Another Josh Story...well almost
I was speaking to a friend of mine who's VP of leasing for a decent sized shopping center company. As many people do (since I first mentioned that Josh started working for us) he asked how Josh was doing and I responded with my typical line: "Great on Monday, Wednesday and Friday but I'm thinking of firing him on Tuesday and Thursday (three out of five ain't bad). He replied: "No really, I want to know for personal reasons since we're having trouble finding decent people at a salary we can justify and our Chairman wants me to hire young, aggressive, recent college graduates to train how to lease."
"Don't do it, quit first," I replied, "it's a full time job that requires the patience of a saint. You'll accomplish none of your other work if you have to deal every day with the untrained and some days the untrainable. Your job will go downhill."
Now don't get me wrong, young people are the future of our industry and they can add a lot to what we've already accomplished, BUT man are they a pain to deal with. Their inexperience in retail real estate and life in general requires a commitment of substantial time and the ability to deal with their mishigosh which too many of us "old timers" (Ann asked me not to call people old farts) don't have.
They have to be taught EVERYTHING, from how to fax, to picking up business cards from every retailer they canvass, to NOT to canvass a regional square foot mall for tenants for a 100,000 sq.ft. supermarket-anchored strip, to "forcing 'em to call 60 to 80 retailers a day so as to start to get a "feel" on how to talk to retailers, and to making 'em canvass two or three times a week even if they're tired. They KNOW NOTHING and they're always worried about embarrassing themselves.
Now they can be an asset also, as they often are, since most of the time they think outside the box. They come up with unusual ideas and some are good. Because they're new to the industry, they have no preconceived ideas and that's great, so I'm not opposed to hiring the uninformed, I just realize it requires a structure and commitment of time to do it right. Otherwise, the newbie quits out of frustration or is fired because the supervisor becomes too frustrated. It's a "lose-lose" for everyone.
There are many development and brokerage companies that have a formal training program with supervision from full time trainers, and that can work great. These companies are educating our future leaders. But to tell a VP of a company to be the trainer is a problem looking for a place to happen. The good news when it comes to these newbies is that they are perfect for telemarketing to retailers and canvassing, something that is hard to justify when you're paying a leasing guy $100,000 to $150,000.
Josh's trials and tribulations must be common for most young folks, as I recently received this e-mail: "Hi, I am 24 and new in Retail after just finishing school in Southern California. I was reading your Real Estate 101 article today about your son Josh and I couldn't help to chuckle at the similarities between him and I when it comes to being optimistic about deals that will never get done. I am currently cold calling like crazy to fill my listings in Northern Utah. Anyway, I wanted to further my education as a new "optimist" in the industry and wanted to speak to Josh about his experience at the ICSC University in Michigan. Would you be able to give me his contact info when he gets back?"
I give him credit, he knows he doesn't know and wants to talk to another newbie to reassure himself that he's not alone. And he not. Josh just left for the University and I'm extremely anxious to hear his thoughts and see what he learned.
Changing subjects, I recently came across an article saying: "Wal*Mart Builds, Waits for Communities to Catch Up." In essence, it says Wal*Mart started out in mostly rural areas where other large retailers chose not to build and now is saturating urban and suburban areas. Now, the retailer is looking to add stores in communities "in the making." In other words, they're store "banking." opening up in areas that are not quite ready for a Wal*Mart but will be in the near future. They buy and build now, banking on future growth to make the store profitable, which it isn't now but will be in the near future. I give Wal*Mart credit for being forward thinking but it's nothing new, since Sears, Kmart and JCPenney were doing that 30 to 40 years ago. But as the costs of acquiring land and then operating these non-profitable stores grew, they stopped expanding based on future growth. Wal*Mart has the money to wait and they are. Smart and long-term thinking, something most retailers don't do.
Ranting on...I recently had a meeting to try and get the leasing for a decent sized, well-anchored center in an affluent market that has about a 5% vacancy rate. The owner had called me to set up a meeting saying they desperately needed help. I hadn't been to the center for several years, so I arrived early to walk the property and see what was happening. Except for being a little tired, the center was in good shape, well leased with a mixture of regional, national and local tenants. Candidly, I couldn't see what the problem was and I'm used to seeing problems. My first question when the meeting began was: "What's the problem. You have a 5% vacancy and the center looks decent, just needs a facelift."
The owner explained that they will be undergoing a major rehab shortly and will be replacing most of the facade, so they knew that problem without my help His concern is that the center's traffic has been off over the last few years (FYI: over 500,000 sq.ft. of new developments have opened within five miles in the last three years and, while the market is good, it's not that good) and about 10% of the tenants are complaining and asking for a rent reduction. I asked what they currently do to market the center to tenants and was told they wait for brokers to call. Not exactly a pro-active approach. I asked why they were not doing more and was told they never had to, enough people called in the past to keep the center leased. I explained that they were no longer that cute, little 18-year-old girl; they're now a mature woman who, before going out on a date has to put on makeup, spend time on their hair and dress right. Their body appeal ain't what it used to be, but that doesn't mean no one wants to date 'em.
I think this problem is too common today; we've all gotten a little fat and lazy after a decade of expanding retailers, tons of new developments and easy money. We, as an industry, don't pay attention to our existing centers. We're too busy planning the next center to be developed or acquired. Long term planning is not part of the gameplan and that's a problem. Back in "the good old days," it was a leasing agent's job to market a center even if it was 100% leased; replacing weaker tenants with more aggressive ones and having a tenant in their "back pocket" if and when an existing tenant defaults. It ties into a conversation Ann had recently with one of the ICSC's people. They were talking about the ICSC's "University" and Ann asked why they didn't teach a course on "marketing" a property from a leasing aspect. She was told that business has been so good for the last 10 years there's no need, and that's true unfortunately.
Parting thoughts: I'm trying to do a deal for a big box retailer I'm representing and, of course we're fighting over rent. After I made my "final and best" offer, I was told it wasn't enough and that they'd lose money on the deal. Now I don't claim to be bright or an expert on redevelopment, but "we" are taking a portion of a former "superstore" and I know the cost of TI for us, have an idea what the property costs, brokerage commission, etc. And my offer provides cash flow to the owner above all these expenses. When I explained this to the owner I was told; "What about the vacancies?" I replied "What do you mean?" and was told that there was a substantial amount of vacancies after doing the deal with us and if we don't pay more rent, they have a negative cash flow. Huh? You want me to guarantee the entire project is profitable even if I'm only taking a portion of it? No way. I tried to explain they had to add to their acquisition costs the cost of carrying the property for two or three years while looking for additional retailers, but they didn't seem to understand that concept. We have too many novices in the business. If, and when, the recession "hits," we'll eliminate many of them and that's good.
"Don't do it, quit first," I replied, "it's a full time job that requires the patience of a saint. You'll accomplish none of your other work if you have to deal every day with the untrained and some days the untrainable. Your job will go downhill."
Now don't get me wrong, young people are the future of our industry and they can add a lot to what we've already accomplished, BUT man are they a pain to deal with. Their inexperience in retail real estate and life in general requires a commitment of substantial time and the ability to deal with their mishigosh which too many of us "old timers" (Ann asked me not to call people old farts) don't have.
They have to be taught EVERYTHING, from how to fax, to picking up business cards from every retailer they canvass, to NOT to canvass a regional square foot mall for tenants for a 100,000 sq.ft. supermarket-anchored strip, to "forcing 'em to call 60 to 80 retailers a day so as to start to get a "feel" on how to talk to retailers, and to making 'em canvass two or three times a week even if they're tired. They KNOW NOTHING and they're always worried about embarrassing themselves.
Now they can be an asset also, as they often are, since most of the time they think outside the box. They come up with unusual ideas and some are good. Because they're new to the industry, they have no preconceived ideas and that's great, so I'm not opposed to hiring the uninformed, I just realize it requires a structure and commitment of time to do it right. Otherwise, the newbie quits out of frustration or is fired because the supervisor becomes too frustrated. It's a "lose-lose" for everyone.
There are many development and brokerage companies that have a formal training program with supervision from full time trainers, and that can work great. These companies are educating our future leaders. But to tell a VP of a company to be the trainer is a problem looking for a place to happen. The good news when it comes to these newbies is that they are perfect for telemarketing to retailers and canvassing, something that is hard to justify when you're paying a leasing guy $100,000 to $150,000.
Josh's trials and tribulations must be common for most young folks, as I recently received this e-mail: "Hi, I am 24 and new in Retail after just finishing school in Southern California. I was reading your Real Estate 101 article today about your son Josh and I couldn't help to chuckle at the similarities between him and I when it comes to being optimistic about deals that will never get done. I am currently cold calling like crazy to fill my listings in Northern Utah. Anyway, I wanted to further my education as a new "optimist" in the industry and wanted to speak to Josh about his experience at the ICSC University in Michigan. Would you be able to give me his contact info when he gets back?"
I give him credit, he knows he doesn't know and wants to talk to another newbie to reassure himself that he's not alone. And he not. Josh just left for the University and I'm extremely anxious to hear his thoughts and see what he learned.
Changing subjects, I recently came across an article saying: "Wal*Mart Builds, Waits for Communities to Catch Up." In essence, it says Wal*Mart started out in mostly rural areas where other large retailers chose not to build and now is saturating urban and suburban areas. Now, the retailer is looking to add stores in communities "in the making." In other words, they're store "banking." opening up in areas that are not quite ready for a Wal*Mart but will be in the near future. They buy and build now, banking on future growth to make the store profitable, which it isn't now but will be in the near future. I give Wal*Mart credit for being forward thinking but it's nothing new, since Sears, Kmart and JCPenney were doing that 30 to 40 years ago. But as the costs of acquiring land and then operating these non-profitable stores grew, they stopped expanding based on future growth. Wal*Mart has the money to wait and they are. Smart and long-term thinking, something most retailers don't do.
Ranting on...I recently had a meeting to try and get the leasing for a decent sized, well-anchored center in an affluent market that has about a 5% vacancy rate. The owner had called me to set up a meeting saying they desperately needed help. I hadn't been to the center for several years, so I arrived early to walk the property and see what was happening. Except for being a little tired, the center was in good shape, well leased with a mixture of regional, national and local tenants. Candidly, I couldn't see what the problem was and I'm used to seeing problems. My first question when the meeting began was: "What's the problem. You have a 5% vacancy and the center looks decent, just needs a facelift."
The owner explained that they will be undergoing a major rehab shortly and will be replacing most of the facade, so they knew that problem without my help His concern is that the center's traffic has been off over the last few years (FYI: over 500,000 sq.ft. of new developments have opened within five miles in the last three years and, while the market is good, it's not that good) and about 10% of the tenants are complaining and asking for a rent reduction. I asked what they currently do to market the center to tenants and was told they wait for brokers to call. Not exactly a pro-active approach. I asked why they were not doing more and was told they never had to, enough people called in the past to keep the center leased. I explained that they were no longer that cute, little 18-year-old girl; they're now a mature woman who, before going out on a date has to put on makeup, spend time on their hair and dress right. Their body appeal ain't what it used to be, but that doesn't mean no one wants to date 'em.
I think this problem is too common today; we've all gotten a little fat and lazy after a decade of expanding retailers, tons of new developments and easy money. We, as an industry, don't pay attention to our existing centers. We're too busy planning the next center to be developed or acquired. Long term planning is not part of the gameplan and that's a problem. Back in "the good old days," it was a leasing agent's job to market a center even if it was 100% leased; replacing weaker tenants with more aggressive ones and having a tenant in their "back pocket" if and when an existing tenant defaults. It ties into a conversation Ann had recently with one of the ICSC's people. They were talking about the ICSC's "University" and Ann asked why they didn't teach a course on "marketing" a property from a leasing aspect. She was told that business has been so good for the last 10 years there's no need, and that's true unfortunately.
Parting thoughts: I'm trying to do a deal for a big box retailer I'm representing and, of course we're fighting over rent. After I made my "final and best" offer, I was told it wasn't enough and that they'd lose money on the deal. Now I don't claim to be bright or an expert on redevelopment, but "we" are taking a portion of a former "superstore" and I know the cost of TI for us, have an idea what the property costs, brokerage commission, etc. And my offer provides cash flow to the owner above all these expenses. When I explained this to the owner I was told; "What about the vacancies?" I replied "What do you mean?" and was told that there was a substantial amount of vacancies after doing the deal with us and if we don't pay more rent, they have a negative cash flow. Huh? You want me to guarantee the entire project is profitable even if I'm only taking a portion of it? No way. I tried to explain they had to add to their acquisition costs the cost of carrying the property for two or three years while looking for additional retailers, but they didn't seem to understand that concept. We have too many novices in the business. If, and when, the recession "hits," we'll eliminate many of them and that's good.
posted by tedkraus at 7:49 AM
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