News & Research Archive

Independent Firms Have Best Chance

Jan 05, 2009

 

 

I recently took a sub-lease listing from yet another one of my clients who is faced with difficult times and can no longer afford his rent.  All of the projections he was counting on were put on hold and he does not have any real business until at least the end of January. Although he will be continuing his business he needs to shed expenses now. 

 

I decided to share some of my wisdom with him and learned something very important about most of my client base, as well as what I have to offer to my clients. I explained to my client my experiences in past down cycles. For me the worst was the late 70s and the early 90s. But market cycles were different in how the down cycle began but the results were the same, higher unemployment, lack of affordable credit, businesses frozen and fear.

 

Yet, both of those markets actually created some of the best years I have ever had. In the late 70s, I was managing an institutional food service company. During that time my competition (larger corporate identities heavily unionized) began drastically cutting back including dropping all low margin accounts. We contacted these firms and were successful in convincing them that rather than walk away from business leaving their customers without service, sell the business to us.  We purchased their equipment (at nearly fully depreciated prices) and they financed the purchases of these routes. We created a five year non-competition agreement and we grew quickly in a down market. These routes turned out to be profitable for us with our lower overhead plus when the market turned around again we enjoyed a tremendous growth in our business while our clients remained with us rather than take back our larger corporate competitors.

 

In the 90s when real estate was absolutely dead I was successful in finding potential buyers that had access to private funds and we went out to the market as a cash buyer ready to close quickly with little due diligence. I was successful in not only closing more sales but by buying these building at a significant discount I was also successful in introducing new leasing opportunities while undercutting my competition in rental rates to attract tenants. We were quick to lease up these buildings while the rest of the market suffered through twenty percent or more of vacancies.

 

When I explained these stories to my client, he turned to me and said something I had not thought about. You know I was just born in the 70s and I have never experienced a really bad market. When I mentioned this story to some of my agents they said the same thing. If you are under 45 years of age you probably have not had a truly bad economic cycle to reference.

 

So take advice from a man old enough to have wisdom. If you work for an independent firm you have the best chance to not only survive this downturn but also actually grow during and after the cycle changes again. Look to your larger competitors and see what they are no longer focusing on and go after that business. Swim against the water not with the flow it will be scary at first but once you breakthrough the awards could be great.

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Written by: Hans Hansson

E-mail: hans@starboardnet.com


Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 24 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email hans@starboardnet.com or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.

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