Principal Perspectives: Lessons Learned from the Recession

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As we have reached a point in the marketplace (both the economy and the commercial real estate industry) where there is a growing sense of optimism, what are the greatest lessons to be learned over the last several years, and how do you apply those lessons to the representation of clients (tenants or landlords)?


Melissa Podolsky, RPA
Very simply, never sacrifice customer service. Even when times are tight and we may be spread thin. Customer service is number one. This applies to all of our clients, including tenants and landlords.


Corey Chase
The industrial market and the economy have shown signs of improvement over the past couple years, and especially in the past 6-8 months. Landlords, tenants, developers and brokers certainly all have different views of the marketplace and the economy but we can all agree it’s improving.

As an example, I am working with a client in the O’Hare area that is looking to renew its lease for 10 plus years. They occupy a significant piece of a newer, half million square foot, 30 foot clear precast ESFR sprinkled building. For the past 6 months I have been working on the renewal. The problem is that there is only one other building in the market with similar features that has this type of space available.

After 28 years of doing this type of work, this is the first time I have seen a landlord raise its price during lease negotiations. The landlord continues to be more bullish on their building and rental rates for Class A product in this area. All of the sudden they are in not such of a hurry to renew this tenant, a publicly traded company with great credit.

The lesson learned here is we as brokers are used to getting our way with landlords to a certain degree. But the market can turn on a dime, so we need to be careful as advisers. We must be cognizant when we represent our clients to prepare them for the potential of a rapidly changing marketplace and be sure to always have a Plan B if Plan A does not work out.

Steven Podolsky, SIOR
We have learned over the years, and especially in past recessions, that to stay alive in bad times, a real estate firm has to be flexible in the services that they offer and how they offer them.

As an example, we offer services for owners/investors and occupiers of commercial real estate. But we also offer services to lenders and the foreclosure courts. We are able to assist our clients in the acquisition, disposition, management and financing/refinancing of their properties, but also in the repositioning of their commercial real estate assets in the bad times. We are able to assist in equity and debt placement.

It is this flexibility that allows us to represent our clients in whatever ways they desire or that the economy dictates.”

Randy Podolsky, SIOR, Managing Principal
The lessons I take away from this downturn, long and deep as it was, will not differ from economic cycles of the past.

When the market seems too good to be true, it probably is! Beware the temptation to buy at high prices because they will keep going up. When sale prices of existing, second and third generation properties meet or exceed replacement costs, it is not the time to buy. Conversely, if you can’t afford to buy, or are willing to take the risk, when prices are well below replacement costs (coupled with low historic interest rates), you should not be an owner. These principals apply broadly to investors, but are a good benchmark for users of space as well. There are times to own the real estate you operate in, and there are times, and circumstances, to rent.

Remember, the cycles of commercial real estate are longer than ever before, but memories are short. I predict that when it does come back (and there are signs of that now) it will once again come back with a fury and vengeance. Almost like it never happened!

Adam Tarantur, Principal
I believe tenants learned to be more deliberate and calculated about their space needs during the recession. Overall market uncertainty caused business leaders to overanalyze their decisions, to ensure they weren’t made out of haste. During the process, companies learned to be able to do more with less — less space, less people and, therefore, less overhead. In the process, decision-makers realized there was a more efficient way to be doing business than they had done previously.

Landlords learned that, within reason, retaining existing tenants was more important that getting the last dime out of the deal. The potential downtime and expense to re-tenant spaces far surpasses the costs to keep tenants happy. After all, tenants don’t just pay rent; they pay a landlord’s mortgage