Recently, there was a local article featuring a distressed tenant under a headline effectively saying that rising rents distress tenants. The article noted that the tenant has been essentially forced to move the business location in search of lower rents. The original location is in a revitalized part of town with significant business interest in the area to capitalize on the resurgence of a specific demographic thriving in the area. This is clearly unfortunate for the tenant. However, it’s also a perfect example of the basic economic rule of supply and demand. I’m sure some of the readership may villainize the landlord as being one of the many greedy business types always looking to maximize their profit at all costs.
But consider this. If you were a landlord and had a property worth a certain amount, why would you lease or sell it for less than the market value? You wouldn’t, and no other successful business person would either. To do so would be to make a poor business decision. Rents, whether they are high, low or balanced, reflect market values. And they always will.
When you’re the owner of a business, part of the most important parts of running your company is to be vigilant to market trends as they impact your business. The problem many, many tenants make, however, is focusing so much of their attention on their particular business products or services that they pay little mind to their lease of the real estate that houses the business. When that happens, and a business owner doesn’t stay current on the economic changes happening in his or her own neighborhood, it’s easy to be caught by surprise come renewal time, when a proposed rent hike seems to suddenly come out of nowhere.
Even with the basic principle of supply and demand, there is good news. This type of situation can be readily avoided if business owners simply stay in touch with their commercial real estate professional. By staying in touch, I don’t mean seeing him or her in the parking lot of a soccer practice as you drop off your kids. I mean stay in touch to the degree that you stay informed of the important commercial real estate issues that could impact your business. There are local industrial and commercial real estate agents who make this easy. We make a point of sharing this kind of information with regular blog posts and informative quarterly market reports and updates. And we do that because we believe that as local agents, we owe our clients the ongoing service of keeping them up-to-date and current as to what’s happening in the local industrial and commercial real estate market, and we make that happen by putting that data in front of you on a regular basis.
The simple bottom line is that if the agent you use for your commercial real estate needs is not providing this valuable service, you should find one who does. It’s how you avoid the unpleasant scenario of the local business owner in the article we mentioned above.
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