The Power of Social Media

This month's CCIM Magazine, Commercial Investment Real Estate , included an article about the use of social media in gaining clients in commercial real estate (and it includes a few comments from yours truly).    

     While the immediate return on investment can't be calculated the prospects for growth are    

    enormous.   A link to the entire magazine is listed below. Enjoy

Build Your Business 

Through Social Media

Looking for new clients? You’ll find them online.

by Dennis LaMantia

Commercial real estate is all about relationships. So the industry's interest in social media — a venue where relationship building is turbocharged — should be expected.

"We have gained several clients because of the exposure we received through Facebook," says N. Justin Cazana, CCIM, principal at Cushman & Wakefield|Cornerstone CRES in Knoxville, Tenn. Cazana is one among many CCIMs who have used the social networking site as an effective business development tool.

As social media becomes a more integral part of business development, commercial real estate professionals are getting results by incorporating Facebook, Twitter, and other platforms into their marketing strategies. A social media presence can increase the likelihood of being found by new clients, establish professional credibility, and streamline communication. Although social media is free, it does require time to learn and maintain. So what's the return?

Quantifying the Value

"Learning about social media and setting up my profiles took a lot of time," says Chad Gleason, CCIM, of Real Estate Investment Services in Kent, Wash. Although it can be an efficient tool, there is an opportunity cost for overcoming the initial learning curve, refining messaging, learning new programs, and staying current on existing ones. And high-profile gaffes by celebrities and politicians remind users of the potential risks of participating in social media.

Given this risk and opportunity cost, commercial real estate professionals — people who rely on models and analysis for decision making — are naturally interested in measuring social media's return on investment. "It's hard to determine," says Greg J. Vollman, CCIM, of Apartment Investment Realty in Cincinnati, voicing a common sentiment among CCIMs.

Even Fortune 500 companies are still finding their footing in social media analytics. Ford Motor Co. recently launched a $95 million marketing campaign that included a Facebook page, but the company still had difficulty determining the value of the interest it generated. "They can give you Likes," Scott Kelly, Ford's head of digital marketing, told The Wall Street Journal, referring to the Facebook feature that allows users to provide quick, positive feedback. "But the question is, What is the value of those Likes?"

"It's too early to establish an ROI on the time I invest in social media," says Shawn E. Massey, CCIM, partner at The Shopping Center Group in Memphis, Tenn. "My goal was to increase exposure and keep my name in the retail community during this slow period. Based on that, it has worked very well."

However, one concrete form of measurement is new business. Cazana — whose company has four Facebook sites, three Twitter feeds, and two blogs — has gained several new clients as a result of social media. Daniel Palmeri, a senior associate at Colliers International in Las Vegas, uses LinkedIn to locate potential clients and connections to them. "This has resulted in a far greater success rate than a cold-call," he says. He attributes three closed deals to social media. Gleason says that 40 percent of his deals can be linked to social media connections, which gives him a larger presence in the market and a larger pool of lease tenants.

"When I get a call from someone I connected with through social media, I know my social media campaign is effective," says Martin Barkan, CCIM, CRE, senior vice president of First Property Realty Corp. in Beverly Hills, Calif. Barkan is working on several transactions that originated from connections on Facebook, LinkedIn, and his blog. "These transactions with new clients took six to 12 months to develop after the initial contact, but I believe the return on the investment will be exponential over the next two to three years. I'm certain this will be the single biggest market visibility and client growth platform in my business."

Being Found

Candice A. Donofrio, owner of Next Wave Real Estate Investments in Laughlin, Nev., gained referral business using social media. After reading a commercial real estate blog post, she found the author's Facebook page through a Web search. After commenting on the author's Facebook wall, she received a phone call from him about a business opportunity, which she referred to a colleague in Las Vegas.

Donofrio's story is an example of how social media can help with inbound marketing. Prospective clients are searching the Web for information about potential business partners, and LinkedIn, Twitter, and Facebook profiles and updates are often top results when an individual's name is searched.

"When someone searches for me, my LinkedIn page, Facebook business page, and Twitter profile are at the top of the results," Barkan says. Social media sites give users privacy settings to control what parts of their profiles appear in search engines. But it pays to have some information available to the public, especially if it's business-related. A recent Pew Research report found that 92 percent of adults use search engines to find information, making it the most common online activity, along with e-mail. Creating a social media profile can help commercial real estate professionals be found online, and it gives their peers a convenient way to communicate with them.

I'm There. Now What?

The initial aversions to social media are being replaced by questions about how to best calibrate and integrate social media into a broader marketing strategy.

Integrating social media into a marketing strategy doesn't have to become a part-time job. Palmeri limits his social media use to an average of 30 minutes a day. Other interviewees worked effectively with even stricter time limits. Third-party sites like Seismic, TweetDeck, and HootSuite improve efficiency by allowing users to update multiple social media profiles from one site. Using these time-saving tools, "I am able to update my Facebook and Twitter profiles with material from my blog with one click of the mouse," Barkan says.

An initial decision also needs to be made about how "social" social media should be. Users like Palmeri don't mind mixing business and personal information. "You need to express a little bit of your personality, which gives insight into who you are," Palmeri says.

Gant B. Hill, CCIM, president and principal broker of Venterra Realty in Louisville, Ky., also chooses to share personal information alongside business information. "I don't mind mixing the two," Hill says. "It creates character and makes you more approachable, but never take either to the extreme."

Facebook and Google+, Google's social network, allow users to have it both ways. Facebook users can create a group of business friends and share only certain updates with that group. Google+ offers similar functionality with its Circles feature.

For those looking for more separation between their business and personal lives, the solution is to create different profiles for each. "People who want to communicate their professional information to their personal network can simply post the relevant information in both places," says Jeffrey B. Pollock, CCIM, principal at Pollock Commercial in Atlanta.

What to Share

Sharing information about recent transactions, insights into local market observations, or trends in certain property types can help establish credibility among peers and potential clients. "People are looking to us for information, and we use social media to provide news about properties and tenants that have come to the market," says Cazana.

LinkedIn is a particularly good platform for such information. For example, Bob Rein, CCIM, associate vice president of NAI REOC Austin in Austin, Texas, posted a series of LinkedIn updates to attract investment from his home state of Arizona. What started as a single post about Austin market trends turned into series of 10 posts. A prospective client saw the posts and contacted Rein, suggesting they work together when an investment opportunity arises.

Finding business-related information to share can sometimes be as easy as repurposing existing content. Barkan takes advantage of the low incremental resource cost of social media by repurposing blog and newsletter content on Facebook and Twitter. Businesses and individuals without blogs can still create a social media presence by finding quality industry information and sharing it with their followers. CCIMs can share insights by applying CCIM education concepts to current commercial real estate news.

Other sources of business-related information include quotes from industry events, reactions to other users' posts, product reviews, and more. A little bragging doesn't hurt either. "I used LinkedIn to announce earning my CCIM designation, and my profile views went up significantly as a result," Rein says. His connections congratulated him on the accomplishment and asked for information about the designation.

Social media is about building relationships, and in the U.S., that relationship building is mostly occurring on Facebook. The site dominates among social media platforms. U.S. Internet users spend 16 percent of their online time on Facebook, according to Citi Investment Research and Analysis, a figure that has steadily increased over the past few years. Businesses are recognizing the importance of going where their customers are. Booz & Co. recently reported that 94 percent of the businesses surveyed view Facebook as one of their top three social media priorities, followed by Twitter with 77 percent and YouTube with 42 percent. The same report found that 96 percent of companies plan to either allocate substantially or somewhat more resources to social media.

Part of the appeal of Facebook and other social media sites is their reach. Social media provides an opportunity for businesses to reach outside their customer contact lists to a much bigger audience. "The more I grow my social media presence the more my inbound marketing increases, which has been essential to growing my business," says Barkan, who like other CCIMs, is finding that making sense of social media makes business sense.

Dennis LaMantia is interactive marketing manager at the CCIM Institute.

http://www.ccim.com/cire-magazine/issues/janfeb12?current

The Wonderful World of Retail...how to pick it

Wow!  Talk about a tough market to get into.

Opening retail operations in these economic conditions is a 50/50 proposition.  The unsteadiness of the economy has many people worried but you have to hedge your bets against some very opportunistic lease rates.  Still, the rent costs should be a very small percentage of your budget and certainly not the decision maker into whether or not to open new store. 

Finding the ideal space in the ideal location

I will let individual business owners make thier own decsions about the economy, but there is a plethora of retail space available all over Knoxville.

Almost every center from Strawberry Plains to Turkey Creek has some type of space available.  Some property owners are in more dire situations than others.  A older center may not have the debt service of new construction so the owners may not be as motivated to deal.  But some centers that were once asking $28.00 per square foot in popular location are down below $20.00.  Those are pretty serious concession.

Even if you are getting a “deal” there are many details to consider before choosing a location.

1.   Of course, Location, Location, Location: Walk in traffic is the best way for a new retailer to be discovered. Spend time in the neighborhood, learn the flow of traffic, the demographic, etc.

2.    Type of space: What side of the street is the space on? Do you get afternoon sunlight? Is the space deep and dark? Is there a lot of wasted square footage in the space? Notice as much as you can on the first tour and make sure to come back several times at different times of day.

3.    Neighbors/competitors: What businesses are located in the area?  Will their customers see value in your merchandise or service? Ask other merchants about the pros and cons of the area.  

4.    Crime:  Being in a neighborhood that is gentrifying or potentially has some crime issues can be acceptable for an office, but potentially disastrous for a retail outlet. Your most valuable asset is your inventory and although insurance will help make up for losses, it is a major distraction from your business. Do a little research and see how many police reports have been filed within a mile of your potential location.

5.    Parking: How far away are the nearest parking areas? Do your customers need parking or will most of them be walking to your location?  The ability to have your customers park close by and affordably is extremely important.

6.    Signage: How big of a sign do you need to attract attention? What are the regulations of the landlord or the city as it relates to signage? Make sure to check out the neighbors and ask them how they got through the system if the regulations limit what you are hoping to do.

7.    Foot traffic: How busy is the street during the daytime? How busy is the street during evening hours? What types of people seem to be walking around? Is their a bus stop or school nearby. Take note of who walks by and what percentage of people seem to be window shopping because the more people looking the higher likelihood you’ll find a new customer.

8.    Brokers: Most shopping centers will have a broker to negotiate the deal…you should too.  They are experts in finding you the proper space, picking out the details and getting you the lease you need.

Potential hidden cost:  NNN Pass thrus.  We have discussed these before.  Shopping centers are not trying to hide these numbers from potential tenants but they are calculated differently than rent.  They are CAM (common area maintenance), taxes and insurance; also know as pass-throughs or NNN charges.  They are different at every center.  Some NNN charges are as low as $2.50psf in older centers or neighborhoods.  NNN charges in lifestyle centers such as Turkey Creek can be between $5 and $8 per square foot!  In many cases these charges are passed through directly from the property owner to the tenant without mark up.  But they can still add a considerable amount to your monthly rent check so pay attention to these.

Basically, if the time isn’t right don’t force the issue.  Find a good broker who is experienced in the field to guide you along and make the decsion when all the pieces fit properly. 

Cushman & Wakefield|Cornerstone CRES manages and leases more than 400,000sft of retail space in the Knoxville market.  If we can be of assistance please let me know so you business has the proper headstart. 

www.cornerstonecres.com   //  865-617-2989   //  jcazana@cornerstonecres.com

Justin Cazana, CCIM

So you need a new office...

It’s a good time to be looking for office space.  It’s a good time to be looking for any type of space if you have decent financials, but office space in particular. 

West Knoxville has been slightly over-built in the past few years.  The space is slowly getting leased, especially in the last quarter, but still plenty of inventory remains.

Types of Office Space

There are three basic types of office space; Class-A, Class-B, and Flex Space.  Some markets have Class-C space but not many people in Knoxville classify buildings that way.   Office buildings are classified according to a combination of location and physical characteristics. Class B and Class C buildings are always defined in reference to the qualities of Class A buildings. There is no formula by which buildings can be placed into classes; judgment is always involved.  A building in downtown Knoxville that might be considered Class A would be a Class B building in Nashville or Atlanta. Also fair number of the Class C office spaces in the inventory are not truly office buildings but rather walk-up office spaces above retail or service businesses.

Century Park I
Class-A

Class A Office Space describes the highest quality office space locally available. The architecture of Class A office structures usually prioritizes design and visual appeal over cost, (and sometimes over practicality).  In most areas, Class A office space is built in multi-story (usually 2 floors or more), multi-tenant buildings using structural steel and composite concrete construction. 

The Urban Land Institute says the following about these classifications in its Office Development Handbook: "Class A space can be characterized as buildings that have excellent location and access, attract high quality tenants, and are managed professionally. Building materials are high quality and rents are competitive with other new buildings. Class B buildings have good locations, management, and construction, and tenant standards are high. Buildings should have very little functional obsolescence and deterioration." 

Class A buildings are typically very functional.  They provide a strong parking ratio, lots of natural light on the interior of the building and are more energy efficient than their predecessors.

Good examples of Class-A space are the new developments at Century Park at Pellissippi, Lakeside Center off of Northshore and Brookview Town Center off of the Papermill exit.  Lease rates for Class-A space will vary from $17.50psf to $24.00psf in Knoxville.  Most all Class-A multi-tenant buildings will be full service or modified full service with the tenant paying for utilities. 

Corporate Square/Cedar Bluff
Class-B 

Class B space can be found in a variety of areas around Knoxville.  Cedar Bluff has a plethora of Class B developments like Corporate Square and Executive Plaza.  Much of downtown would be considered Class-B space, with the exception of about five buildings.  Typically, any building over 20 years old would be considered Class-B.  There is NOTHING wrong with being in Class-B space.  They are very practical and more economically viable for many businesses.  In fact, most Class-B buildings were once Class-A buildings that time has caught up with. 

Class B space is ideal if you own a business that doesn’t require flash to show off to your clients and customers.  The only real difference in Class A and most of Class B is age and management.  They were designed and built in a different time. Instead of floor to ceiling windows you might get smaller four foot windows.  The HVAC units may be dated, or even residential units, that are not as efficient.  All that being said, if a building has the proper management over the years it’s Class-A status can be extended beyond 20 years.  

Lease rates for Class-B space start at about $12.00psf to $15.00psf in Knoxville.  The levels of service provided by the landlord can also vary from building to building and submarket to submarket.  

Flex space can also be considered office/warehouse.  The office-to-warehouse can be 10% office - 90% warehouse; 90% office – 10% warehouse; or anywhere in between.  It just depends on what you need. Buildings in the Baum Drive area or near Mabry Hood & Kingston Pike would also be called classified as flex space. 

Center Court at Lonas
Class-A

There is plenty of space to be found in Knoxville. A 2007 report from the Metropolitan Planning Commission (MPC) shows that Knoxville and Knox County have a total of nearly 19 million rentable square feet of office space, including 5 million feet downtown and 4.5 million in the Pellissippi Parkway submarket.  Those numbers have increased since additional buildings were completed in the Papermill/Weisgarber area and Pellissippi corridor.  

Your office needs to be in the location and environment that suits its business plan.  

If you often need to impress clients and customers in your office during sales meetings Class A could be the way to go.  In fact, Class A building can be considered a monument and a testament to the success and power of its tenants.  That might be why Century Park, with four buildings all under five years old, has seven Fortune 500 companies as tenants.

If you rarely have customers in your office, Class B can be a viable option.  No reason to pay for flash if you don’t need it (unless you really want it).

As always, Cushman & Wakefield | Cornerstone CRES can help you find the space that best suits your needs.  You can reach us at 865-617-2989 or jcazana@cornerstonecres.com.  Check out our available properties at www.cornerstonecres.com.

What you need to know about ....Leases

Today’s focus is on types of leases…and let me tell you there are dozens!

Full service, gross, modified gross, NNN, NN, ground lease…there are many variations.  Today we will talk about the most popular current forms of lease.

Leases have developed over time from verbal, or even handshake agreements, to documents that can exceed 100 pages.  Today’s leases are legal documents and should be reviewed by experienced legal counsel prior to being signed (that is my disclaimer. Get used to it, it will probably pop up every week).

Warning:  I will use the words “typically” and “usually” a lot in this blog but every lease is different.

Full Service Lease:  Typically a full service lease would be found in an office building.  Its name says it all…Full Service.  The building landlord provides all services to the tenant for the price of the rent.  This includes: utilities, janitorial service, property taxes, trash removal, building insurance etc…There are some building that also provide telephone service and cable TV but they are the exception rather than the rule.  In these leases the landlord is also responsible for repairs to the building or the tenant’s space, like the HVAC system, replacing light bulbs or repairing roof leaks.  

Important to note: These leases typically have a “Base Year” or “Expense Stop”.  This is meant to protect the landlord from increases in operating expenses (the cost of janitorial, utilities, insurance etc…).  Example, if Joe is leasing space in a new Knoxville building  for $20.00psf per year his Base Year/Expense Stop would be around $6.00psf per year.  The $6.00 is the amount the landlord had budgeting for operating expenses the year the lease is signed.  At the end of the year the landlord reconciles all their operating expenses.  If the operating expenses exceed $6.00psf Joe has to pay the landlord the difference. If it ends up at $6.04psf Joe has to write a check for $0.04psf.   This is a standard practice in Knoxville real estate.

Gross Lease:   Probably the most common of commercial leases, although less common in new, Class-A buildings.   A gross lease is very similar to a full service lease because the landlord still provides all the services needed for the tenant, only without a Base Year/Expense Stop.   Instead of a Base Year/Expense Stop typically there is a larger than standard annual increase in lease rent rates.

 These leases are popular for a variety of reasons:

1. It makes accounting for the landlord much easier
2. The tenant doesn’t have to worry about writing an extra check at the end of the year.

Some would say both the landlord and tenant are taking chances with this type of lease.  For the landlord the risk is greater, if operating expenses go up significantly (such as the building being reassessed for tax purposes) the increase in lease rent rate may not cover the difference.  For the tenant, there is a chance that they will pay slightly more for rent than is needed, but in this age of rising costs it’s probably a safe play.

Both Gross and Full Service leases typically require high levels of property management to make sure the properties and tenants are serviced correctly and that the end or year accounting is properly calculated.

Modified Gross Lease:  Just like it says, it’s a gross lease with slight modifications.  The rent the tenant pays will cover most operating expenses but the tenant will be responsible for one or more of the operating costs, usually janitorial service or utilities. In most cases the landlord is still responsible for repairs in the office space.

NNN or NN Lease:  These are known as “triple-net” leases and are usually found in retail or industrial leases.  The N’s stand for common area maintenance (or CAM), property taxes and building insurance.  For reasons of simplicity these are referred to as CAM.

The precise items that are to be paid by the tenant are specified in the lease. For properties that are leased by more than one tenant, such as a shopping center, the expenses that are “passed through” to the tenants are usually prorated among the tenants based on the size (square footage) of the area occupied by each tenant.

In most NNN, the landlord is responsible for the building and the common areas.  They repair the roof, structural problems, sidewalks and parking lot.  The tenant is responsible for any internal repairs like plumbing, replacing lights or HVAC repairs. 

The difference between a NNN and NN lease is the common area maintenance is not included (usually).  This is common in industrial property and single tenant buildings like a restaurant or other retailer no in a shopping center.  Single tenant buildings can also have an “Absolute Net” lease.  This means they pay the landlord rent and also are responsible for all upkeep of the building, landscaping, property taxes and insurance.       

Ground Lease:  Just like it says, the tenant is leasing the ground.  The most common on these are found with drug stores like CVS and Walgreens.   These companies lease the land for 10 to 50 years, build a building and operate their business.  They write a check to the landlord every month, or every year.  That is all there is to the landlord/tenant relationship.  At the end of the lease the tenant can leave the building or tear it down, depending on what the lease says.  The tenant is responsible for all aspects of the building, the land and any repair that is required.  

As you can see the variations in leases can be immense and some what confusing.  If you are looking around and have questions contact a commercial broker (such as Justin Cazana at Cushman & Wakefield|Cornerstone CRES; jcazaan@cornerstonecres.com).  Brokers can walk you through the details you need to make your lease work for you.

Justin Cazana, CCIM