Where is the Demand?

Joseph J. Ori

I began my career in the CRE industry in 1981. I left the public accounting industry to be Controller and then Assistant Vice President of Acquisitions for a high growth real estate syndication company headquartered in Chicago, IL. As a young real estate accountant/analyst, I was responsible for preparing 10-year proformas of all types of CRE deals on long column paper (as computers were just being introduced back then). Some of the deals had dozens of tenants, which were included in the gross potential rent line by tenant. I was also responsible for attending and closing the real estate acquisitions for all property types and all over the country.

One of my mentors at this time was a more senior person named Mike and he taught me to always ask on any real estate property, “Where is the Demand?” This means; where will the demand or tenants come from to lease the property and generate the gross potential rent, whether it be a retail center, office building, industrial property, apartment complex or hotel. Each of these property types, based on location, physical construction, amenities, rent level, lease type, market and management, will have high, medium or low attractiveness for potential tenants. This demand factor is critical to generate the gross income and maintain or create value in any piece of CRE. There can be two identical properties on the same corner, and they may be valued differently based on these demand factors. The most successful CRE investors know what demand factors are key to their property and exploit them to maintain high occupancy and cash flow.