A mid the turbulence of the real estate industry and economy, commercial real estate conditions in many parts of the United States, and elsewhere, present a very real opportunity for bold entrepreneurs with the drive and financial wherewithal to step forward while others are stepping back.
Although there is no "national real estate market"-only a collection of local and regional markets with their own trends, values and fluctuations-it's safe to say that conditions generally favor buyers and tenants right now. In the franchising world, that can mean far more site options, with far better terms, for franchisees looking to launch, expand or relocate their businesses.
Favorable lease arrangements can play a significant role in determining the long-term sustainability and success of a franchise. So in many respects, the opportunity facing individual franchisees-the ability to find ideal physical space at a much lower cost than a few years ago-is shared by franchisors as well. In other words, this is a great time to be educating prospects about their real estate advantages and, consequently, a great time for business development and growth.
Higher vacancy rates, lower leasing costs, declining prices for raw land, a lack of commercial construction and abundant inventories of distressed commercial properties-all of these factors, and others, serve the interests of franchisors looking to purchase property or franchisees seeking rental space.
Strong Message to Deliver
"The commercial vacancy rate nationwide is roughly 8 percent, and demand for commercial space remains sluggish in many areas of the country. The National Association of Realtors expects demand to grow slowly through the first half of next year, with vacancy rates declining 1 percent in the office sector, 0.9 percent in industrial real estate, and 0.5 percent in the retail sector. These are small changes, so even a year from now conditions should be favorable for business owners looking for space. That's a strong message to deliver to potential franchisees.
In slower markets, higher vacancy rates have prompted many property owners to offer good terms to secure and hold on to tenants. What's more, commercial landlords understand today's business climate and the effect that lower consumer demand is having on small businesses; conditions are not the same as a few years ago, when high prices and rental rates could be borne by businesses enjoying a steady flow of revenue. Although some landlords...