Arguably one of the toughest physical and mental challenges that one can undertake is to climb Mt. Everest. Less than 4,500 individuals have accomplished this feat since Sir Edmund Hillary first did so in 1953. Since his historic feat, 282 people have died in the quest to the top. Interestingly, of the 7,646 successful summits, over half of them (3,861) have been accomplished by Sherpas.
Sherpa are an ethnic group from the Himalayas, who serve as guides for climbers. Their experience in dealing with the unique hazards of Everest can be the difference between success and failure; without exaggeration, between life and death. They prepare the route, affix the ropes to assist the climbers, carry the heavy loads and provide expertise in the event that the unexpected occurs.
Looking over the most recent quarter’s industrial real estate statistics, I was struck by the number of transactions in which the tenant was unrepresented. By contrast, in most of these transactions, the landlord had chosen to have broker representation. These Landlords, who had the experience of completing many, perhaps hundreds, of transactions in their careers, knew the value of having a guide at their side.
In my opinion, the proclivity of industrial tenants to represent themselves in transactions is in itself a reflection of the typical character of the industrial business leader. To use the Mt. Everest metaphor, many gained experience climbing smaller mountains on their own. Along the way, they charted their own path, set their own ropes, carried their own loads and dealt with the unexpected. They are confident that they can do it themselves and are ready to handle for what lies ahead. These business leaders have gained their confidence through a history of success in handling all kinds of things on their own. Purchasing materials, machines, dealing with clients…these things are all best done directly. They believe that introducing additional players to the transaction adds another layer of cost, results in a loss of control and cuts into their razor thin margin.
As I represent industrial tenants in real estate transactions, I find myself in the role of the Sherpa. My first priority is the well-being of my client. I invest considerable time in getting to know their business, their challenges and their goals. Great transactions improve the fundamentals of a business and provide competitive advantages that propel the business forward.
First, I prepare the route. A good strategy is essential to success. Real estate strategy is not just based upon “market knowledge” but in integrating that market knowledge with the client’s business priorities. Real estate can hold more power for a business than is evident from the surface. Location analysis can provide advantages in attracting the human capital needed to make a business run successfully, provide access to a better supplier base, or improve the inbound and outbound logistics. Identifying the optimal building features and configuration, prospective facilities can be weighed objectively and differences quantified for objective comparison. A strong financial strategy expands the analysis beyond the cost per square foot, projecting a holistic view of the costs and benefits of each location on the business.
Just as the Sherpa affixes the ropes for the safety of the climbers, as the tenant representative, I provide protection for my clients throughout the transaction and throughout their occupancy. Whether it is offering guidance to avoid risky decisions, or negotiating options and protective covenants during the term of the lease, “a good deal” is more than just the lowest possible lease rate.
It seems obvious that summiting Mt. Everest is an incredible feat…one that is not diminished by the assistance of a Sherpa. In fact, the success of the expedition is dependent upon the diligence of each member of the team. Similarly, a successful real estate transaction requires the collaboration of many role-players and is not diminished by the size of the team. A good broker lightens the load for the team and enables them to be focused on serving their individual roles to their highest capability.
Finally, a broker provides guidance in the event of unexpected surprises along the way. Many of the risks that can derail a transaction can be anticipated, prepared for, and possibly avoided. However, some situations seemingly come out of nowhere. Using the experience of a wide variety of transactions, the ability to leverage their industry relationships and a thorough knowledge of the current market , a tenant broker brings a perspective to these situations that help create the best strategy to minimize its impact and return to a positive pathway.
Thankfully, a successful real estate transaction is not as difficult as reaching the summit of Mt. Everest (usually!). While you may not risk hypothermia, hypoxia or being buried by an avalanche, there is wisdom in having the best possible guide for your real estate journey.