The rush for incentives: From a legal perspective, there are a lot of things that our clients are looking for today. One of the biggest is the availability of incentive financing to support their growth and expansion plans. There is a lot more focus on and realization of the fact that most states are anxious for business expansion and business development, and are much more likely to provide incentives and support for those things.
Companies might say to the state that they are getting ready to add employees and build a product line. They’ll then wonder what kind of help they can look forward to from the government. That can be tax breaks, incentive-based financing, a number of things.
The loan-renewal questions: Our clients are also wondering about the requirements on their loan renewals. We are starting to see a little bit of flexibility by lenders, but sometimes the terms of the renewals are difficult for the clients to meet. Our clients turn to us to understand what kind of situation they are in. The lender has come back with a new appraisal of their property, and it shows a decline in value. How does that work?
A time to renegotiate: The other thing that we are seeing is a lot of motivation for clients to either relocate and sign new leases or to renegotiate with their current landlords. We are seeing tenants frequently negotiate for longer-term deals that come with more certainty of rental rates over the long-term. They are negotiating for lower rental rate increases throughout the life of their leases.
The need to adapt: Our practice changes as the commercial real estate industry changes. In the mid 2000s, we were working on a new arena in Kansas City, working on helping that get built. We were working on the renovation of big historic buildings. We worked on a number of growth projects such as new industrial and intermodal warehousing facilities. We were working on lots of downtown revitalization developments. The business is not going as quickly as it was before. We are, though, seeing people who have money who may have been on the sidelines starting to get back into the business. Now may be the best time to get back into the market with real estate, particularly if you are a user. I don’t know if there’s ever been a better time between the price and the relatively low cost of construction.
The return of activity? We are seeing more activity. Our market doesn’t shoot up like some of the other ones and also doesn’t crater as badly as some of the others. The Kansas City region has pretty diverse employment. It has maybe a little more stability. We are starting to see people who believe that real estate values, while they maybe aren’t at the very bottom, aren’t going to be plunging any further. We are seeing some activity with folks who are starting to put their toes back in the market. That is the case on user-operated real estate. We still haven’t seen very much in the way of speculative purchases.
Border war: We sit on a state line. There has been a lot of press about people jumping from one state to the other to take advantage of government incentives. I think this is one of those things that the business community is becoming more aware of. It’s not good public policy, but if the availability is out there, I think you’ll see the businesses take advantage of it. I think you’ll see some businesses relocate from one state to the other to take advantage of incentives.