The current commercial real estate market is still, by most practitioners accounts, "challenging." Certainly the bid-ask gap on rents and sale prices seems to be narrowing, the CRE capital markets have thawed slightly but these are certainly not the glory days of 2005-2007. Positive news continues to trickle out of blogs, news stories and CRE brokerage firms. Brokerage professionals remain, for the most part, optimistic, otherwise awaking every morning and working through the challenges of a difficult economic environment would be daunting and torturous. Most brokers will tell you that the last four years have been one of the most cumbersome deal making periods of their careers (regardless of how long they have been in the business). Both sale and leasing transactions are more difficult to get to the finish line with the challenges of the commercial real estate underwriting and lending environment, cautious Landlords and tepid Tenants have created a perfect storm for taking a typical deal that would "normally" last for 60 days and stretching it out to 6 months.
So what gives? Where is there opportunity? How do we get deals done and what can Brokers, Sellers, Buyers, Tenants and Landlords do to leverage this sluggish economy to their advantage. The answer in the short term is that Economic Development Organizations and Municipalities will play a crucial role in facilitating deals, large and small. The reality of the commercial real estate transactional environment is that the deals that make headlines on the cover of the Colorado Real Estate Journal or the Denver Business Journal are the large, high profile transactions but these deals do not encompass the bulk of the transaction volume that exists in Commercial Real Estate. Most deals occur under the $5,000,000 mark both in the sale and leasing arenas. The positive note is that EDC's and City Governments have become increasingly aggressive with their approach in trying to win the smaller deals (not just the deals that bring 150 jobs, $20,000,000 in Capital Investment and Corporate HQ's) no these Governmental and Quasi-Governmental groups are willing to write smaller checks and attract the employers that bring 20 jobs to a community and make a $50,000 capital investment and are mere satellite or second office locations.
Many of the municipalities in the Metro area have not only started to work more closely and synergistically with their local Economic Development Organizations but they have also reorganized internally to streamline Development review processes and Tenant Finish permitting to make the work of doing and opening business less cumbersome. A great example of this renewed approach to attracting business is the Town of Castle Rock, recently the Town Council approved in cooperation with Castle Rock Economic Development Council a $5,000,000 cash incentive fund to facilitate economic development and attract new business and Commercial Real Estate development to the Town (as a point of Comparison the State Office of economic development and international trade (OEDIT) has a $4,000,000 total annual budget). In addition to this effort the Town has been recognized nationally for streamlining its development review process and recently announced a program that it will guarantee having building plans approved and permits ready for pick up within 10 business days or, the permit is free.
"We're confident in our tenant improvement program," said Development Services Director Bill Detweiler. "In fact, we believe our program's the best in the state. To prove that, we decided to back up our work and offer to have tenant improvement permits done in 10 days - or, they're free." The Town of Castle Rock has created a true collaborative environment between Town Staff, the Economic Development Council, and the Private Sector to foster an environment of business attraction and deal-making. With lease rates and sale prices more and more competitive with much of the DTC, Castle Rock has created an atmosphere where the incentives and programs currently available can take a deal and catalyze a decision in a Tenant or Buyers mind while also narrowing the timeframe to complete the transaction. The pro-active approach by the Town of Castle Rock has allowed the community to land such recent deals as Danish Renewable Energy Company Aluwind setting up its first US manufacturing facility in a nearly 80,000 SF of space and Tech company Mywedding.com relocating its Corporate Headquarters from Seattle to Castle Rock. Frank Gray, President and CEO of the Castle Rock Economic Development Council had this to say about the role of EDC's and Cities in facilitating deals "I think that with the continued budget cuts at the state level that are required by law, that Colorado communities will find that if they want to get deals done it will have to be done at the local level. The Douglas County Commissioners and the Town Council of Castle Rock get that and have taken the lead in creating a first class business environment that will attract retail and create primary jobs."
There is no doubt that Economic Development Organizations and Municipalities will play a role in the near term for Commercial Real Estate deal-making. The key for practitioners, property owners, tenants and anyone involved in the Commercial Real Estate field is to know what your local EDC or municipality has to offer, these groups are more aggressive than ever in luring business. The end user needs to know about available incentives to leverage these benefits to their advantage, but we must have the knowledge to inform them and in the end we will all get more deals done.