Columbia University Libraries Digital Collections: The Real Estate Record

Real estate record and builders' guide: [v. 93, no. 2402: Articles]: March 28, 1914

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REAL i ESTATE BUILDERS AND NEW YORK, MARCH 28, 1914 JllltlEJiiEiillllltllillMlillllllllllllllillllilllllllllillllil ■fliilHIIISiiill'iiil l!lill9lliIllilllllE!ll!!ii||9lll!9l!l1J![.l3ir......i'l CENTRAL REAL ESTATE IN LARGE CITIES Importance of Having a Thorough Knowledge of the Properties — Long Term Leases—Shops on Second Floors—Rentals Rising and Store Spaces Contracting. ■lii!!: iliBil'tHii:";! By JOHN H. SINBERG, of Philadelphia* ^.■■■■■■■IliillM^^^^^ D ECAUSE central real estate has been my specialty during the past ten years, I shall confine myself to central real estate and try to tell you some of the things which in my opinion are nec¬ essary for success in that very important branch. First and foremost I place thorough¬ ness. The broker must know the deal which he is working from beginning to ei'id; know the property, its size, its as¬ sessrnent, its location, its incumbrances, its value as compared with other proper¬ ties in the same block and with similar buildings in the immediate vicinity. He must study the history of the property and its enhancement or depreciation in value. In other words, he cannot know too much about any plot of real estate that he is trying to sell, buy or lease. Second, a central real estate broker must have a wide acquaintance among men of affairs and a general knowledge of merchants, their business methods and reason for their success. He must be a student of human nature as well as a close observer of the tendency of the times. He must study neighborhoods, watch the growth and improvements of various neighborhoods in the city, so as to give proper advice to his clients to take advantage of enhancements in value. Salesmanship a Boon. If the real estate broker has the knack of salesmanship, he is sure to succeed. The shrewd broker is he who studies the wants of his clients and submits proper¬ ties that he knows should attract them. .\ great many real estate buyers have what I would call real estate tempera¬ ment. They have intuiti.ve confidence in brick and mortar or vacant land and prefer it to other forms of investment. The real estate broker who is thor¬ oughly posted on central leases can fre¬ quently make a big profit by reason of his knowledge. Tenants of large prop¬ erties are sometimes short-sighted. They let their leases run too close to the end of the term before taking up negotia¬ tions for a renewal. Occasionally they begin such negotiations too late. Here is an instance: About ten years ago the lease on one of the biggest specialty stores in the central part of Philadelphia had five years to run. An enterprising firm had occupied the building for a number of years and it Jiad become a well-estab¬ lished and popular store. A real estate broker kept in touch with this lease and when he learned that it had but a short time to run he purchased the property. He then told the tenant of his purchase and served notice on him to move at the expiration of his term. You can readily see what happened. The tenant could not afford to go elsewhere, as moving would practically have meant going out of business. He was obliged to buy the property from the broker and pay him a big profit. Had the tenant employed a broker seven or eight years prior to the expiration of his lease, to buy the property or negotiate a new long-terrii •From an address delivered before the students ot the University of Pennsylvania. lease, he would have saved himself a small fortune. Exclusive Listing. Just as soon as owners realize that it is for their best interests to place the handling'of their property in the hands of one exclusive broker, that much sooner will the sale and rental of prop¬ erties increase everywhere. At the pres¬ ent time a great many owners prefer to place their properties in the hands of several brokers. Under this system, the usefulness of the real estate broker is greatly reduced, and real estate often becomes a drug on the market and its value impaired because of lack of com¬ petent methods of bringing the buyer and seller or lessor and lessee in touch with each other. The trouble -with a great many real estate brokers lies in the fact that they have not backbone enough to back up their opinions. One intelligent, hustling broker is worth a dozen poor ones. When an owner brin'-'s a property to a broker, the broker should refuse to put it on his list at an exaggerated price. After he accepts a piece of property to sell, he should sell it. He must have a thorough knowledge of all properties for sale on his list, and he ought not to un¬ dertake at one time to handle more properties than he is sure he can sell or give honest effort towards selling. The broker should occupy the same position towards the owners of property as does a lawyer. He should be trusted as implicitly as a lawyer. Some people have been known to employ two or three lawyers to do the same work, but have usually been sorry for it. An owner of property who wishes to sell it should not have a number of brokers working at cross purposes, each making concessions in the hope of clos¬ ing a sale before some competitor. My experience has shown that the owner who makes one broker his exclusive agent for the sale or renting of his prop¬ erties invariably gets satisfactory re¬ sults. Central Leases. The subject of central property leasing is one that needs a great deal of dis¬ cussion in Philadelphia, because the brokers have overlooked its vital impor¬ tance to the development and prosperity of the real estate business. It is a well- known fact that central leasing in New York, Chicago, many Western cities and in Europe is a special branch of the real estate business and many brokers make a good living by confining themselves to it. The broker who does not know rental values of central properties, par¬ ticularly in lar.ge cities, where values are constantly changing, is not well equipped to make sales, because he de¬ pends almost entirely on the values set bv past sales and on hearsay informa¬ tion for his basis of values. He is not sure of his position because he knows nothing of the earning power of prop¬ erty through his own experience. In Philadelphia, long leases were un¬ heard of until about ten years ago and the tenant who secured a term_ of five years' seemed satisfied. It required the coming of progressive merchants from other cities to Philadelphia to awaken the native business man to the impor¬ tance of long leases, and now the de¬ mand is for terms of ten years and more. Frequently, it is necessary to go out¬ side of Philadelphia to bring the right kind of tenants for central properties. It is the old story of the prophet in his own country. Many merchants fail to appreciate the value of vacant stores in the central portion of the city. It has been my personal experience that by going to New York and other cities, I have succeeded in bringing good tenants to Philadelphia. Among others, let me mention the Bedell Company, depart¬ ment store of New York, to whom I leased the entire five-story building at the southwest corner of 12th and Market streets, which for a great many years was occupied by one of the oldest and best known clothing firms. This is one of the best corners in Philadelphia. Yet it was vacant for seven months. Phila¬ delphia merchants could not see its real value. I went to New York, brought' Mr. Bedell over, and he instantly real¬ ized its value and signed a long term lease at what many merchants probably consider a high rental. Yet he feels that he has secured full value for his money. In addition to getting big merchants from out of the city for central proper¬ ties in Philadelphia, I find it quite profit¬ able to go after smaller storekeepers as well. Leasing Second Floors. The Boston Shoe Market Company has made a new departure in retail mer¬ chandising in Philadelphia. Upon learn¬ ing that this concern was looking for a location, I went to Boston and inter¬ viewed the ■ president. When he heard the prevailing central rents, he was astounded and made up his mind to stay out of Philadelphia. However, when he explained to nie that he was selling sample shoes at what seemed to me ridiculously low prices, I ventured the suggestion that a second floor might prove profitable. Like the up-to-date business man that he is, he decided to experiment and signed a five-year lease with an option to vacate at the end of the first year if business did not warrant his staying longer. He took a second floor in Market street which had a frontage of 70 feet and a. depth of 200 feet. He had two stairways and an elevator. He advertised in the news¬ papers that by reason of his second floor location and consequent low ren¬ tal he was able to give good value at reduced prices. The shopping public came and saw—the Boston merchant conquered. He is now in his third year and has made a big success. To my mind, that is the solution of second floors of central properties and it i.« only a question of time before own¬ ers will appreciate this fact and improve their second floors in such a way as to enable merchants to do a retail business in them.. A great many men. who ought to know what they are talkin.a: about, have repeatedly said that Market street val¬ ues have reached the limit; that rents are too high; that there will be many failures and that the landlord