Missing assets are gaps that should be added to your real estate portfolio or modified to support your business’ strategy. Filling these gaps is what we refer to as a real estate acquisition strategy.
A commercial real estate acquisition strategy looks different from organization to organization. The acquisition process may take time, but the process is essential to keep your portfolio aligned with, and ultimately, add value to your business.
If you feel your portfolio is missing something, then it might be time to consider new or additional real estate. To get started, we’ve outlined the typical process for diving into your acquisition strategy.
Step 1: Conduct a Needs Analysis
A needs analysis identifies the what, when, where, why, and how concerning your organization’s missing gaps. A proper analysis will illuminate any gaps in your portfolio, bringing to light important acquisition opportunities and identifying your organization’s true asset needs.
While needs vary among organizations, some key questions to consider include:
- Does our current real estate offer the best possible access to suppliers and other essential stakeholders? If not, it’s time to plan for how to bring your business closer to those organizations and individuals that are essential to your operations.
- Would a new location improve access to customers or clients? Your organization may not be as dependent on geography as others. If that’s the case, then tapping into a whole new market may not be required. But if you’re considering expanding or want to be closer to your customer base, explore what possibilities exist that will better position you for success.
- Is this an opportunity to tap into new labor markets? Tapping into new labor markets means new opportunities to grow or improve your manpower and to increase the diversity of talent within your company.
There are dozens of other questions you can ask during your needs analysis, but the bottom line is this: How will acquiring or modifying these assets enhance our business initiatives?
Step 2: Set National and Local Site Selection Parameters
The next steps consist of setting and clarifying any national and local site selection parameters. Depending on your organization, parameters can be stricter or looser, and they can help define a company’s overall mission and values. Oftentimes, parameters include factors like safety, location, topography, accessibility, and so on.
Site selection parameters are unique for every organization but common ways to approach parameters include:
- Conduct a labor market analysis to identify the best market that meets talent requirements.
- Explore salaries across the region to help you effectively attract talent and be competitive in the labor market.
- Reveal market trends, including factors like labor demographics, labor costs, renovation costs, and what opportunity zones exist.
- Determine what government incentives, tax credits, training programs and so on are available. Often, certain states, counties and municipalities will offer these to attract investors.
Depending on the size of your organization, parameters may be set at the beginning of the process, other times they will need to be agreed upon or modified as you begin your market research. Speaking with a real estate advisor to research your ideal market can help determine these needs, as well as provide additional market knowledge.
Step 3: Research and Screen Target Market
Once site selection parameters are complete, you’ll need to screen the market you have in mind. The best approach to doing so is to partner with a real estate advisor (if you haven’t already) who can provide market reports and gather custom real estate data based on your needs. Your advisor should guide you through the identification of a long list of properties and capably assist you in narrowing the list to a handful of properties that best fit your needs.
While some markets may offer advantages in terms of talent or logistics, not every market offers the same return on investment in terms of assets. Key data points to measure can vary by industry and organization. Ensuring your target market aligns with your needs before acquiring the asset is essential to boosting your bottom line.
Step 4: Obtain Decision Support
No matter how thorough your analysis, it’s essential to present the findings effectively to leadership at your organization in order to secure buy-in. Ensure that you’ve created an open line of communication and you’re on the same page to present a cohesive plan. Your real estate advisor can help you compile, sort, analyze (both financially and qualitatively) the information in a way that helps you best position your findings and builds the business case and recommendations for leadership. With leadership buy-in, the advisor should help you develop a Request for Proposal (RFP) outlining the important business and legal terms of a real estate transaction.
Step 5: Leverage Negotiations
Once you’ve conducted market research, secured buy-in from leadership on your shortlist, and developed the RFP, it’s time to begin negotiations with property owners and their agents. The goal is to create negotiating leverage by creating competition for your deal. The RFP is used to clarify what is important to you, but also to make it clear to each property owner that they are not the only option.
As part of any negotiation process, be prepared for any potential pivots—expect counter offers and pushback. This helps to keep the talks moving and minimize downtime. Your real estate advisor can help you prepare for this phase, and will be able to lead this part of the discussion. Meanwhile, for each deal, the advisor will update the analytical tools created in Step 4 after every round of negotiations.
Step 6: Close and Document the Deal
No two deals look the same. That’s why it’s essential that you work closely with your legal department and/or outside counsel and real estate advisor to close properly. The more thorough the RFP and business negotiations are, the more smoothly the legal documentation and negotiations should flow. This process may look different depending on whether you’re expanding locally or nationally, but either way, your team can help walk you through the process to assure to dot all the i’s and cross all the t’s.
Get the Expert Real Estate Advice You Deserve from Allegro
Whether you’ve just begun considering expanding your portfolio or you’re ready to identify those missing gaps and fill them, talk with an Allegro Real Estate Brokers & Advisors team member to learn how we can help optimize your real estate portfolio. Schedule your free 30-minute consultation today.