A Hyper Competitive Environment Affects Behavior

While we looked at the topic of the scarcity of industrial real estate or warehouse space in our article last month (Navigating a Tight Real Estate Market (destinoindustrial.com)), this time we will dive a little deeper into how this may effect behavior in the market place.  Buyers and Tenants are very motivated to purchase or lease property, and Sellers and Landlords are very motivated to get top dollar and all the terms in their favor.  While this dynamic clearly creates tension in negotiations, it also creates tension in relationships and interactions on the peripheral.  Buyer’s and Tenant’s can be skeptical of the advocacy of their agent on their behalf when they don’t seem to be scoring too many points in the negotiation process. Sellers and Landlords can also tend to want to over-play their cards and down-play the advice of their agent when introduced to the prospect of so many candidates for their property.  With the tensions mounting and the stakes high, one slip can significantly damage relationships.  However, as transactions successfully come together (or cancel for the right reason) and clients experience how valuable their agent representative was throughout the process, it can solidify that relationship between client and trusted advisor for a long time to come.

​We were recently involved in two industrial sales, one in Santa Fe Springs and the other in Buena Park. We represented the Seller of one and the Buyer of the other, so we witnessed the tension from both sides of the table.  In one instance we had to assure the Buyer that while the Seller was not being too flexible, we are still getting a ‘good deal’ (supported by market data and trends) and, as important, we are getting the property.  In another instance we had to assure the Seller that although we have multiple offers, we really should not push beyond a certain price as we run the risk of chasing these Buyers away.  There was not only the tension of the negotiation but our relationship on the line.  Either Buyer or Seller could have told us we are wrong, but as they trusted our advice and we got the deal closed. Both were very pleased with the outcome and success they experienced.
 
In another transaction, where we represented the Buyer, we had to advise them to disapprove of a contingency on the last day to protect their deposit, even though that could cost us the deal altogether.  When we encountered a Seller who was not willing to cooperate on a request for additional time the Buyer had to make a decision to waive the financing contingency and risk the Buyer’s deposit or disapprove of the financing contingency and be entitled to the return of the deposit.  However, if the Buyer disapproves, the Seller can terminate the deal.  The tension was that the Buyer’s lender verbally said they are able to do the deal, but we did not have a formal approval from the lender for a couple more days.   We aimed to minimize the tension for our client by clearly laying out the options and outcomes, and we agreed on a strategy.  This approach not only helped reduce the tension in the client’s decision, it also reinforced our “client’s objectives first” approach in the eyes of the Buyer.
 
Tension can be a useful tool, but it can also amplify the decisions we face day to day.  As you consider your upcoming or future real estate decision, please contact us today as we work toward creating an environment where tensions are minimized on the road to successfully completed transactions.