The following video was shot on a recent drive to Phoenix and is the first of what I hope will be a regular feature entitled CRE Road Kill. In this installment, I am addressing what I call the Tenant Trough, what it is the problems it creates for owners. In Part 2 I will talk about solutions…stay tuned.

Merriam-Webster defines “trough” as follows:

• a long and narrow or shallow channel or depression (as between waves);
• the minimum point of a complete cycle of a periodic function;
• the low point in a business cycle

Now, some nearly 25 years hence, I truly do recognize the importance of “sorting” and the notion of elimination has become more and more a part of representing my commercial real estate clients effectively.

Of late, and driven by market conditions, there has emerged a new brand of bottom-feeding. It’s a concept I call “LOI Shopping” or, maybe “Networking the Deal” for better terms.

There is no doubt in my mind that this carp-like behavior among prospective tenants is a product of too much inventory and the desire of often marginal tenants to continue their vain attempts to shrink or even collapse the pricing envelope.

Mind you, there is no orchestrated conspiracy here; just a glut of inventory and an every expanding population of weak tenants who think if they shake the tree hard enough fruit will fall to the ground.

Well, I am mad as hell and not going to take it anymore! I am implementing new measures to expose and terminate the pretenders…these fakes and would be tenant hypocrites who are representing themselves to my clients as so much more than they really are.

Although I am not ready to strap on a six shooter like Richard Boone did in “Have Gun Will Travel,” and ride into some western town on a mission of settling scores, I am ready for a serious revision of my qualifying language and the way I handle the “wanna be” candidate.

Sorting through Hypocrisy

Since we are using some Latin, let me throw in some Greek too. The work “hypocrite” is derived from the Greek noun “υποκριτής” meaning “one who wears two masks.” It’s the source of the theater icon that depicts “comedy and tragedy.”

I am ready to pull back a few masks and find out what is behind them. I’m ready for a lot less comedy, especially since no one is laughing. Then too, I am not especially fond of the tragedy angle either.

Masks don’t work well in the empirical world of commercial real estate. Masks are only suitable for the stage, where the emotions of an audience are supposed to be toyed with.

I’m going back to what Del Webb taught me as a highly skilled Sales Counselor…the principle of Terminatio Simulatio Velociter or, in plain English, TERMINATE THE PRETENDER QUICKLY.

You see, guys like Del Webb understood clearly the principled approach to professional representation. There are only two types of real estate investors or, in the case of Del E. Webb, home buyers; the ones that will and the ones that won’t…the ones that can and the ones that can’t…the ones that do and the ones that don’t.

Those that will are those than can and those that can are those that do. No mask, no pretense.

To the Webb organization, the deliberately implemented sorting process begins at the first business encounter (give name, get name, use name) and continues as an integral component of all the follows, culminating in securing loyalty, examination, agreement and execution.

For the foreseeable future, the market is going to continue to hammer us all, owners, tenants and brokers. Too many properties, too little time and too few truly qualified tenants and investors.

I’m going back to the principle of Terminatio Simulatio Velociter or, in plain English, TERMINATE THE PRETENDER QUICKLY.

The International Council of Shopping Centers (ICSC), publishes a “Shopping Habits Report” in the first quarter following the end of a calendar year.

As a retail leasing specialist, I digested the entire 2009 report, subtitled, How the Recession has Impacted Consumer Shopping Habits, and discovered that indeed center owners need to be on top of the consumer game.

The “2009 Shopping Habits Report” contains invaluable information about the future consumer trends that will impact center owners, whether large or small in size.

You can read the report for yourself and draw your own conclusions. However, three things stuck out to me in the report:

• 58% of consumers believe their income will stay the same or become significantly less in 2010
• Most consumers have and will continue to throttle their discretionary spending through 2010
• Strip centers and “Lifestyle Centers” attract the highest frequency of repeat traffic

For those of you who are my clients, I want to briefly focus on the strip center/lifestyle traffic models, which run in the 70-75% repeat traffic level. In 2010 and 2011, my Company, is seizing on the concept of “life-styling” centers that have a higher than normal tenant mix by creating “Center Websites” that serve as a marketing destination point for Broker and tenant inquiries and present a center personality to the viewers.

I am working with clients to help them discover and communicate the flavor and theme of a center to prospective tenants via a unique center website. Village at the Boulders is an example of a “Center Website” that communicates lifestyle and quality of tenant mix. It’s hard work to create this themematic message but the end result is an organic marketing message that can serve the leasing needs, tenant needs and of course, the pride of belonging to the mix.

For owners who have nominal number of national brands or, none at all, the concept still has credibility to the leasing and promotional effort because local strip centers that serve small businesses, pizza outlets, exercise studios, coffee shops and an ethnic restaurant can create a local lifestyle image.

The sites also serve as the focal point for Broker-to-Broker dialogue. One of the most powerful features of the “Center Website” is its “PULL” or “SEPARATION” feature. Owners are looking for ways to differentiate their properties and this is but one way to do so.

The spending habits of consumers will continue to remain in flux until we see a restoration of confidence in the economy. In the meantime, I continue to ask my Owner/Clients to look at “out-of-the-box” models that can create more leasing opportunities and a higher consumer traffic count.

In addition, larger centers NEED and SHOULD create center marketing events that can draw large number of consumers to their centers in order to provide exposure and predisposition for repeat visits.

My team at Arizona Commercial is looking at marketing models that join the “Center Website” to tenant exposure, high traffic consumer events and thus create the old fashioned “Win-Win-Win” for owners, tenants and consumers.

“DOWNLOAD THE 2009 SHOPPING HABITS REPORT” and above all, read it and find ways to recreate your marketing approach for 2010-11.

One thing that will not work is sitting still.

The relevance of the piece was the central focus of creating consumer recognition and value…what else is new in the shopping center marketing game?

What captured my attention in the article was the renewed interest in utilizing events and promotions as a traffic magnet for center impressions in the minds of consumers, tenant recognition and of course, foot-traffic.

The perception of value in the minds of consumers goes beyond having access to a quality mix of retailers (my words) to what retail centers do to create value opportunities to consumers in the form of staged events…an old marketing concept now being resurrected.

Job fairs (relevant in these times), car shows, well-staged concerts (blues and jazz) and segmented events stretched over time that target shopper by product interest for moms, dads, singles, teens, seniors and other demographic groups are seeing a resurgence.

Farmers’ markets were the No. 1 event type that consumers both attended in the past and would like to see more of.” – ICSC shopper habit study

In my own marketing, I implemented retail center websites as a cost effective value proposition developers, owners and center marketing managers can use to provide existing tenants with additional exposure and promote retail center leasing opportunities.

By combining online exposure through Center Website/Blogs and annually staged events, centers can realize additional consumer traffic, predisposition, improvements in tenant satisfaction and new interest from new tenant prospects. There are few losers in this formula and such approaches can create the value proposition consumers seek.

At this time, magnetism seems to be the watch-word to traffic, value, revenue and satisfaction

Three suites are currently available and are priced at $9.50 per square foot, triple net with graduated annual rent incentives and half rents for qualified tenants. Download the flyer.

Owner is offering graduated lease rates with half-rent incentive for qualifying tenants. Download the flyer.

Watch the short video below to preview this property

For more information about this property, contact Donald Teel by email or, if you prefer by calling 928.777.8100. Visit CommercialWebPage.com. Download the flyer.

25,000 SF Retail - Prescott, Arizona

This is an excellent opportunity for an investor to acquire a value added, well located commercial investment property in Prescott, Arizona.

The existing lease is a new 10-year absolute NNN lease with increases and percentage rent and two five-year options to renew.

In addition, the property includes a 4,500 sf pad for retail expansion.

Property Description:
ASSUMABLE FINANCING. 5.75%, 27 year note, 15 years with option to renew at market rates. 8% CASH ON CASH. Single Tenant new 10-year Absolute NNN Lease with Escalations and Percentage Rents. 25,000 sf. Investor opportunity to acquire a well located, value-added asset with no landlord responsibilities. Includes a 4,500 sf Pad for additional expansion. Goodwill of Central Arizona is one of the largest and oldest nonprofits operating in the state of Arizona for more than 60 years.

Location Description:
Located within the Prescott Towne Center, a 53,000 sf retail center comprised of 3 buildings directly across from Village at the Boulders with Super Wal-Mart, Big Lots, Tuesday Morning, JoAnn’ s and Dollar Tree.

Prescott is located 90 miles NW of Phoenix with a mild 4 season climate resulting in a healthy growth rate. The Prescott MSA has a population base of approximately 100,000 and a trade area of approximately 165,000.

For more information about this property or any other commercial real estate investment opportunity in Prescott Arizona, email Mary Jo Kirk, CCIM or call me at 928.710.4045.

Okay, now what about Prescott, Arizona’s commerical market on a per square foot basis? What does it mean to owners and buyers. Is it time to buy? Is it time to sell? If so, how?

My recent suggestion to my Broker didn’t go over too well. “What we should be doing is pricing property for sellers on a ‘per square yard’ basis and for buyers on a ‘per square foot’ basis,” I said. He grimaced…I walked away.

High Value Market

We are a high value marketplace. Commericial real estate values in Central and Northern Arizona generally and in Prescott, Arizona in particular are declining creating an interesting investor market. Indeed, we appear to be nearing the bottom of the trough and it is and has been for some time…a buyer’s market.

We won’t be changing the marketing analysis to a per square yard formula but the principle behind the notion spells out the reality.

Resisting the Market Realties

Some owner’s are resisting the truth inherent in the current makret realities and in so doing they are actually capitalizing the reduction of their property value.

This is especially true in the industrial product sector where the demand has dropped to dangerous lows. Are there still buyers? Yes, but they have turned into razor sharp investors looking for select, easy to finance industrial properties.

In those cases where seller can play banker, they should. Let me go further, they must. Buyers are not looking for low-lying fruit…they are looking for fruit on the ground!

Entrenched commercial property owners who are either over-leveraged are surfacing at an alarming rate. The graph lines between market values and mortage principle balances are within sight of one another and in somecases they are crossing.

Some Sellers Can Sell Now

F&C owners should be encouraged because they are the few that can actually sell NOW, create a paper asset through cash flow and in some cases receive a much higher yield than if they hold on. An owner’s iron grip may prove to be his/her undoing.

Some owners sell now and some are…more will.

Prescott, Arizona industrial properties are wobbling like tops that have lost their centrifugal force.

Prescott, Arizona office space is flat, at best, with vacancies on the rise.

Prescott, Arizona medical…holding.

Prescott, Arizona retail is a nail-biting, month-to-month experience.

Leasing in 2008 was up 50% over 2007, while sales were down nearly 50% for the same time period.

It all makes me wonder, should we start marketing properties like carpet by pricing them per square yard? No, but after all is said and done, it’s always the numbers whether you are a seller or a buyer!

Contact me for a market report. Or, if you are a serious investor, call me, toll free at 1-877-777-9100.