Cutting Through the Brokerspeak

Cutting Through the Brokerspeak

5 years ago 0 0 2010

If you’ve ever bought a house, you’ve heard some of the code words residential real estate agents put in their listings. That “contemporary design” may just be ugly as sin. The “convenient location” could be because you get stuck in rush-hour traffic within a quarter mile of the driveway. And don’t even start thinking about “open concept.”

Commercial brokers have their own language as well, and it can lead the uninformed or unsophisticated buyer to overpay. For the uninitiated, it may take a while to pick it up on this language. But once you’ve heard the same phrases ad nauseam, it can be easy to get cynical about brokerspeak.

Below are five of the most commonly abused phrases, along with the cynic’s interpretation. And, on a more serious note, what you really ought to think about when you see these phrases in a marketing package.

 

  1. Below replacement cost!

The cynical interpretation

Great! But who wants to be there?

What to look out for

A building’s value is only loosely connected to the cost to construct it. If there’s no market for business in the location, replacement cost is meaningless.

 

  1. Long-term tenant!

The cynical interpretation

You know who else was once a long-term tenant? Blockbuster. You know where they are now? Yeah. Me neither.

What to look out for

Like your financial advisor says, “Past performance is no predictor of future success.” Just because a tenant has occupied a space for a long time does not mean it always will. All businesses face risks and opportunities that can lead to changing space needs or no need for space at all.

 

  1. Class A! or Main-and-main location! 

The cynical interpretation

So this one is better than the other 3 buildings on the block that look just like it?

What to look out for

There are quality buildings in every price range. Class A is an overused term that should be applied only to the best in each market. What is “best” can vary from market to market, so adjust expectations—and offers—accordingly.

“Main-and-main” is a similar phrase that is typically used to describe the best retail location in the market. It is a sign that the seller is looking for a price premium, so it would be wise to verify the claim.

 

  1. A rare opportunity!

 

The cynical interpretation

Really? Is it the only office building in the market?

What to look out for

This one is often applied to overpriced buildings in desirable areas where long-term ownership is prevalent. A building that becomes available in such an area may truly be a rare opportunity, but if it is, be prepared to pay a high price.

 

  1. Value-add!

The cynical interpretation

Ok so the building is 10% vacant in a market with a 15% vacancy rate? The vacant space must be really good!

What to look out for

The term ought to imply an opportunity to improve a property through capital investment, leasing and better management. But there needs to be enough upside to make it worth the risk, and that value comes from vacancy. Keep in mind, though, that if a building has high vacancy, there is a reason for it somewhere.

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