What Makes Florida Unique? Sales Tax On Commercial Rent – But Changes on the Way

Posted on May 24, 2023 by Ken

If you asked me what makes Florida unique, I would probably say our reputation for strange and unusual news stories. But today, I’d like to focus on something completely different affecting business in our State. Florida is also unique as the only state charging sales tax on commercial leases. It should also be noted that we are one of only eight states with no state income tax. But the sales tax does put Florida at a competitive disadvantage when it comes to attracting corporate relocations.

That is about to change.  Two years ago, on April 19, 2021 our governor signed Senate Bill 50. The bill expanded sales tax on online purchases, but also plotted a path to reduce the state sales tax on rent from the current 5.5 percent to 2 percent. (plus a 1% surtax in Miami-Dade, Broward and Palm Beach counties) That is projected to save Florida businesses approximately $1 billion per year.

Just as I was about to post this article, it changed again. On May 5, 2023 the State House and Senate unanimously passed House Bill 7063, which upon approval from the Governor, will reduce the tax from 5.5% to 4.5% effective in December 2023. 

But the $1 billion question remains: When will the full reduction to 2% take effect? As a commercial tenant representation specialist, I am very interested in anything that will save my clients money. But after an extensive search, I couldn’t find an answer. So, as a former market research guru, I rolled out my yoga mat and did the investigation myself.  

Source: @Tax Foundation @BusinessInsider

The reduction in SB50 is tied to the Florida Unemployment Compensation Trust Fund. As of March 2020, the state had $4.07 billion in the Fund.  But unemployment benefits due to COVID drained the fund to a low of $623 million in April 2021. Senate Bill 50 stipulates that the sales tax reduction will commence 2 months after the fund balance exceeds the pre-COVID level of $4,071,519,600 .

Are we there yet? Not quite, but according to my research, in addition to the 1 percent reduction this December, Florida commercial tenants will see an additional 2.5%  reduction on their rent bills around August of 2024. 

Upon passage of Senate Bill 50, the State began to apply funds from the online sales tax to the Fund. I spoke to the economist in charge of fund projections at the Florida Legislature, Office of Economic and Demographic Research. She referred me to the results of the State’s Consensus Estimating Conferences which are posted online. The most recent forecast was published on March 2, 2023.  It showed that the fund balance had increased to $2.56 million and that the State will be allocating $90 million to the fund every month. According to the March forecast, the balance will cross the $4.07 billion mark in May 2024, which means that the reduction would take effect in August.  Last week, I called my contact in Tallahassee and confirmed that my interpretation was correct.

Figures in millions (000,000)

But is that projection accurate? At the moment, there are more jobs than applicants in Florida indicating that the state should not be paying out a lot of unemployment claims. While no one could have predicted COVID and there is the potential for an economic downturn or even a natural disaster, it would take some unforeseen event to significantly alter the state’s projections. I also confirmed that the projected December tax reduction will not affect the projections from March 2nd.

When I first started researching this topic back in January, the latest forecast was from August 2022. The August forecast projected a balance in March 2023 of $2.52 billion and showed it crossing the $4.07 billion threshold in May 2024 with a balance of $4.2 billion. The state economist told me to watch for the upcoming March 2023 forecast (above) which I recently downloaded and reviewed.

As of March 2023, the balance was at $2.56 Billion, 1.02% higher than the August 2022 forecast. More importantly, it showed that my friends at the State were highly accurate with their projections.  I am therefore reasonably confident in the March forecast, which projects that the 2% state sales tax on commercial rents will take effect in August 2024.  

So hats off to the Office of Economic and Demographic Research, and a thank you to our governor, whether you love him or hate him. All signs point toward a sales tax reduction in 2024, providing corporations additional incentive to bring high-paying jobs to Florida. Now if we can only get our residents to stop throwing alligators into drive-thru windows or breaking into their neighbor’s house to pet their cat.

Posted in Economy, South Florida, Tenant Representation | Comments Off on What Makes Florida Unique? Sales Tax On Commercial Rent – But Changes on the Way

The Scariest Picture in Commercial Real Estate Tech – And Why I’m Not Scared

Posted on March 26, 2023 by Ken

The Spectrum Office Building is owned by one of our best clients. It’s our building, but the logo on the bottom right makes it CoStar’s Picture.

What is the scariest thing you’ve ever seen? For me, it may the sight of The Weather Channel’s Jim Cantore in Florida during Hurricane Season. But if you’re in Commercial Real Estate Tech, that may rank a close second to the dreaded CoStar watermark. That little white star logo in the corner of their copyrighted photos has launched billions of dollars in lawsuits.

If you’re in Commercial Real Estate, you know CoStar. Others may know their more public-facing division, LoopNet, which they acquired in 2011. I pay around $4,000 per year for my subscription to CoStar’s comprehensive database of commercial properties and frankly I can’t survive without it. As a tenant representative, the first thing I do when I get a new client requirement is search for potential locations on CoStar and generate a market survey for my client.

Jim in Fort Myers with his latest innovation – the batting helmet

CoStar/LoopNet commands over 80 percent of the commercial real estate search volume online and has a virtual lock on the top Google position on any commercial real estate search. Google your office address and you’ll see what I mean. There are competitors, and my apologies to CREXI, Yardi/Commercial Café, VTS, Moody’s and my own partners at TenantBase. But even now, 12 years after I wrote my first blog post on the subject, no one even comes close to CoStar for commercial real estate information.

It’s no surprise that when I Google my company’s office address, Loopnet has the first two results.

Why is that? CoStar isn’t perfect, but they are still the best in the industry. They work hard to protect that position, which includes leveraging the legal resources of a $31 billion company. The best known case was Xceligent, a company created as part of the FTC’s agreement to allow CoStar to acquire Loopnet. CoStar wound up suing Xceligent for $500 million in 2016 for using copyrighted photos with that terrifying Costar watermark. Xceligent filed for bankruptcy shortly thereafter.

Which leads us to the most recent case. CREXI is one of the newer competitors attempting to chip away at CoStar’s dominance. They have an impressive platform with a growing customer base. I am seeing more and more inquiries from them. But I track marketing for my company and we still get around 8 to 10 LoopNet inquiries for every one off CREXI.

But CoStar still sees CREXI as a threat. In December 2022, CoStar sued CREXI for using 50,395 of its copyrighted images, which they value at $50,000 per image, so the suit would be in the $2.5 billion range. CREXI fired back with counterclaims alleging CoStar was engaging in anti-competitive activity, but those counterclaims were dismissed.

The suit, which is scheduled to go to trial in March 2024, alleges that CREXI hired a group in India to collect property images to post to their platform, of which at least 50,395 were copyrighted by CoStar. I could be wrong, but I am highly skeptical.

CoStar actively sources their data with their staff photographers shooting over a million original and proprietary photos per year and with its researchers making over 24,000 phone calls annually to brokers and owners. CREXI, in contrast, is primarily crowd-sourced. My fellow brokers and our marketing teams upload our own photos to the CREXI platform. My regional director for CREXI verified that at least on a local level, CREXI does not actively upload pictures. My guess is that any CoStar watermarks showing up on CREXI come from brokers who downloaded photos from CoStar or Loopnet and then re-uploaded them to CREXI, unaware that they were doing something illegal. CoStar’s Terms of Service (does anyone ever read them?) allows brokers to use CoStar images in their marketing but striclty forbids thier use on competitive website.

I don’t understand why CREXI would employ a back-office in India to upload pictures. CREXI is well aware of the sad tale of Xceligent and wouldn’t repeat the same mistakes. I personally worked for a real estate tech startup where we had a company policy to check our uploaded photos every week to make sure we didn’t have any with the CoStar watermark.

Back then, the little white star was a source of fear. Today, as a tenant representative, it doesn’t scare me at all. Frankly, I welcome CoStar’s litigious nature. I stated earlier that CoStar isn’t perfect, they are far from it. As a tenant rep, I have two rules when it comes to finding space for my clients.

Someday, there may be a fully accurate online listing of available office, warehouse, and retail space. But it will take a major disruptor to effect this change. CoStar is doing its best to make sure this never happens. And even if it did, there are still off-market properties, pocket listings and distressed tenants that are not readily accessible to the public. About half of the spaces I’ve found for tenants over the past 12 months were not on CoStar or CREXI. Local market knowledge and local market relationships are as important as online listings when it comes to finding space. So the need for tenants and buyers to have professional representation isn’t going away very soon. And finding space is only the beginning when it comes to professional tenant representation. I help my clients to negotiate the best terms while avoiding hidden pitfalls that may cost them in the long term. I also help on design and space planning, work with government agencies and direct my clients to preferred vendors to simplify the relocation process.

So I will continue to follow the battle between CoStar and CREXI. But the competitive landscape in Commercial Real Estate data has not changed much since CoStar acquired LoopNet in 2011, and I don’t expect any major changes in the near term.

So to recap, I am a proud customer of both CoStar and CREXI, I don’t fear the watermark, I provide a great service to my tenant representation clients and let’s hope Jim Cantore is nowhere near South Florida in 2023.

Posted in Technology, Tenant Representation | Comments Off on The Scariest Picture in Commercial Real Estate Tech – And Why I’m Not Scared

A Holiday Tradition Like No Other – The Boca Raton Bowl?

Posted on December 22, 2022 by Ken

It’s holiday time in South Florida. While we will never have a white Christmas, South Florida has its own holiday traditions. In Miami, we have Art Basel and the Orange Bowl Festival. Fort Lauderdale has its Winterfest Boat Parade.  Meanwhile Boca Raton has its own tradition dating all the way back to 2014.  No, it’s not a star-studded salute to the early bird special at the Olive Garden, it’s the annual Roofclaim.com Boca Raton Bowl at Boca’s Florida Atlantic University Stadium.

In a watered-down schedule of 43 college football bowl games, 86 teams now get a coveted invitation to the postseason. The 2022 Boca Raton Bowl featured an epic matchup of #77  Toledo vs. #82 Liberty.  I make it a point to record ESPN’s National Telecast of the Boca Raton Bowl every year.  But just like the Super Bowl, I pay special attention to the commercials.

I always fast forward to the annual ad produced by the Boca Raton Office of Economic Development and Innovation. While the game may have some importance to the alumni and students of the participating universities as well as the few degenerates wagering on it, this really is a kind of Super Bowl for Boca Raton. 

It’s a chance for the city to get a moment in the national spotlight. If one billionaire CEO or hedge fund manager stops to watch the ad while flipping through ESPN, it just may trigger a corporate relocation that can benefit our entire region.

Fort Lauderdale Winterfest 2022

Fort Lauderdale Winterfest 2022

This year’s theme was “You Can Have It All”, highlighting our beaches, our colleges, our lifestyle, our sunshine and our 12 million square feet of office space. As someone who leases those 12 million square feet, I don’t have strong feelings for Toledo or Liberty. But I am a huge fan of Boca Raton and I am rooting hard for those CEOs to bring high paying jobs to our community and lease lots of office and warehouse space.

For what it’s worth, the Toledo defeated Liberty 21-19, and may well have secured themselves a national ranking in the top sixty or seventy. But the real winner is Boca Raton and South Florida (and maybe Olive Garden) for the chance to promote our community to a national audience.  In the 30 seconds of the game that I watched, I also heard the announcer refer to a directional sign at Florida Atlantic Stadium showing it was 1.8 miles to the beach. Another win for Boca! But was anybody really watching? We’ll see.

Posted in Boca Raton, Economy, Office, Video | Comments Off on A Holiday Tradition Like No Other – The Boca Raton Bowl?

Which is Worth More?

Posted on June 6, 2022 by Ken

 

Like most of you, I generally start my day checking my email. I see what I need to do to push my deals forward and check for any new properties that can meet a client’s requirement. I was excited to see an email alert for a warehouse in Dania Beach. It is a clean, modern facility in a great location and looked perfect for one of my clients. But I nearly knocked over my coffee when I saw the $9.2 million price tag which was $369 per square foot.

This type of property was selling for under $100 per foot a couple of years ago. I sold one at the end of 2021 for $156 per foot and we are now seeing warehouse properties trade in the low $200s. But $369 per square foot was the highest I’d ever seen. At least until I scrolled to another one in Boynton Beach at $426. 

Are they worth it? It wouldn’t surprise me if someone pays it, and I assume there is data to support those numbers. Would I recommend these deals to a client? No, not unless they had some unusual compelling need to purchase.

I have no problem with sellers trying to push the envelope, but with over 30 years in the business and the first 15 of those as a market analyst, I think I know when they are pushing too far.  I wondered what else you could buy for $369 per square foot. I quickly pulled up the largest recent office sales in South Florida on CoStar and came up with 2 sales in Miami from June 2021 that support my point.

Warehouse on Market for $369 per sf

◄ Back
Picture 1 of 12

The 692.000 square foot One Biscayne Tower sold for $225 million which is $325 per square foot while the 822,000 sf Citigroup Center, sold for $270 million or $368 per square foot. These are two iconic South Florida properties. One Biscayne was Miami’s tallest building when it was completed in 1972. It features spectacular views of Biscayne Bay and has been continuously renovated and updated to maintain its Class-A status. Citigroup Center with its distinctive marble exterior and adjacent Intercontinental Hotel is another of Miami’s premier addresses. I remember seeing Ronald Reagan speak there back in 1986. With one notable recent exception, a venue for a presidential address tends to be a prestigious property.

So why spend more on a warehouse than a trophy Class-A office tower? First, we are talking about a $9.2 million warehouse rather than a $200 million office building. There is certainly more demand at $9.2 million then there is at $200 million. And it costs more and requires more labor to operate a Class-A office tower than it does a warehouse.  In addition, the South Florida industrial market is significantly stronger with vacancies in the 3 percent range while office is in the mid-teens. And while industrial demand is soaring, office demand is still suffering from a post-COVID hangover.  

My opinion is that the industrial market is peaking, while office is just beginning to recover. While there is much concern about recent economic news, it hasn’t impacted the flow of new residents into our market and demand for space remains strong.  That being said, I can’t justify paying $369 per square foot for a warehouse. I would rather take my chances on  an office building. But there has been a noticeable shift in the market. It seems the world has turned upside down and it’s no longer unusual for a big concrete box to be more valuable than a gleaming marble tower.

Posted in Industrial, Office, South Florida | Comments Off on Which is Worth More?

What’s Rising Faster Than The Price of Gas? Ind-flation

Posted on April 20, 2022 by Ken

Whether it’s a gallon of gas, a quart of milk or a dozen eggs. we are seeing prices rise all around us. But what is rising even faster?  The cost of leasing industrial space, and more specifically, small bay warehouse in South Florida – what I call ”ind-flation”.

Click to enlarge – Source CoStar

Commercial Edge recently reported a 4.4 percent annual increase on in-place industrial rents while CoStar reported a 10.6 percent year over year increase nationally as of April 2022. This outpaced inflation which hit a 40-year high of 8.5 percent.   

Amazon’s 800,000 SF Miami fulfillment center in Opa-Locka

Endangered species? A rare vacant 2,000 sf warehouse bay in South Florida.

But that doesn’t tell the whole story. South Florida industrial vacancies are running about 3% with the e-commerce giants dominating the market.  But for the smaller tenants from 5,000 to 20,000 square feet that are the backbone of the local economy, vacancy is even lower.  I believe it is significantly overstated by CoStar due to the “virtual property sign,” a trend I identified last year.

I have been working with these smaller entrepreneurial tenants for many years and I have never seen the market tighter. The rent increases I am seeing are unprecedented. In my early years as a market analyst, I reported on macro trends looking down from 30,000 feet. Today, as a tenant representation specialist, I see the market from the ground up.

While I am not always pleased with the accuracy of the information provided by CoStar, the leading provider of commercial real estate data, they do provide an excellent historical record of asking rental rates. And that data is supported by proposals I have negotiated with some of the top industrial landlords in the US.

At the top of the page is a listing for one of the largest industrial parks in Miami. A 5,000 square foot space that leased for $11.95 per sf in February 2021 is now at $18.95. That’s a 59 percent increase on the gross rent which includes operating expense. On a net basis, which determines the return to investors and the overall value of the property, the increase was closer to 75 percent.  Can they really achieve those rates?  According to my calculations, the 3 million square feet in that park is 99.7 percent leased, so they shouldn’t have a problem.

Just wanted to add that the date 4/20 marks the second anniversary of my most popular blog post ever.  Just in case you missed it.

Moving to Pompano Beach in Broward County, a space in a similar industrial park that rented for $11.40 net in February 2021 is up to $17, up 49 percent in one year. Below that is one in Palm Beach County which leased for $8.75 plus expenses less than 2 years ago. It is now shown at $12 and I was just quoted $14 on that space. Rents are rising so quickly that online listings can’t keep up. These are not isolated cases; this is what we are seeing across the market.

So where do we go from here? It’s a great time to own industrial property in South Florida.  It’s a scary time to be a tenant. Space is leasing faster than we can build it and we are very quickly running out of land to build it on. Our population continues to surge which means more products to be consumed and more demand for warehousing. While I don’t foresee rent increases like we have in the past year, demand continues to exceed supply, particularly in the small bay space.  Rents will continue to rise as long as businesses are able pay them. As real estate only accounts for 5-10 percent of a company’s expenses, tenants will have to pass some of this cost to consumers, but higher rents should be sustainable for most companies. There has been some sticker shock at renewal time, but we have seen no reduction in demand as prices have risen.  

Boynton – Rates rising faster than they can be posted online

While many are waiting for the bubble to burst, I don’t see it happening any time soon. Growth will eventually slow, but strong demand and limited supply indicate continued growth in industrial rents and property values. As a tenant representative it is getting increasingly more difficult to find the right space for my clients.  But with the market changing faster than online listings can keep up, it is important to have someone on your side who tracks the market from the ground up every day.   I will continue to stay on top of the market on a daily basis, not just to help my clients find space, but also to identify the increasingly elusive concept of value.

Posted in Industrial, Leasing, South Florida | Tagged , , , | Comments Off on What’s Rising Faster Than The Price of Gas? Ind-flation

Setting The Trends – Doubling Down on South Florida Industiral Market

Posted on March 18, 2022 by Ken

In KensTrends, I generally try to identify the trends that I see shaping the South Florida commercial real estate market. But it’s even better to be the one setting the trend. This recent 2-part transaction clearly indicates the state of South Florida’s industrial market. We saw the value of this property increase by over 20 percent in the six months we had it under contact.  I was also able to lease the property at a gross rent approximately 60 percent higher than a compatible lease I had completed 15 months earlier. My advice to tenants and buyers: act now – rental rates and sale prices are rising at an unprecedented pace.

It’s always great to put a deal together, but Ken Silberling of Levy Realty Advisors doubled down by not only selling the property, but also negotiating a long-term lease. Silberling represented the buyer SPMG Holdings, LLC in the $4.08 million acquisition of the 27,000 square foot former Craig Electronics headquarters at 1160 NW 163rd Drive in Miami Gardens. He then represented the new owner in leasing the building to The Taverna Collection. The building features approximately 8,000 square feet of office and 19,000 square feet of warehouse space on 1.3 acres. It is located in Sunshine State Industrial Park at the Golden Glades Interchange.

“We agreed on the contract over the summer, but the seller wanted to hold on through the expiration of the Craig Electronics lease at the end of 2021,” said Silberling. “We then marketed the property for lease, which we completed in January. At $151 per square foot, it was high for Miami Gardens, but below prices for comparable Broward properties.” 

Silberling spoke to many owners and brokers in the market but found that no one could explain why Miami-Dade properties sold and leased for less than those in Broward. “That gap is now closing” he said. 

“We had offers to flip the contract at a significant profit, but with diminishing supply, a steady flow of relocations from the northeast and minimal new construction targeting smaller users, we believe the value will continue to grow.”

Ken Silberling is Vice President of Brokerage and Tenant Representation for Levy Realty Advisors. He works with tenants and buyers to uncover opportunities throughout Miami-Dade, Broward and Palm Beach Counties. He is also the author of kenstrends.com a monthly blog on commercial real estate in South Florida and is Regional Partner for TenantBase, an online tenant representation platform. Levy Realty Advisors, established in 1977, guides private equity investors in acquisition, asset management and leasing, overseeing a portfolio of over 3.5 million square feet of commercial property in South Florida.

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2021 in Review from the Ground Up – Amazon, COVID and South Florida on Fire

Posted on December 31, 2021 by Ken

2021 was a year of challenges, but it turned out to be highly rewarding for the South Florida commercial real estate market and for me personally. I specialize in tenant and buyer representation in the office and industrial sector throughout the tri-county South Florida market. I work the front lines scouring the market on a daily basis to find the best space for my clients.

Ken finishes 2021 with a bang – more to come!

In my early career in market research, my perspective was based on statistical analysis. Today, the most valuable insight I can provide is a current read on what I see from a tenant perspective. Sometimes it’s useful to get a view from 30,000 feet. But it is equally important to see it from the ground up.

The two biggest factors I see influencing the current market are COVID and Amazon. COVID has accelerated technological change and fundamentally altered the way we work. Like a lot of you, I used to spend a majority of my time in an office or meeting clients. Then, circumstances suddenly demanded that we work from home. While I enjoy working from home, there are less distractions and more sharing of ideas in the office. In my opinion, and for many of my clients, a hybrid model is the optimal way to get the most accomplished.

The office market has rebounded. After peaking in mid-2020, tri-county vacancies declined from 10.7 to 10.3 percent over the past 12 months (according to CoStar, the leading source of market data). Contrary to popular opinion, the office is not going away. It is changing, however. A side effect of work from home is that companies are reconsidering where they want to be geographically. South Florida is on fire as CEOs and their families continue to relocate to escape icy winters, state income tax and in some cases, restrictive shutdown policies. Meanwhile, the industrial market is booming and Amazon has added rocket fuel to that fire. My unofficial calculations show Amazon absorbing 3.5 million square feet of South Florida industrial space (including 373,000 next to a building I leased) since the onset of COVID with an additional 2 million in the pipeline. And that doesn’t account for the space occupied by Amazon resellers and its e-commerce competition.

Not surprisingly, the institutional developers are building massive warehouses to capitalize on the e-commerce boom. But this is being done at the expense of the smaller tenants in the 5,000 to 20,000 square foot range. That happens to be the market segment in which I generally operate. No one is building for small business and with limited supply, buildings that leased in the $11 to $13 (including operating expenses) pre-COVID are now in the $15 to $20 range.

And those spaces are getting harder and harder to find. My latest run on CoStar shows a 3.3 percent industrial vacancy rate in the tri-county market. But I recently ran a survey of 5,000 to 10,000 square foot availabilities in Miami’s Doral market. Of the 30 properties that came up online, only six were actually available. I see more and more brokers showing occupied spaces as available in order to generate outside activity. I identified this phenomenon on KensTrends as the “virtual property sign”. But owners, who don’t rely on outside deals, tend to be more accurate. Two of the market’s largest owner operated small-bay properties, Doral’s 3.5 million sf Miami International Commerce Center, and South Broward’s 860,000 Kelsey Business Center are showing approximately 1.5 percent available. I believe that more accurately reflects the market for 20,000 square feet of less.

So what do I see for 2022? First, if you are looking for warehouse space in South Florida, you are going to come up empty on around 80 percent of your calls. Finding warehouse space in South Florida is a needle-in-a haystack. It is very helpful to contact a tenant representation specialist who is in the market every day, knows the players and knows what is truly available. Yes, that is a plug for my own tenant representation practice.

With increasing demand for space and limited supply, industrial rental rates and property values will continue to increase. It was recently estimated that Miami will run out of industrial land in about 5 years. It will take creative solutions to continue to meet demand in South Florida and those solutions will certainly come at increased cost. Redevelopment of existing sites, adaptive re-use, higher ceilings and even multilevel warehouses are on the table. The question is whether businesses are sustainable as real estate costs continue to rise.

Miami’s 640,000 sf 830 Brickell is set for 2022 delievery at asking rates of up to $100 per sf. Microsoft has leased 50,000 sf.

On the office side, needs are changing and many companies can operate with a portion of their workforce operating remotely. We may see some downsizing but that will occur over a three to five year cycle as leases roll over. With new office construction limited and an influx of companies relocating to South Florida, the office market is back. I don’t foresee the rapid increase in rates like we did for industrial, but nobody is giving it away. There are still pockets in the market that provide value for tenants – again it is a good idea to work with a tenant representative who is in the market every day to find the best value.

Ken with Broward Vice Mayor Udine, June 2021. He was sworn-in as Mayor in November.

Finally, and to wrap up KensTrends for the year. I want to go back to a presentation that I sponsored back in June. While Miami has the sizzle and gets the headlines as an emerging technology hub, the entire tri-county metropolitan area of over 6 million people is benefitting. As our new Broward County Mayor Michael Udine said earlier this year “Broward (Fort Lauderdale) is getting ours”. The same holds true for Boca Raton and Palm Beach. All of South Florida is on a roll and I don’t see anything stopping it.

I’ve been active in this market for over 30 years in research, acquisitions, and leasing. I specialize in finding opportunities where others can’t. That is the result of market knowledge, experience, persistence and most importantly, communication. Please contact me if you are looking to buy, sell, lease or invest in the South Florida market.

Posted in Industrial, Leasing, Office | Comments Off on 2021 in Review from the Ground Up – Amazon, COVID and South Florida on Fire

Ghostbusters – Please Join Us!

Posted on October 26, 2021 by Ken

As Halloween approaches, one annoying aspect of my tenant representation practice continues to haunt me.  The term “Ghosting” has only recently entered my vocabulary. The urban dictionary defines it as cutting off all communication to someone, with zero warning or notice beforehand. It is used primarily in dating, but I am seeing it more and more in business.

Ghosting seems more popular among the generation that has grown up with email and cellphones. It has gotten easier to screen calls and ignore emails than it is to make the difficult call to say no. What am I asking for? Tell me yes, I want the deal – or just say no, thank you for your interest. Just please, don’t ignore my calls, texts or emails  I welcome you to join me. The world needs less ghosting and more Ghostbusters.

From the Urban Dictionary

I work hard at my craft. As a tenant representative, I help companies to find the best value on the best commercial space for their business. I have an encyclopedic knowledge of thousands of office and industrial properties in South Florida that comes from over 30 years of experience, initially as a research professional, then as a leasing and acquisitions specialist and broker.

I save my clients time, money and aggravation; and my fees are paid by property owners so they receive professional representation at zero cost. My personal mantra in the industry is ABC. You may think that means always be closing, but to me it is always be communicating.

I’m not perfect by any stretch of the imagination, but if someone has made a diligent effort to earn my business and I decide to move in a different direction, I believe in ABC – always be communicating. Tell them no, tell them why and walk away with respect. You may do business with that person again some day and you don’t want to burn bridges. By saying no, you save me time by not having to keep following up. It saves you time by not having to delete my voicemails and emails and saves you from feeling guilty for not responding. I have even developed the ABC email, but people often won’t even respond to that. And these aren’t random cold calls, these are usually people who initially reached out to me to ask for help.

Ghosting is killing productivity, causing stress and it has become the single most annoying aspect of my business. So make the call. If you can’t say yes, just say no and put it to bed. Sometimes it’s easier to rip off that band-aid! Business ghosting must stop! Thanks for letting me vent, I feel better already.

Ken Silberling, Ghostbuster

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The Top Two Reasons To Use A Tenant Representation Specialist

Posted on September 29, 2021 by Ken

As a tenant representation broker, I am out promoting my services every day. There are dozens of reasons for you to work with me. I save my clients time, money and stress. I also help them avoid costly mistakes they may never have considered. I thought a top ten list would be a good idea. But sometimes the simplest reasons are the most powerful. So today, I want to focus on only two.

Many people think they can simply go online, find a space and negotiate a lease. Here is why they usually cannot. These are my top 2 reasons to hire a tenant rep broker:

1. Everything you see on the internet is not necessarily available
2. Everything available is not necessarily on the internet.

My former company had a great tagline “right space, right place.” While there is a whole lot more to the tenant representation process, that is still the most important aspect of my job. By the right space, we mean the right size, right configuration, right image, right price and the right landlord. Of course right place means location, location and location. Your place of business has to be convenient to employees, customers and of course the CEO. Employee safety is another key concern as is access to shipping routes.

So all you have to do is get on Loopnet, CREXI, TenantBase or one of the other online commercial real estate marketplaces and instantly find the right space in the right place. Right? No wrong – please refer to rules 1 and 2.

Finding the right space is more than knowing how to use Google, Loopnet or any of the other online services. It takes market knowledge, experience and relationships to uncover opportunities for my clients. From there we get into reasons 3 through 10 and beyond. The ideal solution is to combine the convenience on online search with the expertise on an experienced broker. That is what I am providing through my association with TenantBase I have a series of articles on other tenant representation topics at kenstrends.com/tenant-representation/ and plan to add more. But the most important reason to use a tenant representation broker is to find the right space in the right place, so please remember reasons 1 and 2. And as I’ve explained in an earlier post, my services are available at zero cost to my clients.

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Vice Mayor: Miami May Have the Sizzle But Broward is “Getting Ours”

Posted on June 14, 2021 by Ken

I was honored to host the June 10, 2021 meeting of the South Florida Office Brokers Association (SFOBA) for only our second live event in the past 18 months. My clients, Prisma at Cypress Creek sponsored the event. Prisma is a newly renovated boutique office building in uptown Fort Lauderdale. We have 1,327 to 5,678 square feet of office with floor to ceiling glass and superior service ready for immediate occupancy. 

Below are  two videos from the event: the first is a two-minute “highlight reel” with the Vice Mayor’s most important points and I also have the full nine-minute presentation.

Highlights

It was great to get back together with a group of the top commercial real estate brokers in South Florida. We have a mailing list of over 380 brokers who represent a large majority of the leasing  activity in Broward County (Greater Fort Lauderdale) and also extending onto Miami-Dade and Palm Beach Counties.

I had met Broward County Vice Mayor Michael Udine virtually over Twitter. I had retweeted an article where he discussed South Florida’s success in recruiting tech and venture capital companies. I also found out he was a real estate attorney by trade and he helped put together one of South Florida’s largest recent land transactions. As mayor of Parkland, he was able to annex 1,000 acres from unincorporated Palm Beach County. He also recently spent some time with Elon Musk’s The Boring Company to discuss tunnel construction in East Fort Lauderdale. 

Full 9-Minute Presentation

I have become a big fan of Vice Mayor Udine for his enthusiastic and proactive support of business throughout South Florida. I’m hoping he becomes a big fan of kenstrends.com!

Michael explains the sizzle as Ken listens on.

 

 

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“Virtual Property Signs,” Tenant Representation and Why Online Property Listings are Always Wrong

Posted on June 1, 2021 by Ken

We’ve all heard how Commercial Real Estate is slow to adapt to emerging technology. But I’ve noticed a new tech trend that has very  quietly surfaced on the internet. It is something I call the “virtual property sign.”

For as long as people have sold or leased real estate, brokers have installed signs on their properties to attract buyers and tenants to the property. They also help us to promote their brand. But the signs also provide a secondary benefit. They help to generate customers that we brokers can represent on other properties.

I’ve been involved in this industry for over 30 years. I’ve seen landlord markets, tenant markets, buyer’s markets and seller’s markets. Back then, even when things were the tightest, prospects would tell me “there’s tons of space out there – look at all the signs on the street.” But brokers always kept their signs up in the hope that they could direct prospects to different properties and make deals – regardless of whether they had space available.

Fast forward to 2021 and thanks to CoStar/Loopnet and newcomers like CREXI and Commercial Café, everything is now out there on the internet – or at least it seems to be. Physical signs are still highly important, but most property searches start online and CoStar claims to capture 83 percent of online commercial property searches. So online presence, and specifically Costar/Loopnet  is now the most important vehicle for marketing our properties and services.

Over the past few years as my focus has shifted to representing tenants, I have become increasingly frustrated with the inaccuracy of the online availabilities. I became convinced that CoStar and Loopnet were always wrong.

But here is a dirty little secret – and my sincere apologies to my friends at and CoStar. It’s not their fault that the online listings are wrong; they are only publishing what the brokers give them.

CoStar has a brilliant business model that seen their market value increase to over 30 billion. We voluntarily provide our information to CoStar for free and then they sell it back to us… You’re welcome, Costar.  Is it wrong for brokers to present information online in a way that best benefits themselves and their clients?

Through discussions with brokers and my performing hundreds of market surveys, I have come to an important realization. Just as brokers keep their physical signs up on fully leased buildings, many brokers are now also keeping their “virtual for lease signs” installed on major website listings regardless of whether the properties are still available.

So you can’t necessarily believe all the availabilities you find on the internet. And you can forget about online pricing – I cover that in another post. Some day, someone may come up with an online listing service with real-time availabilities and full price transparency that will truly disrupt the commercial real estate market. I wrote about that 10 years ago when CoStar was worth only a billion but not much has really changed.

Here is the reality. Availabilities are changing constantly and there is incentive to keep virtual signs for occupied spaces posted online. Internet search is helpful, but it still takes old-school market knowledge and relationships to uncover opportunities in the market. So for now and for the foreseeable future, online availabilities will continue to be incomplete, if not totally inaccurate.

Thankfully, for my colleagues in tenant representation and myself, this is a major reason why you need our services more than ever. It is also why the industry has been so resistant to change. But tenant representation is more than uncovering the best space at the best rate. A tenant representative helps clients avoid key pitfalls and hidden costs that can come back to hurt them in the long run. We also help clients to use their space more efficiently and to create great workspaces in prime locations to attract top talent. And – as I also covered in prior post, a tenant representative is available at zero cost to the client.

So feel free to start your search online and get an idea of what type of buildings and locations are of interest. Then, hire a tenant representative who can uncover both online and offline opportunities, protect you from hidden costs, and help enhance your efficiency – all at no cost to you. And don’t believe everything you read on the internet.

 

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Tenant vs. Landlord Representation – Is There A Conflict?

Posted on April 20, 2021 by Ken

One of the most controversial issues in tenant representation is conflict of interest. It is ok to represent both landlords and tenants in the same market and even on the same transaction? I have faced that question and I believe you can. Still, many brokers exclusively represent landlords while others work only with tenants. There are brokerages like CRESA, Savills and Mohr Partners that are tenant-only or “occupier-centric” houses and they promote themselves on the premise of no conflicts.

Occupier-Centric Brokerages

I spent 13 years of my career as an in-house leasing and acquisitions agent for a regional investor/developer. I later spent two years with an online commercial marketplace exclusively representing tenants. In my current position, I am doing about 2/3 tenant and 1/3 landlord representation. I am comfortable working either side of a transaction and by understanding the needs of both sides, I believe I am more effective in whichever role I play.

I don’t deny that a conflict exists, but as long as it is disclosed to landlord and the tenant, it will generally not stand in the way of a fair transaction. It is a matter of transparency and it is also a matter of integrity. Whether you are the landlord or the tenant, it is a question of whether you trust your broker. In my 30+ years in the market, I have worked with hundreds of brokers. Most of us who have been in the industry for a long time are here for a reason. We are professionals, we generally value our long-term relationships with both landlords and tenants and we will not take any shortcuts for short term gain that can damage our reputation over the long haul.

One additional key point – whether your broker represents the tenant or landlord side of a transaction, it is industry practice for brokers on both sides to be paid by the landlord. So even when you hire a tenant-only broker, there is an inherent conflict of interest. Even though they represent the tenant, their check is coming from the landlord.

Win-Win negotiation – create a larger pie

I am not recommending against hiring a tenant-only broker. There are many excellent brokers exclusively representing occupiers and the same is true on the landlord side. In my case, I have worked both sides and I understand the needs of both landlords and tenants. I work to represent the interest of my client while developing win-win solutions that benefit both sides. It is often not a matter of splitting up the pie, it’s a matter of creating a larger pie.

So when selecting a tenant representation broker, my advice is to be less concerned with whether my broker is “tenant only” and more on the broker’s overall reputation and experience. It’s not necessarily a matter of who your broker represents, it’s a matter of integrity, market knowledge, and the ability to identify and resolve problems. I understand there are strong opinions on both sides of this issue and I welcome your comments.

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Tenant Representation – The Best Deal in Commercial Real Estate?

Posted on March 9, 2021 by Ken

As a tenant representative, my job is to help my clients to find the best deal on the ideal location for their business. One of my key points in selling tenant representation is that it costs the tenant absolutely nothing. Not bad when you compare your tenant rep broker with your attorney, your accountant, your financial advisor and your doctor.  But is tenant representation really free? The short answer is yes. If you are comfortable with that answer you can stop here, but if you’d like an explanation, let’s continue.

Sure you can find space on your own. Thanks to services like Loopnet and more recently CREXI and their residential counterparts Zillow and Trulia, there is more real estate information online than ever before. But in a recent search for a tenant requirement, I came up with over 100 possibilities. Do you have the time, the patience and the expertise to reduce this to a manageable number, to be sure you haven’t missed something, to understand the differences in pricing structure, and to make the calls to verify availability? And is the agent even going to return your calls or emails? Then, do you fully understand the intricacies and potential hidden costs in leases than go on for over 30 pages and seem to be getting longer every year?

Personally, I am a notorious do-it yourselfer. I am constantly working on projects around the house and take a lot of pride in my accomplishments. But years ago I realized I was better  handing my 401K to an advisor who lives, eats and breathes the stock market, having my taxes done by a professional and I certainly wouldn’t have attempted my own knee surgery.

Tenant representation involves gaining a thorough knowledge of the tenant needs including budget, layout and image in addition to location, location and location. Your tenant rep has an intimate knowledge of the market, the properties and the players. Your tenant rep will create competition between landlords and skillfully negotiate the best possible deal on your behalf. I provide a professional service that saves my clients time, money and aggravation. Tenant reps are highly paid for providing a valuable service.

So what is the true cost of my services? The market fee right now for a tenant rep is 3 to 4 percent of the lease value. Most of the major landlords in the market are paying 4 percent.  But that fee is paid by the landlord not by the tenant. So there is no direct out of pocket cost for the tenant.

But my fee has to be added indirectly into your lease payment, right? Not really. The market fee for a landlord broker is 6 percent. If the tenant is represented, that 6 percent is split between the landlord’s broker and the tenant’s broker. So the landlord pays the same 6 percent whether the tenant is represented or not.  So if you don’t have representation, you are essentially cheating yourself and paying the entire fee to the landlord’s rep. By not hiring a tenant rep, you are basically throwing 3 percent of your rent out the window.

Yes, the landlord will often add one more point for the tenant rep broker so they will pay 7 rather than 6 percent. You may also see a landlord rep taking a little less on a direct deal without a tenant rep. So in some cases, my services may cost the landlord one extra point. But landlords have already budgeted for commissions for tenant brokers and it generally has no effect on your rate.

Landlords often tell me they love paying commissions because it means they are getting good tenants who will provide steady income over the long term. And most prefer negotiating with brokers who understand the process rather than tenants who may not.

Can I help you to negotiate a deal that is one percent better than you can do yourself? And can I protect you from mistakes that can cost many more percent?  The short answer on this is absolutely yes.

Call, text or email me and I would be happy to represent you to negotiate the best deal on the ideal space for your company. I will save you time, money and aggravation, and best of all, (and I hope you now have a better understanding) it costs you nothing!

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Tenant Representation and Whatever Happened to Price Transparency?

Posted on February 4, 2021 by Ken

This is the latest in my continuing series on tenant representation.  No time to read? Click here  or on the video above. This month’s article is about price transparency – or the lack thereof. What is price transparency? Let’s take a look at Dollar Tree. At Dollar Tree, everything’s a dollar. No questions,  no negotiation, no drama – and that is generally good for the consumer. What isn’t price transparency? Think about the auto industry. Who wouldn’t want a Lexus for $199 a month, but if you read the fine print, there is an additional $5,000 in up front fees.

While other issues are dominating the headlines, price transparency has been very much in the news. In October 2020, the U.S. Department of Health and Human Services enacted new rules on price transparency in the healthcare industry. Insurers will  be required to post prices for standard medical procedures starting in 2022. By bringing pricing into the open, regulators hope to enhance competition and reduce costs to the consumer.

 

That’s great for healthcare, but price transparency is sorely lacking in commercial real estate. In fact, leasing an office space is probably worse than leasing a car and the fine print takes the form of a 30 to 40 page lease. Business owners today face an increasingly complex leasing marketplace.

There are net leases, gross leases, full service or modified gross. These leases can vary widely is in the way tenants are billed for operating expenses, and there are with many potential hidden costs. Who gets the electric bill,  who pays when the air conditioner breaks? In some leases, tenants are responsible for insurance deductibles after a natural disaster. And what is the cost to build out the space, whs’s paying and how long will it take?  In Florida, we also have sales tax on rent. To make it even more confusing, as I covered in an earlier blog, a square foot in one building can be larger than a square foot in another.

Property owners make it difficult to compare rates on an apples-to-apples basis and that is often by design. With my former company, we developed databases that allowed tenants to search for spaces by price. Our plan was to disrupt the office leasing market using artificial intelligence and price transparency. But our company was acquired and price transparency, at least for now, dissolved with it. Even on CoStar and LoopNet, the industry’s primary data source, you still can’t effectively search by price.

While price transparency helps simplify the process, no two spaces are the same and no two leases are the same. There are qualitative issues that can be more important than price. Does the space allow your employees to be more productive, does it help you to attract top talent and does it encourage collaboration with other businesses?

So how can the average tenant get information on pricing and other factors in order to make the best decision regarding their office space? I hope I’ve made a strong case for why you need someone who can help navigate you through the process. That is the job of a tenant representation broker.

You may sign a lease every three to five years, but I’ve negotiated up to sixty leases in a year. As a tenant representative, I know the buildings, I know the numbers and I know the pitfalls to avoid. I’ll answer all your questions plus a few you didn’t even know you needed to ask. I’ll find you the best deal on the right space and my fee is paid by the landlord so you get professional representation at no cost to you.

And everything’s a dollar

I can walk into Dollar Tree, buy a few things and feel confident I’ve gotten a good deal. But  I won’t buy or lease a car without my auto broker. The less price transparency, the more you need professional representation.  Maybe someday there will be a major disruption in the way we lease commercial space. But considering the qualitative aspects as well as the potential for hidden costs, a tenant representation specialist can save you time and money and help you position your company for success. And best of all, it costs you nothing.

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Back to The Office

Posted on February 3, 2021 by Ken

It’s been a year since the onset of the COVID lockdown in the U.S. and for millions of Americans, work from home has become the new norm. We still have a long way to go and some major logistical roadblocks to overcome. But there is a glimmer of light at the end of the tunnel and it won’t be long before we are all “Back to the Office.” I have learned to appreciate working from home occasionally, but there is no substitute for the interaction and collaboration that can only be attained through physical presence and the office experience. Special Preview – Tenant Representation and Whatever Happened to Price Transparency?

With that in mind, here are some great office space for lease in Fort Lauderdale and North Broward County:

Prisma at Cypress Creek is a three-story boutique office renovated in August 2020. We have space from 1,831 to 5,319 square feet. Below is a virtual tour of Suite 103/105 at 5,319 square feet. Flyer and Plans

6101 Professional Plaza is a renovated two-story office building for medical or professional use with immediate occupancy from 1,200 to 4,900 square feet. It is close to 3 hospitals and conveniently located between the Cypress Creek and Coral Springs markets. Flyer and Plans

Cypress Creek Medical Pavilion is Uptown Fort Lauderdale’s newest office building with surgical center a diagnostic facility and a cafe onsite. I have a great 2,680 square foot office sublease with 12 offices and flexible terms as short as 18 months. Flyer and Plans

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A Shot In the Arm – Thought I’d Share One of My Better Email Blasts

Posted on December 22, 2020 by Ken

I generally tend to blog on items related to office space leasing and commercial real estate. If all I did was promote my properties, I probably wouldn’t get a lot of attention. But sometimes I come up with promotional pieces that I think are worthy of putting out on the blog. This is one. 

Every Business Can Use A Shot in The Arm

Every business can use a good shot in the arm. At Prisma, we have great office space from 1,831 to 5,319 square feet. We’ve recently renovated our common areas and we provide one of the best values in town to inject new life into South Florida businesses.

Socially Distant Virtual Tours at:
www.PrismaCypress.com
1000 NW 65th Street, Fort Lauderdale, FL 33309

Virtual Tour Of Suite 103-105 at Prisma

Click Above for Virtual Tour Of Suite 103-105 at Prisma 2,385 to 5,319 SF

    • Contemporary Boutique Building
    • New Responsive Ownership
    • Floor to Ceiling Glass
    • Individually Metered Electric
    • I-95 Cypress/Powerline Location
    • Virtual Tours for all Availabilities
    • 1,831/2,384/2,835/3,661/5,319 SF
    • $16 NNN + $9 Operating + Elec.
    • Plans, 360 Tours & Interactive map Website

Download Flyer & Plans

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