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Nellie Day is a contributor to Real Estate Southern California, from which this article was excerpted.

There’s no question that Southern California building owners bask in the region’s bright sunlight but also in its lucrative marketplace and economy.

“It’s a good time to own commercial real estate in Southern California,” says Jim Proehl, executive vice president and managing director for PM Realty Group’s Western division. But Proehl cautions that getting to that elite status isn’t easy, or even possible, for some. “It’s great if you’ve already got properties, but it’s tough if you’re not in it yet.”

Bill Halford, president and CEO of Long Beach-based Bixby Land Co., can empathize. Given the current market, Halford understands the tremendous pressure and hazards that growing business owners must face.

“There’s virtually no cons if you’re already in the market,” Halford says. “But as somebody trying to acquire and develop properties the current conditions are a double-edged sword. The values to buy properties are very high relative to the rest of the country and entitlements in California are more difficult than in many places.”This not only means that those already in the market face little competition from newcomers, but also that those who own numerous properties have a lot of room to throw their weight around. Many of the region’s largest owners and developers have been able to set the pace for the rest of their market. And that can mean that if you can’t keep up with big-wigs like the Irvine Co. you may find yourself S.O.L: Spaced Out of Luck.

“Many of the region’s biggest owners have bought a ton of projects, and they go in and put tons of dollars into them – because they can, being the biggest they’re able to afford it.” Proehl notes. “So if you’re going to compete with them you better be ready to go dollar for dollar.”

This mano-a-mano mindset doesn’t apply solely to the market’s newcomers but to seasoned veterans as well. Southern California’s status as one of the more sought-after regions doesn’t exempt those who have been in the game since before the getting was good. The only ones truly exempt from this round are those who want to play the most: owners who rake in so much capital that they are willing to take a few jabs if it gives them the opportunity to lay a TKO on their competition down the road.

“These companies push rates,” Poehl explains. “Every nickel ultimately means so much more money to them because of the product they have. They’re the leaders of the market and they’re pushing, pushing rates. They’ll buy office buildings and slowly increase rents 10 cents per foot, per month. Ultimately it aids the overall market because it helps rates move up. But these people are good; they’re the last to drop their rates because they can afford it. They’ll typically just let vacancy suffer and wait for a rebound because they can.”

So how does one compete with such powerful owners? Easy, follow the same strategies they do.

Experts agree that it’s unwise for budding business owners to acquire more high-profile buildings in smaller markets in the hopes of cornering that sector, according to Proehl.

“You should buy a B product in an A market rather than an A building in a B market,” he states. “If you can get in a top submarket go ahead, even if you have to buy a B or C building.”

Proehl says that buying a “cheaper” building an owner will have capital left over to play with. He suggests underwriting the purchase and putting some of this money toward improvements that can promote the building from a C class to a B or from a B to a B+ or A-.

This means that those wanting to get into the office market should strive for Irvine’s airport area, industrial users should stake out Ontario and multifamily hopefuls should keep their eyes on Downtown’s arts districts and historical buildings.

“Values and land prices are so high because people are optimistic about the values of Southern California,” Halford says. “So you should pick the area that you like and let the physical nature of your product follow that. If you like how an area’s going to perform and how strong the demand will be, the type of property should be secondary.”

Many of Southern California’s top owners don’t rest on their laurels simply because they are financially stable. Robert Peddicord, an Arden Realty executive, asserts that there is one strategy employed by all firms that make it to the top employ: “Be proactive in everything you do with your asset when you’re dealing with customers’ needs and expectations to avoid any crisis down the road,” he says. “You have to align yourself with vendors that have the same objectives and goals in mind. We want people who run their business the same as we do. From parking vendors to security and janitorial services, it’s important they all carry the flag and try to help us achieve what we’re looking for.”

Part of being proactive, in Peddicord’s book, means being knowledgeable about what the tenants’ business revolves around and if they’re satisfied with their space. Peddicord suggests hiring a tenant-service manager who can meet with tenants on a regular basis and work out any issue they may have with the building and its services.

“Don’t just stick managers behind a desk. Free them up and get them out touring the property so they can spend time with the tenants and stay current on the condition of the building,” he says.

Peddicord says that tenant interaction not only allows for happy tenants but it also can prevent a sudden departure. “It avoids a default when they say, ‘My business is going bad’ and they suddenly move out of your building.”

One of the easiest ways to draw tenants away from the competition, insiders assert, is by keeping up with building technology. “For progressive companies this is a big deal,” says Brandon Birtcher, president of Irvine-based Birtcher Development & Investments. “It’s a big issue for a tenant to consider when evaluating new space, and up-to-date methods will likely get you selected because many companies are apt to convert to a more advanced technology.”

For Proehl, it’s automatic flush valves and faucets. “People have gone through this phase where they don’t want to touch things because of germs,” he says. “The more you can automate stuff the better people feel about it.”

Matt Spathas, a partner at San Diego-based Sentre Partners and his colleagues from the real estate service and investment company founded Bandwidth Now, “a next-generation utility company” that installs and manages the Building Optical Networks in commercial properties. “We provide bandwidth as a utility and WiFi as an amenity,” he says. In San Diego alone the Koll Center, San Diego Tech Center, One America Plaza and the NBC and SBC buildings are all wired.

If you have an asset in “Irvine’s airport area you have to do what you can to make it a class A building because that’s your competition,” Halford notes. “If a large tenant comes up for renewal they may throw in a request to redo a corridor or upgrade a lobby, we expect this – and we should expect the technology updates that come with it too.”

Terrorism, technology, construction costs and barriers to entry may seem like more trouble than they’re worth. But those who have entered and sustained their position in the market say that the challenges of maintaining a kingdom are a mere pittance compared to the rewards of success.

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