CVS
Pvolve
4349 San Pablo Ave, Emeryville – Evergreen Sell to Agree
Planet Fitness – Lease – 4349 San Pablo Ave, Emeryville
Home Goods – Lease – Crossroads West
TJ Maxx – Lease – Crossroads West
RH Lease – Broadway Plaza
1525/1531 Locust Street
Calicraft Brewing Co.
Clayroom
Kitava Kitchen
Debt of Gratitude
I had the unique pleasure to celebrate a double milestone a few weeks ago. May 20 was both my 60th birthday and also the 25th anniversary of our firm.
I honestly never thought about distant milestones when I elected to make my 35th birthday the day that I would go into business for myself. Thinking about a 25th anniversary was just about the furthest thing from my mind. And it did not even occur to me until just a few months ago that these two anniversaries would align in such an elegant and surprising way.
What I do remember about May of 2000 was this: I had been married for less than a year, my wife was expecting our first child, we had just bought our first home together, and my dear father had suddenly passed away two months prior. My life was filled with dramatic changes that were quickly redefining my life, my priorities and the course I would chart both personally and professionally. Against the upheaval of these unfolding complexities, I quickly understood that if I didn’t start a business right NOW, life would only become more complicated and it might never happen.
My family was not filled with corporate ladder climbers, and only a handful of the many cousins in my generation had college degrees. My grandparents were immigrants and my parents both learned English as a second language. But what our families’ provenance lacked in higher education and corporate achievements it more than made up for in entrepreneurship and work ethic. My maternal grandfather owned and operated restaurants. So did his children, my aunts and uncles. One of my uncles owned a small pharmacy. Another invested in real estate. My female cousins married contractors and young men who were successfully in business for themselves. My brother who is almost twelve years older than me also went into business, in real estate.
At family gatherings in my youth, the adult conversations that I was exposed to were filled with questions like,“How’s your business?”, “Do you like your CPA?”, “I’m investing in a shopping center with some friends – are you interested?”, “Have you purchased short-term commercial paper with excess cash?” I didn’t always know what they were talking about, but I had an innate sense of respect for the fact that our family was made of up savvy business people who were more than comfortable to bet on themselves. I admired this special character of our family, and a vision began to form in my mind about owning my own business one day.
In college, my high achieving friends had a near uniform desire to go to work in Corporate America; in tech, in banking, in medicine and in law, or to jump directly into graduate school. But the immigrant blood in my veins and chorus of voices in my head from years of dinner table conversations never let me make peace with the prospect of embarking on a long career working for some big firm. Commercial real estate, and brokerage in particular, fit my personality and my aspirations well. There was no limit on my earning potential. The harder and smarter I worked, the better I did. After a brief 12-month training period, my earnings were 100% commission based. I’ve basically never worked for a salary in my life.
As the years unfolded, my production followed a consistently upward trajectory, with occasional plateaus. Meanwhile I watched many of my peers move from job to job, sometimes enduring layoffs or corporate downsizing, and living with salary & bonus compensation that was based on how the firm, or the overall economy was performing, but not necessarily rewarding their individual performance.
In my brokerage space, I tried to work with all of the best real estate firms and/or users that were making a big impact in my market. These included national, regional and local companies or individuals. And while we have had plenty of success working with Fortune 500 firms, I learned over the years to gravitate to the very high quality, but sub-institutional players in my market. The advantages were numerous. These firms were entrepreneurial; I could work with the decision makers; There was no distant corporate boss who may or may not approve of what we worked on locally. I liked the way that well capitalized local and regional firms led by hands-on principals with long resumes valued my work and paid me well. I also learned that one of the most consistent and unbecoming characteristics of institutional clients was their need to grind fees. That made the decision easy to align with people in the industry who I could identify with – people who built their own firms, bet on themselves, paid us well when we created value, and looked for win/win partnerships. It always shocked me at how willing my peers were to engage in the race to the bottom on fees, just for the perceived prestige of working with a big-name client. I’ll take the smaller name and the bigger payday every time.
In time, I surrounded myself with a great team and a great clientele of like-minded friends. I formed a doctrine in my business life – let’s make the pie bigger for everyone. The fee-grinding firms that wanted great outcomes for themselves but only so-so outcomes for us, quickly moved down my list. And we increasingly centered our business around true partners that relished the opportunity to win with us.
I’ll confess that my recent milestones were a bit of a cause for reflection. And when considering the journey, I’m filled with gratitude. A debt of gratitude to my family and extended family that showed me how to be my own man in the business world. A debt of gratitude to clients that have become great friends and who have partnered with us to make the pie bigger for everyone. And a debt of gratitude to my team, the ones who make me and our firm look good every day, who teach me, motivate me, and give me great pride as we win more than our share in the marketplace.
It all leaves me looking forward not so much to the next milestone, but to the challenges and satisfaction of the journey that will take me there.
Hobby Lobby – Lease – Crossroads West
Skechers – Lease – Crossroads West
Western Flyer Purchase – The Brant, Lafayette
Popup – Holiday 2023
Mancini’s LEASE – Crossroads West Riverbank
19 Randwick Ave, Oakland – SALE
Sutter Health – LEASE – Crossroads West, Riverbank
GRE, Not CRE
If you would have asked me 20, or even 10 years ago which part of the Commercial Real Estate (CRE) business I was in, I probably would have answered, “the suburban shopping center business.” While our brokerage practice has always included a High Street business, and work on select smaller properties, the bulk of our trade has always centered on the sale and leasing of neighborhood shopping centers, power centers, strip centers, malls, outlets and lifestyle centers.
The work we’ve done for decades on behalf of the owners and developers of these assets, and especially in representing the users that populate them, continuously sharpened our understanding of how great real estate is defined. Sophisticated retail and dining users have an expansive list of site selection criteria made up of a wide array of real estate ingredients. These include: ingress, egress, visibility, access, signage, co-tenancy with dynamic anchor tenants, proximity to a targeted demographic audience, convenience to freeways that expand the audience size, traffic counts, nearby residential growth, footfall, convenient parking, storefront width, left-turn access and more. Just as important to many of these users are the absence of various restrictions, such as anti-chain store ordinances, drive thru constraints, conditional use permits, and various other measures that limit retail success.
A fundamental real estate truth that we’ve learned and re-learned over the years is that in the retail/commercial arena, no two corners are equal. In the office and industrial arenas, space is much more of a commodity than in retail. An office or industrial user seeking 50,000 or 100,000 square feet can enjoy equal success on all four corners of the same intersection. Yet in retail, the wrong corner can spell disaster, and a location one block away, or less, may as well be in Siberia. Whereas office and industrial landlords seek to differentiate their spaces through amenities, financial incentives and rent deals; in retail, location, location, location is the unsurpassed currency.
As markets have evolved over the past quarter century or so, a fascinating real estate dynamic has come into sharp relief. Increasingly, non-retail uses have crowded the playing field of real estate sites that were once singularly judged as viable for retail uses, both in downtowns and at significant suburban intersections. Urgent cares and hospitals, automobile or E.V. dealerships and showrooms, private schools and senior living communities, title companies, swim schools, residential real estate offices, breweries, chiropractors, dentists, mixed-use residential projects and a growing list of other use types have determined that they also want to position their businesses at dynamic intersections with signage, convenient access, anchor tenant generated traffic, good parking and the other fundamentals first evangelized by retail and dining brands.
In short, these businesses don’t view their real estate as a commodity, but rather as a strategic component of the success or failure of their enterprise. Like retail and dining brands, what this expanding list of users wants is the Great Real Estate (GRE) that optimizes the business’s performance. And fortunately for us, through decades of studying the factors that characterize the most successful real estate, GRE is the only real estate product type that we have ever worked with. Consequently, we’ve come to realize that our next opportunity to source or lease or sell or develop GRE is no longer limited to the retail and dining users that we’ve worked with so closely for so long. Today, we’ve inverted the equation, looked at the real estate first and instead ask ourselves “who are the right buyers (or users) for this property?” And while a retail or dining user is frequently still the best answer, increasingly it is not.
Firms like ours have historically organized themselves in silos that were defined by the user-type. Big brokerage firms have office and industrial and retail silos, and these practice groups rarely cross lines. Like our peer firms, 25 years ago we followed suit and styled ourselves as a retail-only brokerage house, offering a highly specialized service that concentrated 100% of our talents on the one segment of the industry where we were experts. This became an easy way to differentiate ourselves from the big multi-national firms, all of which are generalists, not specialists like us. How many times would I ask prospective client who needed to address a real estate need, “when you are sick, would you rather work with a generalist or a specialist?”
I still view our expertise as being highly specialized, but defined less by the user and more by the real estate – the Great Real Estate – that we work with.
So today, when someone asks me what business I’m in, my answer is clear – “We’re in the Great Real Estate business”.
Temescal Plaza
Raising Cane’s – Ground Lease – Fairview Plaza
The Prodigal Owner
Much has been written recently about the genuinely heartbreaking decision of John Fisher to move the Oakland A’s to Sacramento, with aspirations to later move them to Las Vegas.
As an East Bay native and lifetime fan and supporter of the team, I have personally experienced the rise and tragic fall of the A’s. People everywhere understand the powerful sense of community that sports teams create. Whether supporting our children in youth sports, or later as supporters of our high school and college teams, the network of relationships that are built around the ballfield, the gym, or the swim meet, expand our circle of friends, and frequently last a lifetime. I’m reminded of how a neighborhood dad who coached baseball alongside my father became one of his dearest friends, and how their sons and grandsons remain deeply connected two generations later. Our example is not unique.
At the professional level, this community-building chemistry is similar, yet different in important and uplifting ways. At neighborhood sporting events, the fans of youth teams typically consist of people of similar income and ethnic demographics. But pro sports capture a much wider audience of supporters, and in a place like Oakland, it is quite literally a United Nations experience. Fans of every ethnic, educational and income group attend A’s games, united in support of our team, exchanging high-fives after great plays and consoling one another after a loss. The myriad social and economic barriers to interactions between the classes disappear at places like the Oakland Coliseum. While some groups have tried to manufacture diversity, equity and inclusion in businesses and on campus, market forces and Adam Smith’s “invisible hand” have accomplished these goals magnificently and without coercion or intervention at A’s games for decades. This is Community with a capital C. And this is why the business decision of Mr. Fisher is so painful to so many.
The departure from Oakland by the A’s, following those of the NFL’s Raiders and the NBA’s Warriors bestows a once unthinkable outcome to a major league city – its desertion by all three major sports leagues. And while pundits have understandably focused on the arms race of financial incentives and sparkling venue promises by prospective host cities, as well as the deeply troubled state of Oakland’s city government, the question of the East Bay Area’s fan base is curiously under-reported. After all, while all of the pro franchises have left, the fans did not. In retail parlance, the densely populated, relatively affluent and ever-expanding population of East Bay consumers are shoppers whose stores have all left.
As a firm with decades of experience in helping retail brands secure real estate that will optimize their ability to capture the Bay Area customer base, the question of how to position a sports brand to capture the desirable and proven East Bay audience appears rather obvious. The eastern half of Alameda County includes cities like Dublin, Pleasanton and Livermore that are homes to Fortune 500 companies (Chevron, Safeway, Workday, Ross), affluent suburbs, excellent freeway infrastructure, rail service and capable, drama-free local government. Whether it’s the NFL or the MLB, the common-sense solution to capturing the region’s proven customer base awaits in this further eastern landscape of the East Bay. Importantly, such a move on the geographic chess board of Northern California real estate sites would strategically engage the San Joaquin and Stanislaus County markets, thereby growing the audience size.
But for the indefinite and perhaps permanent future, millions of jilted East Bay fans can cherish only memories and watch from afar. The team that they supported, funded and loved now seeks to give its many gifts to a new audience with no historic bonds, but rather with an irresistible financial offer.
I’m sure that Mr. Fisher is an extremely successful businessman. At least I know that he is a very wealthy one. But in reflecting on his choices, I’m reminded of the parable of the Prodigal Son. This scriptural passage shares the cautionary example of the wasteful son, who spends his father’s money, and mismanages what he is given. Mr. Fisher – fortunes come and go, but reputations are eternal.
Amazon Fresh – Stanford Ranch Crossing, Roseville
Buffalo Wild Wings
Calicraft Brewing Co. – Davis, CA
Chase – Crossroads West, Riverbank – Lease
Core Bay Area Infill Opportunity
Popup – Retailer – Pvolve Expansion
Popup Deal – Kitava Lease – Solano Ave, Albany
Popup – Done Deal – Raising Cane’s Lease – Crossroads West, Riverbank
Popup – Press – SF Biz Times Article March 2024
Popup – Announcement – JCA Our Office Has Moved DRAFT
Popup – Done Deal – Dollar Tree – Marlow Rd, Santa Rosa – Lease
Dollar Tree – Marlow, Santa Rosa – Lease
Seize the Day
Over decades in the CRE industry, our team has completed hundreds, or perhaps thousands, of multi-market site tours with grocers, fuel brands, restaurants, pharmacies, home improvement and fitness brands, coffee and burger and chicken concepts, and many, many other users of quality real estate. Over that time, my appreciation for the art of the real estate tour has grown ever deeper. I’ve learned that in order to have real value, the successful real estate site tour always needs to be two things: the journey has to be horizontal, from site to site or city to city; and also vertical, from one idea to the next.
That travel time with the client is a precious one-on-one window to discuss who their customer is, how they evaluate their real estate, how the brand is executing, growing and changing, what market pressures are helping or hindering their growth – capital markets, competitors, stock price, housing starts, unemployment data, etc. etc.
As the pro who is conducting the tour, you ask these questions, absorb the client’s answers, and create advice that reconciles the client’s needs to the marketplace where you are the expert. Your advice is the synthesis of the horizontal and vertical journeys. Sometimes, as the repartee unfolds in the car as we move from site to site, my questions receive a detailed and lengthy response. But other questions are met with a long silence and a thoughtful gaze out the window. The silence and mystery of the client’s non-answer descend on me like a benediction. Have we struck gold? Have we discovered a new way to capture the customer or frame the real estate deal that they haven’t previously considered? A good conversation about real estate sets the gears in the client’s brain turning, sharpening the focus on how we will execute real estate in this particular market. Like a talented actor who can inhabit the role of his character, the best broker learns the mind of the client, and makes it his own.
Our day long discussion is filled with questions, observations, coffee breaks, answers and non-answers. By the end of a successful tour, we’ve exchanged a great deal of information. Sometimes, the tour feels like a tiny, double espresso version of a trip to the therapist. We both complete the journey with new perspectives, with many questions answered, and a sense of direction about our efforts, both individual and collective.
The successful real estate site tour is less, far less, about sites, rents and terms, and much more about creating a partnership, a bond of understanding, that will inform all of the subsequent energy that we put into positioning the brand to thrive.
Invariably, I return home from the site tour exhausted – mentally exhausted. Imagine if you can, driving 200 miles in a day and visiting eight or ten locations, while conducting a thorough, day-long investigation into your client’s vision, needs, challenges and dreams. Simultaneously, you are navigating traffic, organizing lunch, dinner and coffee breaks, meeting with owners and brokers, answering questions from one or more clients sharing the journey, all sandwiched between a very early and a very late trip to the airport. I am wrung out, yet deeply satisfied when the journey is complete and the mission accomplished.
In some ways, ours is a young person’s business. The site tours can be taxing to the extreme. And, guess what? There’s no guarantee that any of the sites reviewed will result in signed leases or closed escrows. The prospect of a day spent fruitlessly can be daunting. Yet only with age and experience can we give the client everything that they need and deserve from a visit to our market. As a young man, I would simply jump in the car and drive. As an older man, I consider the journey carefully. Now, only when I am ready to go forth and conquer, like the ancient Romans who proclaimed “Carpe Diem!” do I embark. And we seize the day.
Popup Blog Post: Seize the Day
Popup Blog Post: The Prodigal Owner
The Consumer Has Cash
The U.S. unemployment rate is now experiencing its 8th consecutive quarter below 4%, with national unemployment clocking in at 3.9% as Q4 of 2023 begins. Historically speaking, a phenomenon like this occurs about twice every century. Practically speaking, this means that the U.S. consumer has cash.
Much attention has been focused on inflation and the Fed’s policy of interest rate increases over the past year. Generationally high inflation has not simply triggered an increase in the cost of borrowing money, but also brought about soaring construction and materials costs, labor costs and other related costs of doing business in the commercial real estate industry. Collectively, these frictions in the marketplace conspired throughout Q2 and Q3 to slow or stall numerous commercial real estate transactions in markets across the U.S. For better or for worse, these challenging dynamics are the ones that have captured headlines for over a year.
But in spite of the various headwinds the market has encountered throughout 2023, an economy near full employment has proven to be a powerful tonic that neither inflation nor climbing interest rates could dampen. A multi-year period of sub 4% unemployment has not occurred in the U.S. since 1966-1969 (See Chart). This is truly historic data, and an under-reported, poorly understood economic jolt that continues to propel the U.S. economy, even as the Fed has labored to slow it down.
The consecutive challenges of the COVID pandemic and the subsequent spike in interest rates that aimed to combat inflation, greatly reduced the pipeline of new commercial real estate developments in recent years, even in the services arena of retail shopping and dining. Despite the shrunken pipeline of new inventory, the sales increases of essential brands in the quick service (QSR) and fast casual restaurant space, warehouse clubs, grocers, and fuel/C-stores continue to out-perform users across virtually every sector of the commercial real estate industry. Increasing average unit volumes (AUVs) by drive-thru and fast casual users, strongly supplemented by increasing adaptation of online ordering that was learned during the pandemic, have users that sell everything from coffee to chicken to burgers to fuel all scrambling to add unit count.
Consequently, a collision is now taking place in markets nationally in which expanding brands with great credit and a big appetite to meet consumer demand are in heated competition for a limited supply of new retail inventory that is only slowly making its way through the development/entitlement pipeline. This dynamic is presently on full display in the Northern California market, where our firm is bringing multiple new projects to market and consistently encountering multiple offers and overbids on rent for new high quality retail projects. On a single proposed new development that our team is currently pre-leasing, we recently received offers from five national coffee brands alone. Brands like these are flush with business because the U.S. consumer if flush with cash, triggering a fist fight for new, high-quality real estate opportunities as they come to market.
The fully employed U.S. employment market is the engine driving strong sales in the essential retail & dining space, even as other CRE segments, notably office buildings, struggle to reconcile the paradigm shift to work-from-home.
During the early and middle parts of 2023, the factor that was more impactful than the rising costs of doing business, was the uncertainty around how much higher the Fed would have to push interest rates to tame inflation. This uncertainty pushed many would-be users to the sidelines, pausing growth to wait out the impacts of increasing capital market pressure on their businesses.
But the recent flattening of interest rates and cooling of inflation have brightened the market outlook in Q4, removing uncertainty about what’s next, thus enabling those users that had hit the pause button to re-engage in lease and purchase transactions. Consequently, the playing field has quickly become crowded with high-credit retail and dining brands, creating an opportunity for landlords to craft favorable real estate deals that will pay dividends for years to come.
Industry watchers have observed for the past few years that the COVID pandemic and its aftermath would create an overhauled lineup of winners and losers in the US economy. As 2023 comes to a close, the vastly different fortunes in the retail and office segments of the commercial real estate industry provide a vivid illustration of how that transformation has played out.
