Know your market

0 CommentsBy

from Dan Kollar
Vice President
Jones Lang LaSalle

While out for a walk with the family on a beautiful day in Boston, we stopped at a small shoe store that was advertising a summer sale. My wife popped in for about 45 minutes only to emerge empty handed and frustrated. While I admit the lack of shopping bags was a relief, we had no room in our Saturday afternoon for frustration. When asked, she explained that while the store had some great shoes and sales, the selection available in her size was not only limited, but most were not part of the sale either.

Later that day I began to think about how many of my customers as a commercial real estate advisor encounter the same dilemma on a different scale — a disconnect between “perceived” and “true” opportunity.

It’s easy to find market reports highlighting the vacancy, absorption, availability and average rent for a particular product type in a certain submarket. Such reports are churned out on a quarterly basis by many sources. While some are more accurate than others, the inherent danger lies in relying on this information to create an opinion, or expectation about a company’s overall prospects as a tenant i.e. “the perceived opportunity.”

To be clear, these submarket reports are effective in providing a high level overview of real estate fundamentals and trends. However, to truly understand one’s opportunity, a company must establish its search criteria and diagnose how many alternatives can accommodate these needs. In other words, figure out your shoe size/style and assess how many models in the store are available that meet those requirements.

When critical factors such as location, demographics, size, access, quality, amenities, expansion capability, etc are considered many companies are surprised to learn that in a submarket posting 25% availability, there may only be three or four options that fully meet their criteria. Identifying how many other companies are actively searching for similar space at the same time will provide an understanding of your company’s competitive advantage, and give you leverage with these potential landlords.

The real estate market is unique to every company. Establish your criteria. Qualifying the current available inventory is critical in measuring and, in turn, executing the best strategy for your company’s true opportunity.


Leave a Reply

Your email address will not be published. Required fields are marked *