Hey, guys, today we were learning all about commercial real estate with Jessica Reinhardt, and this is great information because we are all dying to know how is the commercial market? Is it the same as residential or is it different?
So you would be surprised. Lately, it is just as crazy as the residential market in some sectors. In some sectors. So like I said, we deal with the office component and we deal with retail. And then there’s industrial property, warehouse, property, retail. Starting to have a come back office is still a little slow, but it’s starting to catch up. And then in your industrial warehouse, flex property activity is really picking up.
I’ve worked with a few tenants in the last couple of months and the competition is just as hot as it is in the residential market. We put in an offer and come to find out there’s three other offers and maybe we lose it and then we have to continue the search, just like in residential. And it makes it a little tougher to find something for tenants these days. But there is still property out there. It’s just a few more steps to find it.
I guess I’m surprised by that because with everything that happened with the pandemic, it was just a perception that there was going to be all of these vacant buildings and what were we going to do with all these, you know, huge, you know, large buildings that now everybody can work from home?
Right. Well, I think, you know, if you walk office buildings, it may be a little quiet in those, but there’s lots of people that can’t work from home, don’t want to work from home. So they still want to have an office to go to. And then I think during the shift really happened where people did a lot more online shopping and then companies had to store that product somewhere to be able to ship it out.
So instead of going to the retail locations, they had to go to the online arena and then companies had to shift gears and ship products somewhere and then ship it from that location out to the consumer. So I think that’s why we had a huge increase in demand for industrial space warehouse space just right after covid.
Yeah. So are people coming in and bidding above, like the the typical rate, or are they offering to buy a car or are the crazy things happening so maybe in the office market you’ll still see a few incentives being offered to get tenants in there. But I think depending on the other way around, it’s not to get a property. It’s like, hey, we’ll give you a car if you lease.
Right, right. Yes. Yes. And so the incentives for industrial space, it’s not as much as it used to be. And the free rent being offered is not as much as it used to be. They don’t have to. They have the demand. They have. You know, if you don’t take it, then there’s someone else that will come along and take it. So, you know, but again, the goal is to get tenants in there. You’ll find some, but not as much as it used to be in the past.
What this is kind of just my thought right now. What is the most surprising? So for us in real estate, it was we can’t believe the prices of the homes today versus, you know, eight or nine years ago, but. The amount of you know, what surprises me is there are people that instead of going to getting home and renovating it, they will take that money and spend it overbidding on a home like one hundred thousand two hundred thousand. So what do you see? So in this shift, what do you see as the most surprising?
So you see the similar tenants are offering or actually landlords have pushed rates because they can rates that are out there today are maybe seen back in the 80s. I mean, some of these rates haven’t been seen in a while. And then with that, again, like the free rent used to be able to get, you know, for example, maybe a month of free rent per year of lease sign, you’re not seeing that anymore.
And then tenants are a lot less willing or a lot more willing to take the space in the current condition versus asking for all the Spanish out, you know, and then maybe do it themselves, because they fear that if they ask for all these things, paint, carpet, that they may lose the deal. So you have tenants that are a bit more willing not to ask for as much as they used to in the past.
So when you have a client, you know, for residential, we have people that will you know, they do all the research online and they come in with a lot of knowledge that they’ve heard online. So same with you. How do you overcome that when they come in and say, no, I’m not overbidding, I don’t need to do that? That’s ridiculous. You know, just getting that message across to them.
Exactly. Yes. We do have people that say, oh, well, I read that all these office buildings are vacant and that’s what I thought.
So it happens. I mean, again, office is a little different animal, but it will pull comps just like you pull comps for homes that have sold in the area. So we’ll do comps for that area, that type of building, that size range and just show them this is what deals are getting done. What do you want it for? If you want to look in another area where maybe rates are more suitable to your budget, it’s all a game where you have to mix and match to find the right spot.
You do, but you have to just show facts, right? You you can’t just be that salesperson that is telling them just whatever it is, you have to back it with some facts.
Exactly. And then you have tenants whose leases are coming up and the landlord wants to raise the rate, a huge number. And the tenants are like, OK, we’ll find that. I’ll just go down the road where it’s cheaper, but then tenant start doing their research, pull Comps Well, come to find out, it may not be as bad as they thought. So. Wow. All right. So the commercial market guys is just as crazy as residential. Good to know. All right. Just got to close it out.