Practical Aspects of Operating in Today's Commercial Real Estate World

 


In today's evolving commercial real estate (CRE) landscape, staying informed and adaptable is crucial for success. With over 40 years of experience, Patricia Lynn, CCIM, founder of ExceedCE, offers insights into the state of the industry, the skills necessary to succeed, and the trends shaping the future.  

  

1. Understanding the Current Market Climate

  

Inflation and interest rates have been major concerns. According to Urban Land Institute’s 2024 Emerging Trends in Real Estate survey, respondents believe the worst of inflation is behind us, and more opportunities for acquisitions are emerging. As cap rates rise and property values stabilize, 2024 could offer prime opportunities for buyers looking to enter the market at favorable price points. 

  

2. The Importance of Market Knowledge

  

Successful brokers, especially during downturns, are those who position themselves as market authorities. Whether working with investors or users, having a deep understanding of market dynamics—such as property values, absorption rates, and lease terms—can set you apart from the competition.  

  

3. Participation in the Commercial Real Estate Business

  

CRE offers a wide range of participation opportunities, from user brokerage and leasing to site selection and project management. Whether you're representing landlords, tenants, buyers, or sellers, having a broad skill set is crucial. Continual learning and skill enhancement are essential for long-term success. 

  

4. Differences Between Commercial and Residential Real Estate 

  

Differences between commercial and residential real estate include financing, market areas, ownership entities, and holding periods. Commercial real estate transactions tend to be larger, involve more complex ownership structures, and often focus on long-term value generation through leases and capital market interactions. 

  


5. Client Services: Essential Skills for Success

  

The successful CRE professional must possess both technical and non-technical skills. Some critical non-technical skills include communication, adaptability, and problem-solving. Providing valuable information, going the extra mile, and treating clients as partners are key to building long-lasting relationships. 

  

6. Investment Properties in Today’s World

  

Understanding the differences between user and investor perspectives is essential. Investors are focused on creating value through lease income and NOI (Net Operating Income). Leases are the engines that drive commercial real estate value. Therefore, it is important to understand the intricacies of lease terms from both the investor and user viewpoints. 

  

7. Key Property Types and Metrics

  

There are four main property types:  

  • Multifamily 
    • A residential investment property is a building or series of buildings where the occupants: live there for more than 30 days at a time and there are no substantial services provided as part of their stay. 
    • Classifications include garden, mid-rise, and high-rise.
    • Resources 
  • Office 
    • Office buildings provide space for businesses providing services to industries 
    • BOMA (Building Owners and Managers Association) Classifications 
      • Class A New – state of the art 
      • Class B 10 – 20 years old 
      • Class C – Older, need renovation 
    • Resources 
  • Retail 
    • Classifications 
      • Malls 
      • Strip Centers 
        • Examples include: 
          • Drug sub-anchor 
          • Supermarket anchor 
          • General merchandise 
          • Apparel and services 
          • Multiple anchors 
          • Manufacturers 
      • Freestanding 
        • Examples include: 
          • Drug and specialty retail 
          • Out-parcel locations (gas stations) 
          • Restaurants, banks 
    • Resources 
  • Industrial 
    • Industrial buildings provide space for the manufacture, warehousing and distribution of products 
    • Classifications 
      • Bulk warehouse 
      • Office warehouse 
      • Office/service 
      • Free standing 
      • Warehouse and Distribution 
      • Multi-tenant 
      • Large Manufacturing 
      • R & D 
      • Industrial Park 
    • Considerations 
      • Rail and truck access 
      • Ceiling height and span 
      • Docks and OH Doors 
      • Electrical Service 
      • Sewer and Water capacity 
      • Floor Loads 
      • Outside storage 
    • Resources 


Understanding metrics, such as cap rates, cash-on-cash returns, and occupancy rates, is crucial when advising clients on potential investments. 

  


8. Patricia's Three P’s: The Marketing Process 

  

A well-structured marketing process is key to attracting the right buyers or tenants for a property. The process can be broken down into three core components:  

  • Property: Determining value 
  • People: Developing target markets 
  • Process: Crafting a comprehensive marketing plan that includes budget, advertising, and internal coordination 

  

9. Tips and Tools

  

One of the first steps to understanding the user side of the business is to learn as much as possible about a specific product and the types of clients that use it. 

One of the first steps to understanding the investor side of the business is to learn as much as possible about a specific product and the types of investors that buy it. 

Four Useful Forms 

  • Property Acquisition Form 
  • Annual Property Income Form 
  • Multi-Year Cash Flow Form 
  • Sales Proceeds Form 

- Patricia Lynn



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