One of the lessons which all students are supposed to learn from their Intro to Marketing class is that successful sellers satisfy the needs and wants of their customers. The proof that this lesson is not obvious can be seen in the formerly successful companies which stumble (e.g. car companies, airlines, Starbucks or everybody) and then apologize for forgetting the “obvious”.
This lesson is also important for students and practitioners of real estate because there is so much to learn about the other side of a market. Many people think that “build it and they will come” is the secret to being successful in the real estate business. That thought is wrong on many levels, including the fact that many real estate professionals are employed by tenants.
With that in mind, I was very happy to have a guest speaker visit my class in Property Management to speak specifically about working with tenants to find their ideal real estate that suits them.
His discussion included many reasons why the real estate should not be thought of as a box with four walls and a roof. A lot has to happen before starting to negotiate the price of the box. For example, a good first step is a long (3-4 month) conversation about what the tenant in an office building wants. It is not just about the tenant’s clients:
- is there a better way to use the existing space? (i.e. “interior design” is not just about paint and drapes)
- where do the employees live? (i.e. maybe the company should move for that reason)
This exercise may teach the CEO, hiding in his or her corner office, what the next generation of employees really cares about.
Based on what this exercise discovers, the second step is the more familiar process of finding and negotiating the “right place at the right price”. The final step is not quite as simple as packing and moving: fitting into a new space take a little bit of work.
Understanding these steps shows why time is such a valuable resource in real estate: it takes much much longer to buy (or sell) real estate that to buy (or sell) a bar of soap. 20 year old students do not learn that in an Intro to Marketing class.
Planning ahead and learning as much as possible helps when negotiating. (If people do not realize that fundamental truth, as was true of some of my students during their recent classroom case, then they learn that the lack of knowledge hurts.) The challenge with trying to profit from this statement is that it is not possible to profit from knowledge that everybody knows. It is also not possible to profit from facts which are misunderstood. And it is not possible to profit if the tenant or their broker does not understand what the tenant values. Being tenant-focused means really listening: really listening means having a good dialogue.
The real estate business is surprisingly diverse and one of my guest’s comments is worth repeating to anybody who misunderstands the real estate business: “If a client says ‘This isn’t Real Estate’ then I knowing that I am doing my job right.”