Tom Miller, CCIM
What we're seeing in Q1, 2009
This blog has gone dormant for months now. The reason is that we tend to try to accentuate the positives and frankly, there has not been too much good news lately. Except the masterful job of aviation the pilot and crew accomplished in the ditching of his disabled aircraft into New York’s Hudson River last week.
2009 has started off with an extreme uptick in activity for Miller Industrial Properties. We have seen numerous new prospects into the marketplace and it seems like each one of them is proceeding through with a commitment to take space. This is in deferance to 2008, where lots of lookers but few takers were the norm for ourselves and other Northern Nevada brokerages.
For these new prospects, there is a definite underlying theme however and that is the desire to remain flexible with their commitments. Some firms are wanting terms added that give them the right to terminate and buying out of the leases and others are opting for shorter term commitments. Apparently, this is not just a local trend, as this interview with a national-wide Tenant Representative firm indicated:
Excerpt of an Q and A between National Real estate Investor and Mr Bill Goade, CEO, Cresta Partners dated 1/22/09:
NREI: “What are tenants looking for today?”
Goade: “It’s flexibility. We have a lot of corporations out there right now that are uncertain about their futures and they are looking for flexibility. Unfortunately many of them are doing it the wrong way. That is, they are doing it with very short-term leases and landlords are willing now to accommodate that. When the markets are high, all landlords want to do is long-term leases. All they were interested in doing in the big markets a year ago were 10-year leases. In the bad times, landlords are all of a sudden ready to be flexible because the rents are down and they’re hoping in two years they will be back up. What we try to advise our clients is, right now we’ve got about a one-year window that hasn’t even started yet. Commercial real estate is a lagging economic indicator about six to nine months behind the economy because companies have tough times, then they lay off people, then they restructure space, then they get rid of it. So we haven’t even seen the effects of all these layoffs. Companies are just starting to do their restacking and put space on the market. We think the window of opportunity is mid-2009 to mid-2010 where companies should be looking to do long-term deals on their core space, with contraction and cancellation options. We’re advising our clients to take advantage of the market now. But we do see a lot of companies doing short-term deals, which are going to put them in a position where rents are rising in the next two years when the economy recovers, and then they will be negotiating a long-term deal at the wrong time.”
The key for tenants in the market today is to add an experienced tenant representation expert onto your team early n the process and allow the team to maximize your negotiating leverage in today’s market. With vacancy at an all-time high in Northern Nevada, the environment for making excellent lease purchases has never been more in the tenant’s favor. We are dealing with a number of new prospects that are recognizing this and they are receiving incredible deals with favorable terms.
While we are certainly not predicting a turnaround in our market activity yet, all new business is welcomed. And these new tenants are certainly welcoming the lease terms and rates that are being offered.