR

NAI Southern Real Estate

The passages within a retail tenant’s lease that allow for certain remedies should there be a material change within the properties Anchor tenants’ operations or occupancy:

• Prior to the systemic economic melt down in late 2008, co-tenancy clauses in retail leases were rarely examined in such minutia as currently appears to be necessary. In prior days, our focus as brokers in these clauses was centered on the anchors square footage utilization and competition. After those items were addressed, discussions would turn to rent abatement and reductions. Now in first quarter 2010, co-tenancy clauses’ focus and scrutiny may need to be expanded to include assessing probability of an anchor or co-anchor tenant going dark, and to what degree might the anchor tenants’ new business practices affect the other tenants or landlord. These items were once considered a non-issue, but in today’s retail leasing environment they may need considerably more thought and analysis.

Let us first examine the Anchor relationship:

• Retail centers need anchor tenants not only shoulder a vast portion of the financial burden, but also to drive traffic to and through the center. Common anchor tenants commit to the development first, and therefore have considerable influence as to the terms of their lease. Rarely will they allow any type of perceived market competitor to locate within an unmanageable distance to the anchor’s front door. The influence and preference is similar when there are co-anchors.
• When a landlord is faced with the disaster of prematurely loosing an anchor, e.g. Linens and Things, Circuit City, there will be impacts to the co-tenants. One of the difficulties is measuring those impacts. When you lose an anchor, you can assume that traffic will drop in the center and that sales and revenue would adjust accordingly.

Items to consider when drafting language in a lease to protect your tenant client, while at the same time leaving them an opportunity?

• There are significant variables, coupled with the fact that this is unchartered territory for many. Of course you want your clients to have options in the event of material change. The current economic environment has opened up many new items for tenants for tenant to negotiate, therefore creating options. So you have an opportunity to insulate your client from risks, while at the same time possibly allowing them to capitalize in gaining lease concessions or market share.

Consider the following:

• If the anchor tenant prematurely vacates, it is an opportunity for the others to gain market share. The other junior tenants may be retailing similar goods and services to the anchor, but not in a scale that the anchor felt to be a direct competitor. With the anchor now closed, the juniors have an opportunity. That opportunity does have other risks though, specifically the question of the landlords’ fiscal health.

Protecting your clients from the possible adverse effects of co-tenants new or modified business practices:

• This again deals with not water heavily chartered. However now it appears necessary to be further analyzed and the risks assessed for both the tenant and the landlord. The daily headlines continue to read about businesses fighting for viability. Some would opine that as retail businesses strive to reinvent themselves and pursue new sales, there could be and have been undesirable impacts to the other tenants.
• Just think of some of the new and innovative ways businesses are marketing themselves. Would any of those methods impact your practice? Would they impact your tenancy? In times past after wrapping up the building or monument signage debate and who could put out a sandwich board sign on the side walk, this topic was closed. Now though, we are seeing that it maybe necessary to further scrutinize scope of the clauses for the protection of all parties.
• From the landlord representation perspective, we are always attempting to balance the tenant restrictions with their ability to operate. We certainly don’t want to in any way inhibit one of the tenants, but at the same time, we can’t allow for the center or the other tenants to be negatively impacted. In either case, fluidity and flexibility and most times creativity are characteristics that now more than ever we are having to display during negotiations.
• Of course during any transaction cycle, there are going to be obstacles to overcome. Some are expected and some like co-tenancy clauses are less frequently analyzed to the degree that now appears to be warranted. They now afford you another opportunity to further serve your clients best interests.

George Mennen Jr is a Vice President with NAI Southern Real Estate, and the Broker In Charge of the firms Mooresville, NC operation.

Contact George at 704-375-1000 or by email

Buyers who have traditionally used high leverage to acquire investments are out of the market today due to the lack of bank lending. There is some unattractive debt available, but with very low loan to value ratios and/or some forms of guarantees. Conduit loans are coming back, but at a slower pace.

There is still a disconnect between buyers and sellers expectations, especially with Class “A” properties.

1031 exchange buyers, with cash, have a wide selection of properties from which to choose. We are seeing more activity and inquiries from buyers who are ready to buy except for readily available financing.

The expanding level of interest, coupled with the increase in inquiries on properties that we represent, has been encouraging. This increased activity spreads across the immediate Charlotte area and both Carolinas.

For more specific information about the Investment Real Estate market or about specific properties, please contact Neill Wilkinson at (704) 375-1000 or by email

NAI Southern Real Estate

600 NAI members from around the world attended the NAI Global Convention in Las Vegas. Breakout sessions on topics such as “Recession Resistant Selling”, “Capital Markets: The State of the Industry” and “Social Media” along with many others made the three-day trip very worthwhile.

The following offices from the Carolinas were represented: NAI Southern Real Estate (Charlotte), NAI BH Commercial (Asheville), NAI Piedmont Triad (Greensboro), NAI Earle Furman (Greenville) and NAI Avant (Columbia).

During the conference, NAI Southern Real Estate was honored to receive the Eagle Award, which is given to the major market company which embodies the qualities of NAI Membership: leadership, capital resources, commitment to quality and global vision. Roger Cobb, Senior Vice President, accepted the award on behalf of NAI Southern Real Estate. “Being a member of NAI has given our company the ability to assist our clients across the country and around the world, especially in this tough economic environment. I am honored to accept the Eagle award on behalf of the brokers and staff of NAI Southern Real Estate,” Cobb said.

In addition to the Eagle award, two NAI Southern Real Estate brokers received individual honors:

Billy Cooper, Vice President of Retail Brokerage, qualified for the NAI Hall of Fame in 2009, an honor recognizing individuals with at least five years as a Top Producer or Top Performer.

Contact: Billy Cooper at 704-375-1000 or
bcooper@srenc.com

Tim Bahr, Senior Vice President of Office Brokerage, qualified as a Top Performer at the Global Elite level based on his production in 2009.

Contact: Tim Bahr at 704-375-1000 or
tbahr@srenc.com

24^th Annual Global Market Report

Tenants, Investors to Take the Reins in 2010

Commercial real estate markets around the world experienced the full impact of the global economic recession in 2009, according to the 24^th annual Global Market Report released by NAI Global.  Rising vacancy rates and declining rental rates were evident in virtually every market sector and geography, with weak demand and a growing supply of sublease space further eroding market fundamentals.

After a turbulent 18-24 months since the market peaked, 2009 marked a year where transaction volume nearly came to a standstill as corporate tenants waited for clear signs of recovery and investors remained on the sidelines waiting for signs the bottom has been reached. As the year progressed, government intervention in the form of stimulus packages in the U.S., Europe and parts of Asia took hold and by year’s end many markets had begun to stabilize. However, with U.S. unemployment topping 10%, consumer demand and spending power at their lowest levels in decades and international manufacturing and trade proceeding at a crawl, the global recovery will take some time to truly stimulate economic growth.

“The past year was extremely challenging for commercial real estate, and we don’t anticipate much new demand in 2010,” said Jeffrey M. Finn, President & CEO of NAI Global. “We’re working with our corporate clients to help them take advantage of the current tenants’ market to reduce their long-term occupancy costs. Many tenants are able to negotiate more favorable lease terms today in exchange for a longer commitment. This ‘extend and blend’ practice is a trend we see continuing well into the next 18-24 months.”

Investors who have been sidelined by economic uncertainty will see tremendous acquisition opportunities in the coming year as banks and financial institutions clean up their balance sheets and move more aggressively to dispose of commercial real estate loans and financially distressed real estate assets, said Finn.

“The recession has been over for six months and job growth is just months away, but the fact remains it will be impossible to predict what will happen next,” added Dr. Peter Linneman, NAI Global Chief Economist and Principal at Linneman Associates. “With significant tax, healthcare and regulatory proposals still in the offing, there is little clarity as to the ultimate outcomes or costs. We’re concerned with commercial mortgage delinquency rates as they have been on the rise and could keep the commercial real estate industry in neutral for several more months.”

While the United States, parts of Europe, the Middle East, Asia and Latin America experienced a deep recession, some economies survived 2009 nearly intact. Brazil, India and China all experienced a slowdown in economic growth, international trade and manufacturing demand, yet continued to post positive GDP growth for the year, far outpacing their neighbors and global trends. Brazil is looking for increased activity in the commercial real estate sector, specifically in big cities like Rio de Janeiro, which will soon host the World Cup and Olympic Games. At the end of 2009, China began to see a sharp rise in foreign direct investment in its manufacturing sector, and is expected to post 9% GDP growth in the coming year. India is positioning itself as a leader in logistics and manufacturing, and though commercial property markets will remain soft in the short term, significant growth is expected over the longer term.

Select U.S. Markets Highlights

Office property vacancy rates are continuing to rise, and severe job losses have resulted in increasing shadow or sublease space along with tenant inducements. The national average vacancy rate for downtown/CBD Class A space reached 13.9% in 2009, an increase of 35% over 2008, while the national average rental rate for downtown/CBD Class A space fell 21.6% to $37.09/SF/YR. Class A office space in the suburbs did not fare much better as the national average vacancy rate rose from 13% in 2008 to 16.9% in 2009 and rental rates fell 4.6% to $25.11/SF/YR.

Industrial properties are also seeing an increase in vacancy rates as the slowdown in retail, manufacturing and international trade cut into demand and delivery of new supply pushed vacancy rates higher. The national average vacancy rate for bulk warehouse space topped 11.1% in 2009, the highest level in five years, and the national average rental rate dipped 1.3% to $4.57/SF/YR.

Multifamily starts have fallen 75% in the past six months and will remain low due to the shortage of available construction capital. The sector will take longer to rebound and will not see a recovery until late 2010.

Retail vacancies continue to rise across the nation, and construction has dropped nearly 50% from its 2007 peak. The national average vacancy rate in regional malls reached 7.1% in 2009, up from 5.6% in 2008, while the national average rental rate for prime mall space fell 10.6% to $32.76/SF/YR. The vacancy rate in power centers, a favorite of the struggling big-box retailer segment, soared to 9.8% in 2009, up from 5.9% in 2008, and the average rental rate fell 6.3% to $19.46/SF/YR.

“We believe we will see a slow stabilization across the office and industrial sectors in 2010, with multifamily and retail lagging further behind,” said Finn.  “We expect to see a great deal of churn across the industry as billions in commercial real estate mortgages come due in the next 18 months for properties that have lost significant value and occupancy since the market highs of 2006 and 2007. How the financial industry and investors adjust to and absorb these mortgages will determine how long it will take the industry to truly recover.”

Atlanta: The office market’s supply has far outweighed the demand, pushing the vacancy rate up to 19-22%, creating negative net absorption and declining rental rates. The office market is expected to remain flat for 2010. The industrial market slowed in 2009, and even with increasing vacancy rates and declining rental rates, leasing activity remains active.

Baltimore: The downtown office market continues to gravitate to the water as Inner Harbor East continues to build out. With asking rates hovering just shy of $5 NNN, developers have sharpened their pencils after sitting on recently-delivered product in a market that was flooded with new construction for most of 2008.

Boston: With office vacancy rates climbing to 9.5% in the CBD and 16.5% in the suburbs, there is no shortage of supply, allowing tenants with solid financials to take advantage of tenant-favorable conditions. The lack of liquidity continued to plague the investment market in 2009, and sales have been limited to smaller deals that can be locally financed.

Chicago: The downtown office market experienced four consecutive quarters of negative net growth and rising vacancies in 2009. Leasing activity is expected to pick up in 2010 as asking rents continue to slide, stabilizing the vacancy rates. The industrial market will see an increase in transactional activity, leading to an eventual market rebound.

Dallas-Fort Worth: Leading the nation in employment gains for 2009, the market’s office sector appeared to be healthy for the year. Market rents are on the increase, and many companies are looking to do short-term renewals versus making long-term decisions. The retail sector has a 9.4% vacancy rate and net absorption has been in excess of 1 million SF.

Las Vegas: Industrial inventory grew to 103 million SF, pushing the vacancy rate beyond 12%. Speculative development remains limited while net absorption remained negative throughout the year. MGM Mirage’s $8.5 billion, 18.5 million SF CityCenter mixed-use development debuted at the end of 2009 on the Las Vegas Strip. The property is expected to act as a catalyst for increased visitation, which will have rippling effects throughout the local economy.

Los Angeles: The office market saw a drop-off in demand market-wide, aside from properties associated with the entertainment industry. Higher vacancy rates, lower lease rates and tighter credit have almost eliminated new construction. Losses in international trade have contributed to rising vacancy and weakening rents in the Los Angeles County industrial sector. One bright spot is discount retailers (Big Lots, Dollar Tree, 99 Cents Only and Wal-Mart) continue to expand.

Miami: Office vacancy rates rose while rents dropped more than 10%. And with 2 million SF due to come online in the next 18 months, the CBD and Brickell markets will be hardest hit. The industrial sector suffered as transshipping slowed, smaller tenants failed and bankruptcies in the automotive and construction industries intensified problems.

New York: Office vacancies topped 11.9%, the highest seen since 2005, and asking rents have dropped $20 to $52.05/SF. However, the rate of decline and the supply of sublease space weighing on the market have stabilized. Manhattan investment sales have been few and far between; however, distressed assets are starting to appear in greater number and it is expected that foreign investors and well-capitalized investment groups will seek to take advantage of a new pricing structure, spurring the expected turnaround.

Phoenix: The office vacancy rate overall is 25%, but Class A+ product downtown and in suburban markets has reached a staggering 60%. Relief won’t come anytime soon as 2 million SF is currently under construction. Despite landlords being aggressive with rental rates and concessions, overall retail vacancy has risen to 11%. New construction has added to the problem with 2.8 million SF added in 2009, and 1 million SF due to come online by mid-2010.

Raleigh-Durham: As tenants downsized, the office market experienced an increase in vacancy rates and new sublease space, putting pressure on a market with 19% vacancy. Overall net absorption in the retail sector remains positive, with a low vacancy rate of 7% and declining rental rates. As construction continues on the Outer Loop around Raleigh, new retail opportunities will be opened at major interchanges.

Washington, DC: The amount of vacant office space in Washington trended up throughout 2009 and with over 3.8 million SF set to deliver in 2010 it’s easy to predict which way the rate will go. Still, things could change quickly if demand shows any sign of recovery.

Select Global Market Highlights

Asia-Pacific Region: For most of the economies in the Asia-Pacific region, the worst of the economic crisis is over. Commercial rents have been dropping since late 2008, and yields have risen as sellers have fewer “real” buyers. Credit markets have lower loan-to-value ratios, more stringent underwriting and higher interest rates. Since the start of the economic downturn, institutional investors have turned to the developed countries with lower risks. In countries like China, foreign investors who were active in 2005-2008 became sellers in 2009, and domestic buyers dominated the investment activity. Capital values have been hit hard, resulting in a significant amount of transaction activity. In India, 2009 was a wait-and-see period, as high land prices paid in 2006-2008 could not justify new projects at greatly reduced rents. We must note that Hong Kong and Shanghai, among others, have rebounded strongly after precipitous decline to get back to near record levels.

Canada: The Canadian economy performed surprisingly well throughout 2008, but the decline in U.S. manufacturing, trade and demand for products, forced a sharp downturn in 2009. A rebound in commodity demand helped to stabilize the economy by the end of 2009. Land prices softened and cap rates increased in 2009 and 2010 is expected to be a challenging year, with pockets of strength in western Canada. The retail sector is expected to suffer the longest as consumer spending and confidence will remain sluggish in 2010.

Europe: While most of Europe is still in the firm grip of the recession, the worst is over and recovery is on the horizon. Demand for space in the EMEA region (Europe, Middle East and Africa) remains weak across all property sectors, with office vacancy rates climbing to their highest levels since 2004. While Western Europe entered the recession with little office development, cities like Moscow, Dubai and Kiev are suffering under the weight of overbuilding prior to the downturn. Office rents have fallen across the region, and property owners are offering increased incentives to prospective tenants. Retail rents, though stable, have fallen slightly, and expansion plans are generally on hold. Industrial development activity has virtually stopped across the continent.

Latin America & the Caribbean: Latin America and the Caribbean were clearly affected by the global economic crisis, but the overall impact was not as great as previously feared. Countries like Brazil, Peru, Panama and Colombia all registered positive growth in 2009, though real estate development has slowed significantly across the entire continent. Demand for real estate in 2010 is expected to increase, as will development as developers and investors regain their confidence. The larger economies (Brazil, Peru, Chile, Columbia and Panama) will see positive real estate supply growth, and more modest economies (Mexico) will see a smaller revival. However, growth in resort and hotel development will lag.

The 2010 Global Market Report includes market data for more than 200 markets worldwide.  For more information, contact Roger Cobb at rcobb@srenc.com.

About NAI Southern Real Estate

At NAI Southern Real Estate, our mission is to provide our clients with an integrated, single source for all their commercial real estate needs.  Our local knowledge and expertise can help our clients develop the best possible solutions for their real estate requirements.  NAI Southern Real Estate is a full-service commercial real estate firm specializing in the development, sales, leasing and management of a broad spectrum of properties including office, industrial, retail, medical office, land and income-producing real estate.  In addition, we offer a full range of real estate consulting services that can help our clients develop and implement a real estate strategy to support their primary business or investments goals.

Founded in Charlotte, North Carolina in 1899, NAI Southern Real Estate is the oldest commercial real estate firm in the Charlotte marketplace.  We are the city’s most experienced real estate agency and its third largest property management company with approximately 6 million square feet under management.  With an average of 20 years experience in the industry, our agents bring a wealth of knowledge and contacts to the solution of our client’s real estate challenges.

About NAI Global

NAI Global is one of the leading commercial real estate services providers worldwide. Headquartered in Princeton, New Jersey, NAI Global manages a network of 5,000 commercial real estate professionals and 325 offices in over 55 countries, and completes over $45 billion in annual transaction volume. Since 1978, NAI Global clients have built their businesses on the power of NAI’s expanding network. NAI Global’s extensive services include corporate real estate services, brokerage and leasing, property and facilities management, real estate investment and capital market services, due diligence, global supply chain consulting and related advisory services. To learn more, visit www.naiglobal.com. Follow us on Twitter (@NAIGlobal) and Facebook.

Contact: Roger Cobb 704-375-1000 or
rcobb@srenc.com

The predictions for 2010 are peppered with cautious optimism. The speculation is that the bottom for the residential real estate market will be reached by mid-year. However, there are mounting concerns over the large number of commercial loans coming due. The still looming banking crisis and the lack of capital in the market will throttle the recovery.

In Charlotte we have had several economic development success stories resulting in the creation of thousands of new jobs. The partial list includes Ally Bank, Electrolux, and Zenta. Employment numbers are on the rise, and we appear to be coming out of the doldrums and headed towards a local recovery. The announcement of Brian Moynihan as CEO of Bank of America and his declaration that the headquarters will remain in Charlotte is another positive. There is hope on the horizon.

So let’s enter the New Year with creativity, vision, passion, purpose, and the realization that the joy is in the journey.

Please join me as we raise our proverbial glass and toast the New Year:

We’ve watched and we’ve waited
And We’ve all suffered through
What the Doctor has told us is economic flu.
The foreclosures were rising
While interest rates were low
The banks were not lending the answer was NO!
2009 was the year to lament.
We are glad to be through it,
But boy are we spent!
The New Year is upon us as we enter with glee.
There is hope for rebuilding this lousy economy.
Home sales are growing,
But prices are down.
Nay hope springs eternal when you’re selling your ground.
To work with a client and write the big deal
Oh what an experience Oh what a thrill!
Oh to write leases and contracts and such
A 1031 would be such a rush!
Let’s work for the client.
Let’s work ‘cause we can. Let’s work for the little guy.
Let’s work for the man.
When the day is over and all is well,
We will laugh as we tell how we lived through the hell.
We’re stronger and wiser, more driven than ever
Here’s to recovery and being so clever.

Cheers to the New Year!

Please do not hesitate to call NAI Southern Real Estate at (704) 375-1000, or contact Kevan Smith at rksmith@srenc.com for any of your real estate needs.

We have a lot of clients who are actually swimming against the tide and are doing quite well; however, the problem with most of these clients is that no one knows how long their success will continue.  Therefore, no one is willing to take a risk to expand or enter into a long term lease arrangement even as today’s market offers the most favorable rental rates that we have seen in a decade. It is only those clients who have no choice but to act who are doing anything. So what are those service providers who depend on the real estate transaction market to make a living going to do while the market decides what it is going to do?

Every service provider that I know, including NAI Southern Real Estate, is gearing up to market their services to commercial banks who have, as part of their asset base, distressed real estate loans. This would encompass every commercial bank in the country, which creates an enormous potential base of business. These service providers include, of course, real estate companies both large and small, large law firms, large consulting firms, large architectural firms, land planners, engineers, environmental consultants, contractors, investment bankers who have raised money to form large vulture funds to buy distressed properties and/or loan portfolios backed by real estate assets. The list goes on and on. To those firms who have predicated all or a large portion of their income on serving an active real estate market, this potential distressed asset market represents the road to the continued existence of that part of their practice or of the whole organization.

The real question that I have been trying to resolve in my own mind is what happens if this distressed asset market does not materialize in the way that most of us think that it will, and what happens if it does? Based on my experience to date having talked with a number of commercial bankers both large and small, those bankers who do not have liquidity issues are not seeing pressure from regulators at this time to dispose of troubled real estate related assets. Most of their time is being spent understanding these assets and trying to get their hands around these properties in case they are forced by regulators to foreclose. Exceptions are those properties which are partially completed but will require significant amounts of capital and expertise to complete. These properties are being foreclosed upon and in most cases are sold at deep, deep discounts to buyers who can either hold or complete at prices much lower than actual replacement cost. To date we have seen little of this in the Charlotte commercial marketplace. Under this scenario, the bankers and regulators will hope that the economy as it improves will bail them out. I think this would be the best scenario for our country because, with the exception of those borrowers who are dishonest, the best person to work with financial institutions to resolve sticky loan situations are the people to whom the original loans were made.

If the banks do not create a pool of distressed assets which need to be sold or individual properties which need to be restructured and sold, what happens to the vulture funds? No money is disbursed and no fees earned.  What happens to the real estate companies both large and small, large law firms, large consulting firms, large architectural firms, land planners, engineers, environmental consultants and contractors all of whom have geared up to support this massive redeployment of real estate assets from commercial banks and other financial institutions? No business is generated and no fees are earned. Can these businesses survive? The answer is maybe, but not without internal restructuring to be able to survive on significantly lower earnings than those to which they have been accustomed. Those without a strong capital base will go out of business. Not many folks in good times put money away for a rainy day.

This is already happening.  Real estate companies have sharply reduced their staff levels or closed, and brokers who can find other employment are leaving the field in great numbers. Law firms are closing offices and reducing staff, something that hasn’t happened in the Charlotte marketplace during my business career to this point. Architects and engineers are down to the bare essentials with no immediate prospects for future work.  Other than public work, there is very little going on from the contractor’s viewpoint.

2010 will certainly be the turning point for those groups who make up the real estate industry. In the 34 years that I have been in this business, I have seen many ups and downs, but none quite like what is happening today.  What I do know is that the business will return to a very profitable level, and I also know that what we are going through today will happen again.  Perhaps under a much different set of circumstances, but it will happen again. As you begin your celebration of Christmas 2009, take every opportunity to hold those dear to you and recognize the blessings that family and friends bring to your life. Thank God that you live and work in the Charlotte Region. Nowhere else will you find more long term opportunity, and soon the headlines of the Charlotte Observer and the Charlotte Business Journal will read “GOOD SIGNS FOR THE REAL ESTATE MARKET”.

Please do not hesitate to call NAI Southern Real Estate at (704) 375-1000, or contact David Goode at dgoode@srenc.com for any of your real estate needs.

If you have been in the workplace for at least twenty years, you probably recall a pre-desktop environment.  If your company did have a computer system, it was a monster and was programmed for very industry-specific tasks (i.e. insurance, banking, manufacturing).  Most business was conducted in person, and all correspondence, documents and invoices were generated on a typewriter.  The post office and couriers were the principle movers of all that paper and business transactions took time to come together. Commercial real estate deals were no exception.  It really was a different world.

Back then, a commercial broker’s most critical asset was his (because it was almost always a “he”) market knowledge.  With no on-line services available to help identify properties, locate owners and tenants, and track vacancies, each broker’s personal data-base was very proprietary and closely guarded.  It was a tangible representation of a lot of work and hard-earned experience, and it wasn’t given away for free.

Today, anyone can log on to the web and search for anything, whether it’s a car, a new office, or the best cinnamon rolls in town.  With so much information at your fingertips, why rely on a broker?  Or, if you’re a broker, why leave the office yourself?  It seems that one could make a living by simply managing and processing information, and connecting the dots between tenants and landlords, needs and wants, without ever leaving the office.

Fortunately, there is still a place for old fashioned market know-how.  This year at
NAI Southern Real Estate, we have closed real estate transactions that would have never happened if we solely relied on the available listing services currently serving Charlotte.  In one instance, a plumbing supply company needed what was assumed to be an easy-to-find building, given all of the negative press about the market in 2009.  It should have been easy to find, but it wasn’t.  Fortunately, an opportunity presented itself in the form of a build-to-suit that, had it not been for some long-standing relationships, would have been completely missed.  The tenant will move into a brand new building this December.

In another case, the owner of an established Charlotte company was looking for a new home in the Midtown market, after selling his current location earlier this year.  While we were privileged to sell the property, we were very happy to accommodate a valuable client in his search for a new location.  A quick search conducted on the computer revealed very little that could possibly work or that our client had not already seen through competitive brokers (cold-calling our client, of all things!).  But being out and about has its value, and we knew that a furniture store had recently vacated a prominent space on East Morehead Street, but the building was not being marketed through the more typical channels.  It took a just a few phone calls and trips to the building, but ultimately it didn’t take long for both parties to realize they had found an optimal solution.  The tenant will be moving into his new art gallery/framing shop around the holidays.

The common element between these two stories is that the deals that ultimately took place required a deeper understanding of the market we operate in than what can be gleaned from a computer screen.  They required getting out of the office, acquiring firsthand knowledge, and building relationships. There is no substitute for knowing your market at street-level.  That doesn’t mean that there is no room for young professionals in the commercial real estate business, but if you have engaged a broker to help you locate a new office or facility, there are a few basics you should expect:

• When touring properties, is the schedule efficient?  Are listing agents prepared and on time when you arrive at their property?  (Ask your broker if he/she has conducted a dry run of the tour in an effort to reduce idle moments and not waste your valuable time.)
• Does your broker display a solid understanding of the market while you’re out and about?  (When driving by an obviously available property, ask why it’s not on the tour. The answer may be revealing)
• Are you looking at relevant properties in the first place?  Has your broker fully grasped your requirement?  To be fair, have you completely shared the specifics of your space needs?  (If you are seeing too many properties that don’t work, something is wrong.  Either you have not communicated clearly your needs – be honest – or your broker has not dug a little deeper to uncover your best options.)
• Finally, how are you and your broker being received as you visit each property? The other party’s demeanor and body language may offer some important clues.  (Are you working with an experienced and well known professional, Blackbeard, or the Invisible Man?)

I’m glad that our industry still places a value on hard work.  If you are running a small company or managing a corporate office, then you are likely a hard worker too.  Expect nothing less from the people you engage to assist you in one of your most important business decisions:  the location of your business.

Oh, and by the way, Happy Hunting!

If you would like to know more about the deals described in this article, or the market in general, please do not hesitate to call NAI Southern Real Estate at (704) 375-1000, or contact Tim Bahr at tbahr@srenc.com.