BY BARRY HARDWICK, CCIM
In real estate we’ve always been told that it’s “Location, Location, Location.” The Law of Location is as true as the Law of Gravity. A property at the right intersection, with the right zoning, topography, access, utilities, and traffic counts will sell for 25% to 50% more or even double than a similar size property two blocks away. As true as the Law of Location is: there are many more ingredients that go into making a successful real estate transaction. As stated previously, the right location ‘with” … can create value. What a lot of people seem to forget is the “with.” The “with” can’t be ignored. There are many aspects that must come together to make a successful real estate transaction. While a transaction may have one or two items that make it look like the next great location, all of the pieces must come together to be truly successful.
Let me share a story to illustrate the point. A couple of years ago we met a businessman who had purchased a piece of property to build his own building. The location was okay, purchase price a little high, but fair, it had the correct zoning, topography was good, and utilities were at the site; however, there was one glaring problem. The problem: the lot was too small to build the size building they required and still meet all the design standards of the City. Because of one ingredient the project is now dead, and valuable resources of the company are locked up in the property and can’t be used to grow the business.
So, what are the ingredients that make up a successful real estate transaction? The correct answer is always “it depends.” It depends if you are an investor or an owner / user. It depends on the type use: office, retail, or industrial; and each of these will have subcategories depending on the specifics of your business. It depends on your customers, your employees, your product, your financial resources, your lender, financing, the current economic cycle and are businesses expanding or contracting. When purchasing property, it depends on the utility of the property: topography, zoning, infrastructure, roads, access, utilities, water and sewer, as well as many other factors.
If leasing a property, does the building fit your product type, and is it convenient for your customers and employees? When leasing you still must take into account zoning and infrastructure and tenant improvement costs. One item that is most often overlooked is the lease document itself. There is a lot more to the lease document than just the length of the lease term and the monthly rent. Know your lease document, because you have committed yourself to fulfilling ALL of its terms.
When embarking on your next real estate transaction, make sure you have a good team of advisers who are versed in commercial real estate, who understand your business and the objectives of the transaction. The team will include a commercial real estate agent, lawyer, CPA, architect, and contractor.
The bottom line is that real estate is one of the top two or three costs for any company, and you want to make sure that the real estate works for your organization versus being an impediment to its success.
Please feel free to contact Barry Hardwick, CCIM, author and Centennial Retail Services broker, to talk any time you’d like.
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