Q for Asset owners/operators: How do you approach pricing strategically? Specifically, interested in office, retail, industrial owners.
Based on your understanding of the market conditions, how are you balancing occupancy and rent growth? 

For instance, in a oversupplied cre market, do you sacrifice rent growth for maintaining certain level of occupancy? How do you determine thresholds? and What levers do you pull?

Basically, looking to better understand how asset owners approach pricing strategies under different market conditions.
[{"id": "galfdz2", "text": "Cash Flow. It all boils down to the money. Are you able to weather a storm so to speak? What is your critical, \"oh shit, this is bad\" worst case scenario. Figure that out and get creative in how to ensure it does not ever reach that point. \n\nSecondary factors include the age of the property and increasing maintenance. Then the space itself and how it compares to the competition, ease of access to major freeways, quality of tenants, etc. \n\nWith loans so low, most everyone I know is putting money into improvements to try and retain customers and show an effort in updating areas. LOC are very popular from what my bankers are saying.\n\nMy area is mostly industrial, and with many people leaving the office market have angled to convince office brokers to bring their clients to me to transition them to an office/warehouse area. Has worked out surprisingly well. Am 95% occupied with full rents and only one vacancy at the moment. \n\nHaving a big focus on reserve funds helped this year. Gave all tenants the month of April free rent with 50% total rent for May, June, and July. Realizing nobody knew what was going to happen, and extending a big olive branch to others put many peoples minds at ease and to \"ride this thing out.\" It worked great and nobody has left. Am projected to be 20% down in revenue, which isn't much in the grand scheme of things. \n\nGot creative and reached out to friends who were killing time with the work from home and got them to help update websites and online presence for many tenants. Of course they charged the tenants, but presenting an option to help my tenants not feel outdated and my friends to practice their CS skills was a huge win win for everyone. I'm a personal busy body and seeing my friends and tenants get depression from being inside really hurt. Found a way to connect others and to update their business while making some of the outdated tenants happy at the same time.\n\nIts realizing that real estate is a long game and to try and adapt to the changing environment. Some of my tenants are old school and were struggling with the technology updates that many folks went through with the work from home. \n\nAnother bit of history is during the 2008 downturn most of my industrial portfolio was around 50% occupancy with some as low as 35%. It was VERY stressful, but pushed hard for a year going door to door to competitor properties to convince larger tenants to downsize with an extreme discounted rate. Sold it to them as a more secure place for ones business. If I could get a property 75% filled rather than having to worry about potential break ins was my biggest concern and goal.\n\nIt worked out really well where all the expenses were covered and the income didn't matter so long as the property survived. Invested money into new outside lighting and visibility (dipped into my reserve funds at this time). Banks had seized up and were not lending as they are now in 2020. As the break ins increased, the competitors tenants would drive my properties and see the improvements and instantly called me to work out a deal.  The newer tenants who downsized, could increase their rents over time and they still felt they were getting a great deal. \n\nI do hope this gives you some insight to my personal experiences. Am in Houston, Texas and the biggest expense/headache is always going to be the property taxes. Never actually had specific numbers or thresholds, only goal was survival.\n\nEveryone has a different business philosophy, but real estate is work. Its not a guarantee. Putting people first and striving to meet them where they are has yielded me great results. What you are worried about, chances are most everyone else is thinking the same thing.", "replies": [{"id": "galu33i", "text": "Thanks for sharing your experience. 95% occupancy with full rents is incredible! great work.", "replies": [{"id": "gaotoqy", "text": "I do hope this helped you in some way. It is clich\u00e9, but in the field you only have one reputation. Do not waste it. Follow through on what you say you will do and over time people will start to notice the ones who care vs. want to make a quick buck.\n\nDepending on the type of company/owner you represent, I imagine they will have their own goals, etc. Its easier to be creative with smaller owners vs. the big boys in corporate settings. A lot of politics and too many cook in the kitchen so to speak. \n\nMaybe ask them what their best case scenario in today's market goals would be and to try and work from there? \n\nNo point in trying to do work that wont mean much in the long run. It is precious time you could be improving and working on other skills such as: cold calling, networking, learning construction, tax codes, negotiations, building a good team, etc. \n\nGood luck and never let anyone say you can't be where you want in life.", "replies": [], "depth": 3}], "depth": 2}, {"id": "gaqza9k", "text": "Agree that, for me as an asset owner, my approach depends #1 on portfolio cash flow. I was negotiating an extension with a big credit tenant last winter, they're about 25% of my income stream. Below market rate so would really like to bring them up, or take the hit on the vacancy and re-tenant. I was prepared to weather the storm if necessary, so to speak. Then negotiation dragged and COVID hit. I'm 100%, ok 97% industrial, so everyone was paying but pucker factor starts to go up. Tenant schedules a call - they never schedule a call! Are they leaving, are they telling me they can't pay rent? No, they wanted a flat 1 yr extension. I wanted min 2 years and 5% bump, but I took it right then. I didn't know if another tenant would fold, didn't want to try to relet 75,000+ sq ft in a suddenly uncertain market, etc. Maybe a bigger guy would have held firm on raising their rate.  \n\\#2 factor- Tenant quality. Credit tenant above always pays early, has their own maintenance guy, has 24 hour security patrol, very much hands off. Another tenant in the same complex came up for renewal this fall. Slightly smaller footprint, already at market rate, but mom and pop, frequently late on rent, ALWAYS complaining about something that isn't my responsibility, etc. They had short extension options but at a big bump. I offered them a 10 year extension at 2% annual bumps (they've been in the space 10 years). No dice? Ok fine - exercise your option or get out. They took 2 years at a 30% bump! I was shocked they didn't go for the longer term and just negotiate an exit down the road if needed. Or go out business more likely..\n\nNow the crazy thing is - if I could do it over again, October vs April on the credit tenant - I would have insisted on a raise/term or let them walk. Industrial demand is nuts right now, I keep getting inquiries for large space. I thought leasing activity would dry up. Go figure. Circling back to your question, that shows me how my perception of the macro market may be wrong at any time and my tenant negotiations are really more influenced by my personal financial concerns. A professional asset manager (OPM) might give you a different answer.", "replies": [{"id": "gas5hgl", "text": "Isn't it funny how our personal emotions go through such a ride? Similar to the stock market. Glad you got your big tenant resolved. Negotiations combined with all the stuff in the news at the time can really get to ones mental state. \n\nEasy when one sticks to a plan and ride the emotional Rollercoaster. Much harder for someone without the experience. 9/10 everything is going to work out.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gaqvbg1", "text": "Those three asset types have wildly different asset management strategies. It\u2019s apples and oranges to discuss how it works between these three, and even within them there\u2019s still substantive stratification. Only thing in common is that WALT is most important thing to solve for.", "replies": [{"id": "garwnz9", "text": "To clarify, I am not trying to compare them. Just need info on pricing strategies for each asset type.", "replies": [{"id": "gasafdd", "text": "Yea, got that it\u2019s what you wrote. asset management strategies are wildly different between the three, it\u2019s apples and oranges to offer give a catch all strategy for leasing other than to say WALT (and I guess REVPAF) is what you\u2019re gunning for across all 3. The strategy for a supermarket anchored shopping center is much different than a 1mm sf flex facility is different than an office tower. Also depends on who you are / what your business plan strategy is. So.... not to be crass but you need to be in the weeds doing it to know what the strategy is for a property.", "replies": [{"id": "gasb8b9", "text": "WALT makes sense. For context, we're building a pricing/RM software and are doing some research on asset management strategies for different cre assets. In your experience, how do professional asset managers do it? The one's managing millions of sqft.", "replies": [{"id": "gascf0g", "text": "I mean I\u2019ve asset managed millions of square feet. It honestly depends on what your strategy is and what the building is, it\u2019s tough to give a blanket answer. A broad brush stroke I guess would be get a big anchor tenant at low rate to allow you to push pricing on the next marginal lease. Hotels (and multifamily to an extent) are really the best place to see this pricing dynamic in action.", "replies": [{"id": "gasqjvf", "text": "Yeah, dynamic pricing has been applied to Hotels and MF where the frequency of transaction is much higher. However, with low frequency and longer leases for office,  industrial and retail, it's important to get the pricing and terms right. The PSF is market driven and the lease factors - free rent, annual increment, concession etc are all negotiable.\n\nWe've been able to gather data building occupancy, property financing, tenant credit worthiness, etc and calculated a weighted cap rate and produce different cash flow scenarios. If you had all the data, how would you use the data to make decisions? WALT pricing strategy.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "gawc31n", "text": "It depends. I'm not sure how often \"asset owners\" randomly purchase properties without any plan or reason. If they do so it's probably for holding reasons, tax purposes, or maybe they can get some cash flow (which seems like the main point of your question.) \n\nMost properties in strategic and high proximity locations are owned for a reason and are leased out. Rarely sold, and if they are, they're bought by someone else to hold it.\n\nEvery now and then you probably see a few properties on the market that shock you.\n\nAnd for your question, it depends on how important the property is. The idea is to at least be able to pay off any monthly costs, whether using cash from another source or getting whatever you can from the property. Something is better than nothing. Might as well keep your tenants and figure out what's going on in their world as well. Unless your specific property is in a highly contested area, it might be some time until you get another tenant.\n\nWorst case scenario, you have to sell the property which in this situation would be priced lower and hopefully your mortgage isn't too high. There are special companies to handle things like this including bankruptcies.", "replies": [], "depth": 1}]