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How Owners Can Benefit in Today’s Marketplace



by Neil A. Dolgin

Looking back at the ten largest industrial projects underway in the US last year, Amazon accounted for eight of them, according to CommercialEdge.  Over the last few years Amazon, other leading brands, Real Estate Investment Trusts (REITs) and investors have paid top dollar for secure, well-located, modern industrial buildings throughout the outer boroughs. As commercial real estate came back to life in 2021, prices rose at a double digit rate through the third quarter of 2021, according to CoStar. Owners of vacant industrial buildings followed the trends and priced their buildings high, perhaps expecting to land the likes of Amazon and other companies in search of suitable buildings for logistics and warehousing. Today, many of those same buildings remain vacant as owners continue to hold out for high paying tenants. 

Just recently, as we see buildings come to the marketplace, we are seeing a shift in the mindset of owners. We sense a new thinking among some owners who see that window of opportunity closing and who realize that prices may need to come down. Even the REIT’s that we speak with are suggesting that asking prices are unsustainable. There’s more flexibility in how owners are approaching pricing. Instead of sticking to an asking price that we believe from experience is beyond the capacity of the marketplace, owners are now saying, “Bring your customer over, we’ll sit, we’ll negotiate and maybe we can make a deal.”

2022 has been a tough time for owners and tenants who are being buffeted by the challenges of the pandemic compounded by rising inflation, higher costs of gas and oil, the war in Ukraine, higher taxes, and general uncertainty in the marketplace. Everybody’s pocketbook has been affected. And there seems to be more financial pain ahead. So what do owners and tenants do?

I often ask owners, “Why do you want to try to get the last dollar from a prospective tenant when you know he’s gonna go out of business because he just can’t afford it?” An owner may be asking $25SF for a property when it’s probably worth closer to $20-22SF.  If we ask an owner to drop the asking price to $22 now, we’re finding some more flexibility. And if we find a prospective tenant willing to pay close to that amount, we might get a deal. We just worked with an owner who was asking $25-27SF for a building and we knew that $23 was a more accurate asking price. The owner acquiesced because he realized that he was not going to sign Amazon or WalMart. And we closed the deal.

There is a feeling among owners that the days of high lease prices are behind them, and they’re wondering if they missed the boat by waiting and keeping their buildings vacant. And prospective tenants are still wondering if lease prices will ever come down. They visit a building for a walk through and they like it. Then, when they add in the additional cost of renovation, the costs are often out of their range.

I’ve said it before: if lease prices remain high, then companies that want to operate in New York City will choose lower cost building options in New Jersey, Long Island and Pennsylvania. 

Here are a few ways New York City building owners can turn things around and benefit in today’s marketplace:

Save With Third Party Building Management 

KND Management, the building management arm of Kalmon Dolgin Affiliates, has been developing properties and managing buildings for decades. We serve some of the nation’s largest institutional owners, passive investors and owners of single properties. We can bring a higher efficiency to managing tenants, collecting rentals and making sure tenants are being charged the correct dollar amount. We have the infrastructure in place to manage buildings in ways that save owners money. 

Have a Building Facelift

Make your building more attractive by giving it a facelift.  We help owners to manage the cost of renovations from building materials to labor.  I’ve always said you have one time, one time only to make an impression on a client, because clients today are going to run around and look at various buildings. And you want to make a good first impression for your building. That’s why it’s a good idea to improve a building’s facade and interiors and we can help..

Longer Leases

We think longer leases benefit owners and tenants. Some owners have said they don’t want to offer more than a five year lease. Tenants generally want a ten year lease, especially when they’re moving a production or warehouse facility to your building, and they don’t want to have to turn around and do it again in five years. We encourage owners to give prospective tenants the timeframe they need to grow their business. I’m not saying to go beyond 10 years, but 10 years is not an unreasonable number. You can also negotiate the deal as a five year lease with a five year option. So if they’re not a good tenant, and they’re not maintaining the lease the way it was written, then don’t renew their lease in the fifth year. You can include a clause that gives you that ability.  

Divide and Win

If you’re an owner of a large industrial or office building, think about dividing up your building into smaller units. In my post last month I noted that our company is always looking to divide up large industrial buildings with one or two large tenants, and reimagine it with smaller units and multiple tenants. Why? If you lose one large tenant you’re at risk. If you lose a small tenant, they are replaceable. I see that as a big plus. Our properties on Long Island and in Philadelphia are built around small tenancies. Management wise it can be a headache, but it makes a building more financially sound.

Have a question on how you can benefit in today’s marketplace? Email me any time.

Neil A. Dolgin is co-president of Kalmon Dolgin Affiliates. Founded in 1904, Kalmon Dolgin Affiliates (KDA) has grown into one of the New York metropolitan region’s leading commercial and industrial real estate firms. Kalmon Dolgin Affiliates specialize in all aspects of real estate services for developing, managing, selling, leasing and marketing commercial and industrial property. KDA’s highly-trained professional brokers offer clients a practical, street-wise approach to commercial and industrial real estate brokerage, leasing and sales, supported by the latest in real estate marketing, management and research technology.


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