California ‘Shutting Down,’ Again… How Does that Affect Your Real Estate Transaction?

As of July 13 Governor Gavin Newsom of California announced another ‘shut down’ of our economy to ‘non-essential’ business and other indoor/outdoor gatherings of more than a small handful of people.  While opinions vary widely on the prudence or effectiveness of this approach, the  focus of this month’s article  is how this shutdown will affect your current real estate transaction(s).  Whether you are considering buying or selling or renting, people evaluating a transaction right now are generally concerned with three things: (i) are we negotiating the right price, (ii) are we negotiating the right amount of space, and (iii) how will this space accommodate the needs we have into the future. But wait, you are asking yourself, ‘ Aren’t these the things we considered for transactions before  COVID and the subsequent government shutdowns, and won’t they also be after?’  Yes, they will be.  So how are these shutdowns affecting these considerations?

For starters, it depends on which side of the negotiating table you are on.  For buyers and tenants, cash flow and flexibility are on the top of the list.  While tenants always want to minimize their occupancy cost through the least amount of rent, they may be willing to agree to slightly higher rent per square foot in exchange for more free rent up front or other concessions to help their 2020 bottom line.  They may also exchange this higher rent for shorter or more flexible terms to give them options for growth or retraction in the future.  Landlords, on the other hand, are  concerned primarily with tenants who pay their rent and secondly, how that rent component affects the value of the property.  Therefore, landlords are looking for businesses who have weathered the  COVID storm well, those who have strong balance sheets, and those whose business success is not related primarily to discretionary spending.  When it comes to the topic of buying and selling,   second on the list of items negotiated – after price -  is where is the money coming from to fund the deal.  Liquidity in the market has been strained with all the stimulus money being supplied because most, if not all,  of that money is not slated for real estate acquisition. 

A couple of other interesting things to note  are  the  manner in which property is shown and how it is marketed.  The standard protocol for masks when entering facilities or meeting with prospects remains, and people are getting more comfortable with that.  Virtual tours are on the rise with videos, drones, and still photography capturing the message of the opportunities being presented.  However, nothing can ultimately replace getting out and kicking the tires on the property itself.

Furthermore, as people continue to adapt to working from home or remotely,  one thing we are seeing is the use of DOCUSign more in commercial transactions, as this is an efficient solution for reducing face to face meetings. DOCUSign is also a great tool for minimizing paper which is good for the environment and cuts down on hard file storage space. 

Another often overlooked component to many real estate transactions is that with many offices closed to normal business, Broker calibration in the office has been adjusted.  Just as we have networked with our competitors in finding opportunities, agents in the office must now make the same effort to collaborate and share information within their own company.  The rise of ‘zoom’ or other web-based meetings and conference calls is instrumental in  sharing vital information.
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Our team is adapting regularly and implementing key procedures and protocols.  Our objective is to provide that same great level of service while also striving to keep people as safe as possible.  Contact us today to discuss your needs and objectives, and how we can help.  We look forward to helping you take the next step.