Flipping the CRE Script: Paying Your Tenants (Transmission #276)

Flipping the CRE Script: Paying Your Tenants (Transmission #276)

Written by: Duke Long 

[Adapted from Duke’s newsletter on December 14th, 2023]

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What happens when your tenant demands to be paid to occupy your space?

Hear me out, the world changes everyday. If you take yourself back to March 2020, did you think we would be here in this market and economy today? You can say whatever you want; I will admit I saw none of this coming.

You know the owners of millions of square feet of office space didn’t forecast today’s reality. If you read anything about commercial real estate now, it's the only thing they talk about. Give the owners credit: They are fighting like hell to keep their buildings occupied and performing. What are they not trying?

Institutional, mid-market, and smaller portfolio owners all tell me the same thing. The numbers are unprecedented—a return to "normal" may never happen. They are some of the smartest people on the planet. I am rooting for them, I truly am. But of course I do want to bring up something I've mentioned in the past, and it may be more relevant now than ever.

What if this is a market that forever changes the way buildings generate revenue?

Let me blow your mind with this one.

In the near future, there will be no leases, just the ability to generate revenue from each individual occupying a building.

Let's assume there’s a down market for the foreseeable future. The outlook for occupants/tenants looks pretty sweet. Leverage is just that, leverage, so why not use it?