May 22, 2007 by jack petrie.

Ron Roel, a former Newsday editor and a co-founder of the real estate educational service Real Estate Next, has written a white paper called “Real Estate and the Media: Understanding news coverage and its impact on the housing market.” While the paper examines the issue of whether the media unduly focuses on negative real estate stories in the residential real estate markets, it also raises the important question of how the media shape public opinion about the commercial real estate markets.

The Commercial Analogy

Roel describes the recent increases in stories about a housing “bubble” being ready to burst. The media equivalent in commercial real estate would be the increase in coverage of the unrelenting rise in the prices of commercial office space in Manhattan. Before opining on this coverage, let’s examine some of the underlying facts:

• Average prices in Midtown and Downtown are at all-time highs;
• Vacancy rates are at recent historical lows;
• Vacancy rates are below the consensus rates of “equilbrium”;
• The majority of real estate pricing is subject to supply and demand curves;
• Real estate pricing, like the economy itself, is cyclical and subject to both upturns and downturns;
• Commercial property owners are major advertisers in the local media;
• Real estate brokers are paid higher commissions commensurate with higher rents and longer lease terms;
• Most real estate brokers at any given time are representing the interests of a property owner.

What does this mean for the commercial tenant today?

1. If you face an upcoming lease expiration, think long-term. Consider renewing on a short-term basis until this market cools down. We often recommend a short-term renewal in order to allow time to execute a process that leverages the market. If you’re out of space and need to relocate, sign a short-term relocation lease.
2. The recent rise in prices has been fueled primarily by a lack of supply. For Downtown tenants, this will change as new construction breaks ground at World Trade Center. For tenants in Midtown, the peripheral boundaries have expanded in all directions. Tenants must now evaluate the west side, Midtown South and Northern Manhattan (Harlem).
3. Many companies are currently “inventorying” excess space. If and when the economy falters, this inventory will initially become “hidden” or “shadow” space and ultimately, sublease space. Currently, corporate “belts” are cinched at the loosest notch.
4. Don’t believe everything you read. Media coverage of the market is inherently biased. Examine the individuals quoted in the media. Understand which firms they work for. Ask yourself if those firms represent major property owners (and if in doubt, turn the page and look for their advertisements). Ask also if these professionals are incentivized to promote a market frenzy.
5. Commercial real estate is not like residential. Leasing office space is not like buying a home. There are no “hot” properties. There is only new construction and old construction. Companies do not select locations because of the property marketing, they select based on a matrix of criteria, including cost, commutation, amenities, efficiencies, etc. (i.e. Long Island City is still located in Queens).
6. Higher a trusted advisor. Understand how your advisor is compensated. Understand who your advisor’s other clients are and if any of those clients represents a potential conflict of interest.

In summary, navigating today’s commercial real estate market is fraught with greater peril than ever. The risk is in “locking in” a long-term rental rate that will leave you underwater in a market downturn. Take a deep breath, turn the page of that publication and let sounder reasoning take its course. There are many more options to discover from which to benefit.

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May 17, 2007 by jack petrie.

CresaPartners recently hosted the May 9^th, 2007 New York Software Industry Association’s Sales & Marketing Special Interest Group’s Panel Discussion on Search Engine Optimization.

Stellar Panel

The panel consisted of Abe Mezrich, Manager of Communications for Did-it.com; Tony Grass, President of e-Market Intelligence and Raphi Salem of SalemGlobal Internet Website Marketing.

Did-it.com

Abe Mezrich opened the discussion with an overview of Did-it.com and made the distinction between generalized search (i.e., Google, Yahoo or MSN), research-based search (i.e., Answers.com, Wikipedia or Weather.com) and consumer search (i.e., Amazon.com, eBay, Business.com or Expedia.com). He also made the distinction between organic search, which is typically for information searches and paid search, which is used mostly for commercial searches. Abe cited the example of MetLife’s website, which attempts to capture organic searchers and convert them into customers. Their website offers landing pages with instructional information on financial planning and places links to consultation with MetLife representatives alongside this information.

e-Market Intelligence

Tony Grass followed up with a presentation on the differences between internet traffic and internet sales. He focuses on helping companies find qualified prospects when they are most ready to purchase a product or service. This methodology focuses on targeting qualified prospects who already are searching for the product or service that a company offers. At the very least, this focus will produce sales leads in addition to actual internet sales.

SalemGlobal Internet Website Marketing

Finally, Raphi Salem discussed the building of community within a local industry. The tactics of developing a community include offering educational information, monitoring page rankings, linking to other sites, creating email newsletters, blogging, utilizing social media sites and developing promotions and/or contests, to name several. This approach differentiates itself by asking not just is traffic being driven to the website, but are visitors being fulfilled enough to return to the site?

The presentations were followed by a spirited question and answer session moderated by Jack Petrie of CresaPartners, co-chairman of the NYSIA Sales & Marketing SIG. Discussion topics included Google’s impact, degree of rocket science in SEO, the future of search, mobile search and Wikia’s proposed entry into the search arena.

Future Event

Next month’s NYSIA Sales & Marketing SIG meeting will be held on Wednesday, June 6^th at 6PM at CresaPartners, 100 Park Avenue (40^th-41^st Streets), 24^th Floor. The topic will be “Creating Your Sales and Marketing Plan” and will feature a discussion with Morris Bocian, President of Creative Business Planning Inc., Kevin A. Drakeford of Drakeford & Kane LLC and Anna Lieber, President of Lieber Brewster.

Hope to see you then!

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May 16, 2007 by jack petrie.

Working for a real estate firm that focuses exclusively on tenants, we don’t have the advertising & marketing budgets of our competitors who represent landlords and can “slap” their names and logos on buildings or tombstone transaction announcements throughout the media.

However, when life gives you lemons, it’s time to make a great batch of lemonade!

The Dearth of Midtown Meeting Spaces

Many attendees at CresaPartners-hosted events have been witness to the power of one of the greatest marketing assets our firm possesses – our conference/event space. Due to the shortage of affordable meeting/conference space in New York City, our conference facility (offering close proximity to Grand Central Terminal and a maximum seated capacity of about 75 people) has recently been in great demand.

Since our relocation to our 100 Park Avenue offices three years ago, I have offered this space to every group imaginable – Chambers of Commerce, Industry Trade Associations, Marketing/Networking Groups. Surprisingly, not everyone accepts. Not surprisingly, sometimes we’re asked to join a sponsoring group. Not a problem though, as we have found a successful formula for networking within this type of group.

The Service-Firm Marketing Model

Taking a page from the marketing playbooks of the law and accounting firms, we have found that event sponsorship offers tremendous marketing value and provides a high level of marketing awareness among attendees.

Additionally, from sponsoring and attending so many events, I have learned a lot about the event dynamic, itself.

Three Networking Lessons

1. Don’t “Eat Alone” - One lesson learned is that (like Keith Ferrazzi describes in “Never Eat Alone“) it is more efficient to market to 75 people collectively rather than individually, particularly when one has the credibility of being an event sponsor or host. At CresaPartners-sponsored events, I typically deliver a quick elevator pitch to the audience. But I don’t stop there. I usually network before the event and collect cards and I definitely follow up after the event.
   
2. Be an Early Bird - Another lesson learned from panel discussions is that the best time to network with the panelists is before the event, when everyone’s standing around waiting for the event to begin and the panelists are up front and eager to get started. If you wait until after the event, you’ll get lost in the horde and quite frankly, at that point the panelists are in a hurry to get home or back to work.
3. Always Make Re-Introductions - After attending several events the likelihood increases that I will have previously met some of the attendees and/or panelists. When this is the case, I always reintroduce myself and say hello to someone I’ve met before. I also try to approach the panelists (pre-event, of course), reintroduce myself to anyone I’ve previously met and say a few quick words. Many times, a warm reception and/or recognition from one of the panelists makes it easier to introduce yourself to the other panelists.
   

By utilizing this approach the benefit is that once the event starts, the “heavy lifting” has been completed and you can focus on the event content and stay as long as your schedule allows. This approach also allows for “double booking” or attending multiple events in a morning or evening. It can certainly make networking extremely efficient.

Event sponsorship is no substitute for the sales process, but calling on prospects who have visited your offices and have a familiarity with your firm and personnel can instantly warm up a sales call. It is a lot easier to make a warm call to someone who already knows who you are, what you do, “where you live” and who has visited your workspace and observed your company culture recently.

Next Steps…

1) Planning your next office relocation? Here’s a quick tip: double the size of your proposed conference facilities!

2) Looking for event space? Contact me at jpetrie@cresapartners.com and perhaps we can discuss a possible fit with our facility.

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May 15, 2007 by jack petrie.

Many tenants mistakenly feel there may be a potential savings to be had by forgoing an advisor when entering into a lease negotiation, particularly on a lease renewal. However, in the absence of an advisor, the commission monies (which are a line item in any transaction’s pro forma) revert to the landlord’s agent or management company. In essence, you are paying for an advisor whether you choose one or not.

From our experience exclusively representing tenants, engaging an exclusive advisor does the following:

1. Protects you from any brokerage claims of third parties claiming to have represented you or a prospective property,
2. Provides industry expertise that allows you to preserve internal company resources (i.e. “time”) for your core business,
3. Provides an objective, unbiased voice in comparing competitive properties and scenarios,
4. Provides a process that creates leverage for your tenancy and identifies all potential occupancy costs,
5. Gives you greater credibility and leverage with the landlord community,
6. Attracts the top tenant representation available.

To conclude, the New York City lease is a formidable document crafted by the landlord’s leasing team to protect the landlord. It is the summary of a large set of historical contingencies that gradually attempts to close any and all tenant loopholes or ambiguities. Each clause in the lease has monetary impact. Do not attempt to tackle this one without adequate protection in the form of an objective, tenant advisor.

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May 14, 2007 by jack petrie.

CresaPartners recently cohosted the May 8^th, 2007 iBreakfast featuring a discussion by Jimmy Wales of Wikipedia & Wikia.

The Online “Magazine Rack”

Most readers are familiar with Wales’ non-profit, Wikipedia, a collaborative, open-source, online encyclopedia. Wikipedia is one of the more obvious example of the recent trend towards networked collaboration among individuals and the resulting potential for greater efficiency and achievement. However, most people are unfamiliar with Wikia, which is a separate, for-profit company. If Wikipedia is the online encyclopedia, Wikia’s mission is to be the online magazine rack, with a title for every user interest along a very broad continuum and possessing a library’s volumes of supporting documents.

A Threat to Google?

As Fast Company detailed in its April, 2007 cover story, “Google’s Worst Nightmare“, Wikia’s other ambition is to provide the same Wikipedia-style democratization to the process of online search.Wales contends that the online search process has become commoditized: witness comparable results from any of the top three search engines. Where Wikia will differ is in providing four key criteria to the search process and results: 1) transparency – of content, algorithms and systems; 2) collaboration – providing search with a social and communal focus; 3) quality – improving the relevancy and accuracy of search results and 4) privacy – elevating user privacy protection. Wikia will launch later this year with a version that, like the early Grateful Dead, will admittedly “stink”, but improve with experience.

Miscellaneous Opinions

Wales was entirely entertaining and completely candid in revealing many of his beliefs that reflect his personal mission. Many of the concepts that he believes are unsustainable and will become extinct include: the black box model of source code (a.k.a., “security through obscurity”), algorithmic approaches to reputation (a la “Digg”), paid content models (i.e., About.com) and Digital Rights Management in general.

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