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    Written by Andrew Friedeberg
    on May 15, 2019

     

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    This is part of our ongoing blog series on why hiring the right professionals is essential to making an informed and successful lease decision as a business and potential tenant. To match with the best local, commercial-focused real estate professionals and vendors visit VoxLink, our trusted portal to real-time, highly qualified industry partners.

    Andy Swanson is a senior vice president at Centric Commercial, an Austin-based commercial real estate services firm. He has over twenty years experience working within the industrial property type.

    Andy holds a unique perspective for a tenant representative, stemming from his experience working on both sides (Tenant and Landlord) of a real estate transaction as well as many sales. For the past five years, he has successfully represented tenants in their search for both office and industrial spaces.

    So, how did you get started in Commercial Real Estate?

    I was a student at The University of Texas, graduated in 1997, and was out looking for a job once I got done with school. I was interested in commercial real estate. I had been working for an insurance agency in Austin for a number of years before then while I was in school, and got to see a lot of the city, got to know a lot of the buildings, some of the real estate [developers], as well. And that was my interest in real estate. It’s tough to break into it. You need to typically know somebody, you need to have an opportunity somewhere in order to figure out where you can go, what kind of stuff you can work on, that kind of thing. Like a lot of different professions, you’ve got to have that opportunity. And I had an opportunity presented to me. I responded to a job listing in the Statesman--that’s the way they did things back then a lot of times. It’s changed a little bit now with the way people look for jobs, but back then I actually sent a resumé to a blind ad. I got a request for an interview, went through the interview process with a Dallas-based real estate development company. They had a fairly large real estate development operation in Austin, and they needed someone young and fresh to train and teach how to work their portfolio, run the business, that kind of thing. So I worked for them for sixteen years. It ended up being a long-term relationship that turned out really well.

    What drew you to tenant representation?

    Well, initially, I was strictly on the landlord side for that first sixteen year period, where I worked solely for a developer/owner-operator of industrial property. So I’ve learned the landlord side of the business extremely well. I’ve learned all parts of the business--the construction side, the property management side, leasing side--so I’ve got a really good grasp of everything from that side of the business. I didn’t do any tenant rep work until about 2014 when I made the transition from landlord to tenant rep, and I’ve been doing that ever since. So, it was a natural transition for me. It was something that I knew I would probably do at some point in my career, and that opportunity came along. And that’s when I joined Centric Commercial, and I’ve been with Centric Commercial since May of 2014.

    Could you speak a little bit about situations in which you believe prospective tenants would require your services?

    Well, I think anybody that is out in the marketplace [would require my services], especially in a market that’s as tight as Austin. I think it’s good to have someone that’s working for you on your behalf when you’re out looking for space. If [you don’t], it can be tough to figure out which way to go, whether or not you have a deal that makes sense, what are the risks with any given deal, that kind of thing. So, having somebody that’s got experience with different landlords, different real estate agents is certainly important in Austin. If you’re talking a relatively short-term lease, small space, under 1,000 sq. ft., there’s minimal risk with that. But when you start talking about leases that have bigger square footage, longer terms, more dollars involved, it’s certainly worth talking to somebody that knows what they’re doing in that arena in order to make sure that you minimize the risk in the real estate side of your business.

    What kind of value can you bring to potential clients?

    The value I bring is through a lot of experience, especially experience on the landlord side of things. Knowing what landlords are looking for, what they are hoping to eliminate on their risk side of things, knowing that side of the table very well from doing it for sixteen years is something that certainly gives me a lot of background with that. And then as far as the tenant side of things goes, I work with a great group of people here that have got a lot of tenant rep experience. We work in teams to always work to get the best deals possible for our clients.

    What are some qualities that distinguish you from any other tenant representative?

    A lot of experience on the landlord side of things; I think that’s a big thing that I bring to the table. For our particular firm, the way we group together and organize in order to work on different accounts. We team up, we try to make sure that we have skill-sets that are set up appropriately for whatever client we’re working [with]. And we don’t pass a small deal off to a junior broker and tell them to take it and run with it. All of our senior brokerage people are heavily involved in every deal that we’re working on and typically the one that is taking the lead with that at all times.We feel that our experience really helps us a lot with that.

    Given the current market atmosphere in Austin, what are some key points of advice you have for tenants in their search for their ideal spaces?

    There are spaces available, you can find space. You need to be out early in the process--earlier than you probably would’ve ever expected. And that’s another good reason to reach out to a tenant rep broker in order to find out when should you start looking for space, when should you start talking about that. And a lot of times you need to start talking about it at least a year out before you need the space. As far as when you need to have a deal cut, it depends on the size of the space, the amount of work you need done on the space. There’re a lot of different tiny aspects that are critical to getting a deal worked out so that you aren’t in a time crunch when it gets down to it.

    And like I noted, there are spaces that are available. The issue is there are a lot of tenants out there looking for space right now, too. So if you find a space that you like, you should probably move forward on it as quickly as you possibly can in order to secure it. Otherwise, if you think it’s a good space, there’s a good chance somebody else out there’s thinking the same thing. And if you don’t make a move on that space, there’s a good chance that within two weeks, four weeks, six weeks that it’s going to be gone.

    There are many different CRE firms that perform tenant representative services in Austin. What qualities would you say distinguish Centric Commercial from other firms?

    Well, we’re a small firm. We pride ourselves on our ability to provide a high level of customer service for every client that we’re working with. So I think that’s our number one reason why we think that we’re a good fit for a lot of different clients that we’re working with. Our experience here, as well. The average experience among the senior brokers is twenty-five years per person. We have two younger brokers that are very hungry, hard-working, and we’re looking to add additional people, as well. So I think those are the top reasons why, I think we’re very competitive at what we do.

    Where do you see the market for tenants going in the next few years?

    I don’t see vacancy rates changing a whole lot...short-term, meaning a year or less. I think things will probably be similar to where they are right now. I think construction activity is still pretty high, but we’re still seeing buildings getting leased up fairly quickly, getting absorbed in a time frame that developers--I think--is reasonable for sure. And a lot of the bigger office buildings...are pre-leased 100% before they’re even finished. The market for smaller spaces is going to continue to be tight, in general, because no one is adding a whole lot more small space to the inventory. And when I say small spaces, 10,000 sq. ft., 5,000 sq. ft. or less (kind of the 1,000-5,000 sq. ft. range, especially) where there’s not a lot of new inventory being built, brought onto the market.

    Outside of the Domain sub-market, are there any other sub-markets that you think will be seeing major growth in the near future?

    Yeah, I think there’ll continue to be buildings built in the Southwest part of town. Sites are becoming more and more limited, a lot of them have been built out over the last cycle. That’s strictly talking office. On the industrial side of things, I think we’re going to continue seeing development happen all around, really mostly outside of Austin because most of the sites in Austin have been built out for industrial. There are still a few that still will be developed, and most of the activities [will be] happening in Pflugerville, Round Rock, there’ll be some stuff happening in Georgetown, Hutto, and then down south in Buda and Kyle, as well.

    Could you talk about a deal you worked on in which you really made a difference in your client’s lease search?

    One example is an office client that is a security services firm, and they have a special parking requirement that is quite a bit over above the typical parking allotment for a building. Most buildings it’s 4 [spaces per thousand sq. ft.], a lot of them it’s 3.5 [spaces per thousand sq. ft.]. This particular one--it’s not quite double that, but it’s fairly close--so it’s probably more like a 6 [spaces per thousand sq. ft.] requirement. They were concerned that they wouldn’t be able to find many properties at all that would work for them for that type of parking requirement, and we ended up finding three or four good options for them at rates that made sense where they weren’t getting dinged extra for the parking, where there were opportunities to take care of that special requirement that they needed. And they were extremely happy with that, did not expect to find as many options as they ended up getting to see. So that was something that we were really pleased to help them with.

    How does setting up a true office lease differ from that of a flex or industrial lease? And how (if at all) do current market conditions shape your process in navigating these different lease types?

    The biggest difference between office and industrial leases is the way expenses are handled within the leases. Office leases, typically the landlord pays for everything, and then they bill things back through their operating expenses to the tenants. For industrial, most leases, generally almost all leases now in Austin, are set up where the tenant pays the base rent, and then they pay their triple net expenses. Then they’re responsible for finishing units. Lighting, all of their interior items, plumbing, HVAC, electrical. If something goes wrong with that, then they’re responsible for it. So the key thing there on industrial leases is trying to control those expenses. If you’re moving into an older space, you want to try to push as much of that expense risk back over to the landlord as you possibly can. There are ways of doing that, and that’s one thing that we always try to negotiate for our tenants, for our clients whenever we can to improve that situation for them so they’re not stuck with a huge HVAC bill down the road.

    With an office building, you may see that HVAC bill as part of your operating expenses, but you’re usually not the one that pays the whole thing 100% if you just sign the lease and don’t negotiate any of that stuff out. So those are key things to always look at. Knowing exactly what the expenses mean when you sign a lease is very important because there’s a lot of risk there. You could get hit with a bill for $20,000 of maintenance work that you thought “Oh, that’s not something that’s going to happen to me” and it happens all the time. That's the stuff that we look at all the time when we’re looking at older properties. So those are the first questions that we ask.

    It can be [harder to deal with these lease types in current market conditions]. Landlords are less flexible in this market than they were, say, five or ten years ago. We keep saying that we’re at the peak of the cycle. I don’t really know if we’re there yet or not, but we’re pretty close. We think pricing seems to have leveled off a little bit, but expenses continue to go up for properties. But your question regarding flexibility as far as what you can get landlords to agree to in a lease, certainly it’s tougher to do that now than it has been, it’s still part of the negotiation process, it’s something we still work on and try to make sense of the landlord to do that. And it is [an industry trend that’s going on].

    What do you do when you’re not placing tenants in their ideal spaces or assisting real estate investors with their acquisition and disposition needs?

    I do a number of things. My wife and I love tennis and skiing. So summertime, we’re on the tennis court as much as we can be. In the wintertime, we try to get to Colorado or Utah, California as much as we can. Those are the things we like to do to get away from the work side of things for a little while, clear the mind. Those are two things that we definitely enjoy.

    Thanks Andy, to reach out and connect you can reach Andy at Centric Commercial

    Andrew Swanson

    Senior Vice President

    Centric Commercial / CORFAC International

    Direct: +1 512 320 9190 ext. 227

    Mobile: +1 512 777 9916

    swanson@centric-re.com

     

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