Moving from rural Nevada to Arizona also required searching for suitable office space. A recession suggests a soft market, which translates into an assumption that the tenant is in the driver’s seat. Well, you know the old saw about “assumptions.”
Many landlords are caught between the proverbial rock and hard spot. They have fixed costs, which limit their flexibility. There goes the first chink in the false assumption. Second, like homeowners everywhere who’ve seen their home equities plummet, commercial landlords grind their teeth over the similar fall in asking rents. Third, commercial brokers, who with their landlord clients are stakeholders to the Nth degree, likewise cling to a past reality of high rents, short supply, long lease terms and high commissions. One stupefying broker sniffed at how the commercial space he was offering “would ordinarily command $34 per square foot on an yearly basis but because of the economy, it was now going for $28.” He talked as though he were offering such a deal. Well that space still sits vacant, the broker and his client having forgotten the first rule of business, which is fair market value, i.e, that value is determined not by one’s subjective fantasy but by what a knowledgeable, willing and able buyer is willing to pay.
Finally, if you think the solution is shared space with another lawyer, think again. I spent over two decades as a businessman and still think of myself as a business person first. Lawyers generally do not. No loaf is better than half of one and a glass half full, looks better when it’s empty. Want to kill a business deal? Be careful of the lawyer you use.
After the 3rd or 4th lawyer tried to “sell” me space in their empty offices for the going rate of $5 to $6 a square foot, I knew I’d found the intersection between cluelessness and business vacuity. For example, one lawyer had an empty building in a “economic development” area downtown. The homeless slept under carports and wrought iron bars graced the windows. This lawyer wanted $1,000 for a small office. And for an assistant’s workstation, well, that was another $300. Well, the building still sits empty and presumably, the vagrants snooze on undisturbed.
The search took longer than expected. But the second rule of business is that the power in any negotiation always rests with the party willing to walk away.