It has been more than a year now since the initial effects of the subprime melt-down began to encroach on the broader capital and credit markets. The result has caused concern, raised questions and certainly peaked the level of anxiety in the commercial real estate sector.
“There are certainly more questions than answers in the market right now,” says Ray Sandelli, senior managing director for CB Richard Ellis in Tampa. “The issues we are dealing with today are subject to larger, external factors and, subsequently, the complexity of the problems and the possible solutions have become more challenging. Our potential, and our risk, as a business community are no longer confined to Tampa’s geographical boundaries. We are part of the global economy and must understand and consider how those external factors affect decisions we make locally. The importance of partnership, at every level, is therefore critical to the path we take going forward.”
Smart Business spoke to Sandelli about the importance of how clients, service providers and communities must work together to a common end.
What challenges are facing today’s commercial market?
Let’s always start with the fact that the common goal of all businesses is to serve their current clients well, expand the enterprise and run as efficiently as possible in the process. That alignment allows for clarity of purpose among all the parties involved. As economic conditions allow this scenario to play out, everyone is moving in a positive direction.
The challenge in today’s market is that the downturn in the global economy, caused but multiple issues, has forced businesses to take alternative paths to how they address both their clients as well as their own needs. A reduced revenue picture means a more monitored approach to expense management while attempting to maintain the quality of service provided. Simply put, trying to do more with less. This scenario, however, is not unique to commercial real estate. Virtually all sectors, both private and public, are dealing with the same issues.
Do these conditions change the expectations among the parties involved?
A few years ago when the markets where very active, or perhaps overheated in hindsight, everyone was simply trying to keep up with the volume and pace of activity. The expectation then was to address as much of the demand as possible. Decisions where typically made very quickly as market conditions where changing almost day by day.
Today, that process is much more deliberate at almost every level. As such, all parties must be more involved in a longer-term strategic partnership with one another. For property owners, the near-term goals are to retain their key clients, ensure they see every potential opportunity in the market and seek improved operational efficiencies in running their property. At the same time, these same owners and investors continue to look for those opportunities that will allow them to expand when conditions are right. For tenants, near-term decisions are based primarily on either direct costs or making decisions that position them for greater efficiencies long-term. While expectations may differ, the common theme comes down to each party gauging current needs while ensuring it is positioned for expected growth as the economy regains its strength.
So how must the commercial market respond?
We must think globally while staying attuned and responsive to local market conditions. To start, the partnership and interaction of the public and private sectors is essential. Success can only be assured when there is the will for a cooperative vision and agenda.
Secondly, it is imperative that the process brings a seamless team of expertise to the table. The days of the generalist are gone. Not only are very specific skill sets needed but it is critical that the parties know how their contribution relates to the overall solution. As an example, quality appraisal work will help substantiate the placement of debt and equity. The right financing vehicle will allow the development community to respond to demand with a product that is economically and operationally feasible for all parties. In turn, this helps create a quality business climate that positions Tampa to compete favorably for job retention and growth.
It’s all tied together; it is partnering in vision and purpose. The importance of thoughtful collaboration is essential in crafting long-term goals while working on solutions to near-term needs.
RAY SANDELLI is the senior managing director for CB Richard Ellis in Tampa. Reach him at firstname.lastname@example.org or (813) 273-8450.