Written by W. Stephen Hagenbuckle, Managing Principal, TeraCap Partners March 21, 2013 National Real Estate Investor Online
Real estate gurus frequently talk about “shadow inventory” in the residential markets. But there’s a similar phenomenon occurring in the commercial real estate markets that should be encouraging for nearly every commercial real estate investor, especially ones involved in distressed deals. This new phenomenon, which we call “shadow tenancy,” refers to pent up demand by prospective tenants for new available commercial space and it can be a significant return driver.
As general rule, commercial tenants are sensitive to basic customer service and they want responsive, well-capitalized landlords who are ready and willing to invest substantially in their properties. When lenders or special servicers own a property (typically because they’ve acquired it during foreclosure) prospective tenants become concerned about how much the landlord is willing to invest in the property and respond to the tenants as a long-term owner. They also know banks and special servicers are likely to sell the property in the short-term to an unknown buyer. Understandably, prospective tenants, even if they are keen on the property, are wary to commit to new space until they know the identity of their long-term landlord.
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Danny Watts, a commercial real estate sales and leasing specialist with Saurage Rotenberg Commercial Real Estate, is a graduate of Louisiana State University (LSU). He has over 20 years experience in commercial real estate brokerage and appraisal. His areas of expertise include commercial and industrial brokerage and leasing; multi-family brokerage; lease negotiations; tenant build outs; market analysis and insight; and feasibility and valuation analysis. Danny is a member of the Commercial Investment Division (CID) of the Greater Baton Rouge Association of REALTORS®, a board member of the Perkins Road Historic Merchants District Association, and has served as a vice president for Literacy Works of Baton Rouge.
Saurage Rotenberg Commercial Real Estate is a member of the Baton Rouge Area Chamber of Commerce (BRAC); the West Baton Rouge Chamber of Commerce; the Baton Rouge Better Business Bureau; the Louisiana Commercial Data Base (LACDB); and the International Council of Shopping Centers (ICSC). Several agents, on an individual basis, are members of the Society of Industrial and Office Realtors® (SIOR), the Certified Commercial Investment Member Institute (CCIM); the National Association of REALTORS® (NAR); and the Greater Baton Rouge Association of REALTORS® Commercial Investment Division (CID).