Hans Hansson | October 29, 2018
On June 6, 1978, nearly two-thirds of California’s voters passed Proposition 13, reducing property tax rates on homes, businesses and farms by about 57 percent. Under Proposition 13 tax reform, property tax value was rolled back and frozen at the 1976 assessed value level.
Property tax increases on any given property were limited to no more than 2 percent per year, as long as the property was not sold. Once sold, the property was reassessed at 1 percent of the sale price, and the 2 percent yearly cap became applicable to future years. This allowed property owners to finally be able to estimate the amount of future property taxes and determine the maximum amount taxes could increase as long as he or she owned the property.
Today, as we move towards the 2020 election, there’s a movement to remove commercial properties from proposition 13.
The beliefs by voters on the left is that commercial properties and commercial property owners are not paying their fair share of a potential property tax revenue and that the original intent of proposition 13 was to ensure the people that own their home would not be taxed out of their home by property tax reassessments.
This is particularly true with property value increases throughout the state. An example of how this would play out would be a retired couple that owned a home in the San Francisco’s Sunset District. If they purchase their home in 1970s, they probably paid around $100,000 for their home. Their property taxes today would roughly be several thousand dollars a year. However, with the current values of homes being over $1 million in the Sunset, that same couple would be required to pay well over $17,000 per year for property taxes.
The same scenario would happen to commercial properties. It’s true that the large skyscrapers are primarily owned by institutional corporate players. However, the majority of commercial properties in San Francisco (and California) are actually owned by individuals or small family partnerships and trusts. Many of these properties are the sole income and livelihood for these property owners.
What state legislatures and the backers of this proposal don’t understand is that commercial property owners through their lease have the right to pass any property tax increases onto their tenants. Therefore, the majority of any reassessment property tax increases will actually be paid by the tenants, making it even more expensive to house your business in California.
The impact of such increases could have serious financial consequences on businesses and affect their ability to even survive.
The Embarcadero was originally built in the late 1970s and when they sold for the first time in the late 1990s, it was one of the first commercial property portfolios to be sold for over $1 billion dollars.
A local attorney firm that had full floors at the Embarcadero received a new property tax bill, which was over $250,000 per partner. These costs actually caused the firm to go bankrupt.
The bottom line is that the proponents of this bill would cause a mass exodus out of the state and/or businesses simply because they cannot afford the additional tax. With the already high costs of doing business in the state, we don’t need to burden businesses and property owners with more added expenses.Photo Credit: OldOnliner Flickr via Compfight cc
Hans Hansson | October 14, 2018
When your business is a startup and you don’t know just how quickly your business will grow, the decision to lease a coworking space over a direct office can be a difficult one.
Immediate Occupancy vs. The Waiting Game– The main pros of utilizing a coworking space are that your business will have immediate occupancy and will include all of the furniture, phones, and internet access you need, ready to go in a pinch. For an independent space, you’d have to purchase your own furniture, sign a longer-term lease, and wait for improvements to be completed.
High Cost, Low Risk vs. Low Cost, High Risk– Coworking facilities clearly offer you the advantage of starting your business right away, BUT the catch is that there’s a high price to pay. The average monthly costs of a coworking space can be 2 to 3 times higher than leasing a private office space. You also have to be concerned about your identity in a co-working facility, where it may be difficult to develop your unique brand when you’re lost in the mix of other brands/tenants in a very tight space.
Flexible Renting vs. Commitment– With a private office space, you have your own working space that can fit your needs, represent your brand, and have stronger security. The advantage of a co-working space is that renting is much more flexible. You could rent for a few weeks, to a few months, or for over a year. Whereas in private space, you will be required to sign a lease that lasts anywhere from 2 - 5 years. Of course, you can always sublease a space. The main pro of a private space is the stability it has for your business.
Amenities vs. DIY– Most coworking spaces will offer your business several amenities, including staff support. If you need something, they will have a professional ready to help. They also offer networking and community events and services. With a direct office, this needs to be handled in-house, a.k.a….YOU.
Strong Security vs. Open Door Policy– The biggest difference, and for many companies can be the most important, is the security. In a co-working facility, since you’re sharing space with other firms, there is always the security risk you take when leaving documents out, laptops open while you run to the kitchen, etc. Something else that business owners don’t consider is the possibility of your employees being recruited by another firm in the same coworking space. This happens much more often that one would think. With a private office, you have the ability to fully secure your business and protect your employees from direct access to competitors.
Control vs. Dependence– In a coworking space, if your business outgrows the space available at the time, the facility has the right to move your employees to another space within their building, or even another location, which is oftentimes inconvenient and puts a pause on real work as you’re your business.
Coworking facilities will tell you that when you add up all of the costs of buying furniture, phones, internet, and staff support that coworking facilities end up being cheaper than a direct space. And direct space owners will tell you that their rent is far cheaper and that you do have the ability to create your own identity, which means that you would be able to develop a better brand for yourself more quickly.
Coworking facilities are becoming very popular for tenants in some of the most urban settings, so clearly there is demand. Meanwhile direct spaces under 10,000 ft.² are now becoming more competitive in pricing.
To determine the real differences between the two for your business, it is best to solicit a commercial real estate broker who can provide you a comprehensive comparison and identify which would be better suited to meet the needs of your business.Photo Credit: homethods Flickr via Compfight cc
Hans Hansson | October 8, 2018
The San Francisco Giants have ended another losing baseball season. After three world series victories, the likelihood to see another “win down the road” is looking pretty slim. However, some of our biggest stars still remain on the Giants’ roster: Madison Bumgarner, Buster Posey, Brandon Crawford and Brandon Belt. Since their World Series wins, all have been rewarded with long-term contracts. Madison Bumgarner’s contract is due in 2020, and he’s expected to garner a long-term salary equal to some of the best pitchers in baseball history. The problem is that none of these players have shown success like they did prior to signing their big long-term contracts. Since their last victory in 2014, the players have since seen their families grow, as well as their wallets. They all have big houses, nice cars, and a great life financially that is experienced by few.
I do not for a minute question if they deserve it. There are less than 25,000 ball players that ever played the game at their level, and without these players during the 2014 World Series, we would not have been in the victory circle.
Once you earn the brass ring of financial success and are financially set with no more worries about paying bills, affording your kids’ education, or having enough savings for retirement– the question is, how do you continue to perform at your best level?
Some would say that pride and character are and always will be the guiding light to success. Aaron Rodgers and Tom Brady have both continued to play at the pace and drive that they’ve become known for each and every week.
And for all the successful salespeople of the world who are financially secured for life– how do you push yourself every day to achieve greatness. Or…. do you anymore?
There’s a scene from “Facing the Giants” that’s considered one of the best motivational scenes, where a coach is trying to figure out a way to motivate a disinterested team. The coach blindfolds their best player and asks that player to carry another player on his back as he crawls across the field. He has no idea where he is at. The coach is pressing, screaming at him not to give up until he collapses. When the coach says to take off the blindfold– he is in the end zone. The team in disbelief walks towards the player and the point was made that anyone can push themselves beyond their limits.
Richard Bowers from Bowers Commercial in Atlanta is that kind of person. Today, Richard has a very successful commercial real estate office in which he himself still cold calls people every morning. He is still the highest-producing agent in his company. When asked why he still cold calls, he explains that it’s how he understands what is going on in his market and to him, it’s still the best way to get new business. Success has not changed for Richard– he’s still on fire.
In order to continue to succeed, even after you are financially secured, you need to find your passion and your mojo. It isn’t easy, but when you drive around in a Mercedes, live in a big house, can treat your family to any vacation, any restaurant, and buy anything you want– your pride, character, and passion is what will keep you working.Dinur Flickr via Compfight cc
Hans Hansson | September 24, 2018
Today, the retail community is faced with many serious challenges. From the threats of the online shopping world to the scarcity of labor– and for San Francisco retail—the overall high costs of doing business. But the impact of the city’s homeless crisis is taking a real toll on local retailers.
Throughout almost any neighborhood in the city, you will see empty retail stores, which were once flourishing businesses. Union Square, Market Street, and of course the downtown financial district is seeing retailers struggle. One challenge to our retailers, unique to San Francisco, is the negative impact of our homeless issue.
The city is searching to find answers to solve this massive crisis, while simultaneously spending an obscene amount of money ($305 million a year) on programs that haven’t worked.
Our new mayor, London Breed, promises to find a solution to the homeless problem by putting in place mental health and addiction treatment programs, as well as building new housing. The problem with building new housing is that it will take years before it becomes a reality. Instead, we should be looking for solutions that will help homeless today—such as the Laguna Honda Hospital project.
Most retailers feel alone in their fight to keep their storefronts clear of loitering homeless, which deter shoppers from entering their stores. Encampments will often result in the surrounding neighborhood to be filled with infected needles, feces, and garbage. What does not get mentioned when we talk about homeless is its impact on all businesses, particularly retail, which is already declining. What is that loss of business equal to in dollars?
Today, the city is combatting businesses shutting their doors, which many community organizers believe is due to the high cost of rent and the gentrification of our city. However, they are missing a much bigger issue–the effect of homelessness on the psychology of a sale.
Sales is driven by a buyer’s motivation to purchase. A customer needs to first feel good, then they have to want something, and then they have to make the leap to purchase. Today, if you see a homeless person struggling to survive as you enter a handbag store, or a shoe store–– do you really believe that most people can simply turn off their feelings of compassion and empathy to come to the decision to buy a new pair of shoes? This may seem overly simplified, but this is the reality.
Homelessness also brings about more theft, which further erodes a buyer’s confidence and desire to purchase. The downtown Ross store and many local merchants experience homeless robbing their stores without any penalty daily. Police are almost powerless to do anything because unless the amount stolen is valued over $900, the penalty is no worse than a traffic ticket – which the homeless cannot pay anyway.
We need real changes implemented to help the homeless community, and also help support our local retailers and bring business back to their stores. We need to have more walking police officers on the street, moving loiterers away from shopping areas and reinforcing laws among homeless that ban illegal drugs. We need to look at ways to develop policy and direction that will support them now– not later, before we lose one more retailer.Photo Credit: David Holt London Flickr via Compfight cc
Hans Hansson | September 23, 2018
As a critic of the direction that our city has taken in solving homelessness and how we take care of cleaning our streets, I have to commend our new Mayor, London Breed, for taking immediate action in her new role.
As a city that has struggled with a large homeless population for decades, it has become a crisis– according to the SF Chronicle, in 2016 we spent (including housing and treatment) around $241 million annually, yet we see more and more homeless on the streets than ever before. However, much of this spending is focused on housing the formerly homeless, or those at risk, and not the currently homeless.
Working in the commercial real estate industry, I have personally seen the unfortunate outcomes of the homeless population, including streets covered in feces, urine-filled air, garbage everywhere, tent communities taking up entire blocks of sidewalks, or in the entry ways of properties I sell, and more. In addition to high costs of rent and labor, our city’s dirty streets and potential health hazards are making alternative Bay Area cities more attractive for businesses to take their headquarters.
I walk the streets every single day as I tour my clients and I have seen Mayor Breed’s intentions turned to action in the short time that she’s taken over leadership. During my morning walk up Powell Street at 6:30 am, I now see cleaning crews busy removing debris. As I continue my routine walk down Sutter Street at 9:00 am, there’s usually a few homeless people that will block entryways of buildings while harassing visitors in and out of the Hyatt hotel. I’ve witnessed these cleaning crews ask them to leave and clean the properties.
Although this isn’t a resolution, more of a band-aid, I am pleased to see our Mayor do SOMETHING to help. It’s more than I’ve seen in years.
In a recent press release, Mayor Breed signed a two-year budget of $11 billion to target homeless solutions. She shared, “I’m proud of our investments to reduce street homelessness, champion public safety for all citizens, clean our streets and parks, and keep our commitment to the residents of San Francisco.”
We of course have a long way to go, but I applaud Mayor Breed for tackling these problems day one on the job! They are definitely needed and appreciated.Photo Credit: Aidan_S Flickr via Compfight cc
Hans Hansson | September 11, 2018
In 1984 when I got into the commercial real estate business, San Francisco had a vibrant garment production business, commonly known as “sweatshops.” Long before the sewing business was sent overseas, most of today’s South of Market was dominated by sweatshops. These industrial spaces were packed with rows and rows of sewing machines, with one person sitting at each. These spaces had concrete floors, exposed ceilings with drop down lights, full kitchen and rest areas. Employees at these offices spent long hours working at their stations, and company owners would offer everything to keep their workers onsite throughout the day.
Today’s tech firms are really yesterday’s version of sweatshops. They offer rows of long desks with computers, instead of sewing machines. Tech offices are typically in wide open industrially designed spaces with concrete floors and exposed ceilings. Offices offer full kitchens and common areas along with a concierge of services provided by the employer to keep their workers longer at the office and maximize productivity.
The challenge that strikes as a result of this trend is that employees barely leave their office for lunch or breaks, and in turn hurt sales of surrounding restaurants and retail stores.
Restaurants are already struggling with higher labor costs since minimum wages went up to $15.00 an hour just last month. Tech firm amenities, mandated city regulations, and high cost of build outs are leaving San Francisco restaurant owners no choice but to close.
For example, Umbria is an Italian restaurant on the corner of 2nd and Howard. It was a very successful restaurant for over twenty years, until LinkedIn moved their headquarters into the new building across the street. The landlord of Umbria’s lease had expected Umbria’s sales to raise, so they raised their rent when the lease expired. Unfortunately for Umbria, instead of seeing an increase in business, they saw a decline by 1/3 when LinkedIn opened their doors. LinkedIn, as most tech firms do, offered employees a full kitchen with catered lunch. Umbria simply could not make money and ultimately closed its doors.
As a result, San Francisco City officials are reviewing office kitchens and concierge services. If passed, it would adjust zoning laws to ban new construction of on-site workplace cafeterias.
During the sweatshops era, virtually no retailers existed around them since their workers were not allowed to leave the premises. Today’s modern offices are essentially doing the same thing to retailers, except there’s no enforcement, with employers offering top notch food benefits and services that outside retailers cannot compete against.
Photo Credit: eSeL.at Flickr via Compfight cc
Hans Hansson | September 11, 2018
There are very few salespeople that will tell you that they actually enjoy making cold calls and finding new client prospects. Most prefer to work on deals, because deals closed brings in income. Yet, without new business prospects, you will not have clients or customers and therefore no deals to close.
Most salespeople have the winning mentality, and prospecting is about losing. You lose, and then maybe win, but often lose. It equates to having to climb a big hill to get home every day. You look at the hill and you’d rather not climb it. As a result, deals take priority in most salespeople’s minds over prospecting.
However, great salespeople view sales very differently. They understand that their business is about new business. Without new business, you won’t have business in the long run. As a commercial real estate broker, I’m unemployed after each transaction, whether I have done a good job or not. Constant unemployment means that I need to wake up everyday thinking where my next job is going to come from.
When salespeople shift their mentality and priorities, putting new business activities in front of deal-making, then they’ll become an entirely different person over the long run of their career.
To make new business development a priority, you will need to “schedule” more time in your calendar to developing relationships with new prospects. And just like deals, you will have to service and nurture your new business as if they are already clients. The biggest difference is when you switch your priorities– you become the client and begin to service yourself. If you fail, just like in working deals, you will not see the paydays you were hoping for.
You will also be tracking different metrics to gauge results. For example, instead of looking at how many deals you close, you will need to track how many new clients or opportunities you secure.
Obviously, you still need to service your clients in order for deals to close, but if you prioritize new business as your most important task, then the pressure to close deals will also change.
When you build a strong pipeline of new business, you will have more deals to keep you occupied than you have time for, and therefore will protect yourself on a downside if a deal does not.
As salespeople, when asked what you do, your answer should be, “I secure new business.” Think about the next question that person will ask you.
Photo Credit: SkintDad.co.uk Flickr via Compfight cc
Hans Hansson | August 15, 2018
Many years ago, I began purchasing single family homes for investment in Arizona. I had found a terrific residential real estate agent whom I trusted and over the past ten years, we have bought a number of homes that he found. He helped me find the right people to remodel and maintain the homes, he managed the care and of all the leasing, and he continued to advise me on when to buy and sell.
You could say my real estate agent and I had formed a partnership. On the finance side, I had my relationship manager from Bank of America. I could call Seta who was in San Francisco and she would arrange financing for me with just one phone call. She knew all about my finances and knew how much I planned to put down– she would do the rest.
Both of these partnerships have made me a lot of money. I curated my own team and was able to buy outside of California, without any issues. If something went wrong, it was always taken care of.
Today, what I had developed would be much harder to duplicate. There are excellent residential real estate brokers, but I’ve seen the personal relationships between brokers and clients diminish. One reason for this are mega franchise brands. Firms like Compass, which is rapidly becoming the largest real estate brand in the U.S., is pushing technology tools as a way to better service its clients.
On the financing, side the “Setas” of the world no longer exist. Banks do not allow a single person to have that kind of authority anymore. And with government regulations today, they would not have the ability to find or buy a property on my behalf.
Sadly, we’ve lost the personal touch. Technology takes information and tries to put it into the hands of the end user (the buyer)– without the need of a single person. The challenge is that the real estate agent and the lender knowledge cannot be replaced with data. Having more information by the end user does not mean that they are in a better position to close a deal. When they do not have that personal helper– who has the experience you lack to get the job done right?
Real estate and banking have traded in personal support and relationships for expansion and acquisition. Believing they could service more people, but in turn, lack quality of service.
But, you have to start with me and those that do what I do. In the past, I could move much more quickly and buy homes with professionals supporting my effort throughout the process. I bought homes faster, which means that I began feeding the food chain faster. My buying a house, my money for my real estate agent, as well as my lender, but I also was able to employ contractors, permit expeditors, inspection personal title companies, insurance companies and eventually was able to provide improved housing to my renters. In other words, I was able to spur the economy a lot faster with my efforts.
This was more to create bureaucracy in real estate as banking stymied the growth of smaller investors.
The cost to get started is already high, but the challenges to get individuals in the industry to help you has been replaced by a mobile app and a chat room.
Photo Credit: Adriaan Bloem Flickr via Compfight cc
Hans Hansson | July 5, 2018
If President Trump follows through with his plan to institute tariffs in order to force more fair trade, then commercial real estate across the country will be affected in a very big way. To understand how, we need to look at our history to see how trade imbalance came to be.
At the end of World War I, Germany lost the war and was forced to pay serious reparations for all of the damage inflicted on the allies. Germany was forced into a major depression that eventually led to Adolf Hitler coming to power, thus causing World War II.
In order to avoid the same mistakes after World War II, the United States incentivized the development of both Germany and Japan so that they could rebuild their countries faster and enjoy prosperity, instead of being relegated to a third world power. The trade imbalance against the U.S. grew to a point in the 1980s when then President Reagan decided it was time to issue tariffs to put pressure on both countries to create fairer trade practices.
Japan’s massive trade imbalance with the U.S. impacted industries from the domestic car market to the electronics market, including televisions, computers, cameras, and home goods. Germany’s trade imbalances included their luxury car market where BMW, Mercedes, and Audi leveled and initially destroyed our leadership in the luxury car market.
President Reagan forced both countries to either create equality or build their products in the U.S by implementing tariffs or threatening to do so. This strategy led to the construction of major car manufacturing plants, building foreign brands here in the U.S. in areas that were once struggling in poverty, which created a building boom that turned southern states into new economic powerhouses for long-term growth.
If President Trump follows through with a similar tariff, perhaps we can expect foreign countries to decide to build in the U.S., rather than lose market share altogether. Today, we already see tech giants like Apple and car brands like Volvo that are constructing new plants here in the U.S.
We might see foreign countries build plants, too–– from steel to appliances and clothing. This will lead to major growth in commercial real estate across industries.
The challenge is–– what would it cost us? We can certainly expect costs of goods to go higher, but we could also expect better quality goods to be built as well.
I remember when the U.S. began looking to foreign countries to offer cheaper labor to manufacture our goods. At the time, I had asked an economist from Chase, “How will this strategy NOT create major job loss in the U.S. and NOT hurt our economy?”
His response was, “For every dollar lost in manufacturing jobs, we will gain back four times in buying power through the U.S. consumers’ ability to buy goods at lower costs.” However, when you look at the buying power of today’s consumer–– their incomes do not match inflation and we see that it hasn’t been in favor of the working U.S. citizen.
Clearly, the erosion of our middle class is one of the reasons that President Trump got elected. They want real jobs back--and if they do come back, America will see one heck of a new boom in commercial real estate.
Hans Hansson | July 5, 2018
If you are a golfer, you understand that golf is 90 percent mental and 10 percent skill. My theory is that the power of your mind is what controls your ability to hit a good or bad shot. I’ve been playing golf for over 40 years now, yet at best, I am considered an “average” player. My goal when playing the game is to win, but I let my mind get bogged down by my low score rather than concentrating on making my next shot better.
Recently, I tested out my theory by purposely thinking about negative thoughts before I took my shot. As I suspected, this led to a terrible hit. Following this embarrassing shot, I cleared my mind of everything and only concentrated on the ball, my swing, the weight of the club, and the direction I was going to hit. With a centered focused, I was able to produce an outstanding hit!
I think about this analogy and how it can also be applied to sales. We have the same issue– we constantly need to enforce positivity into each action– from the way we answer phone calls, to drafting emails, to showcasing a new space, etc. If we go negative, we get negative in return.
I recently attended a real estate conference where the guest speaker introduced a new motivational sales training program called Ninja Selling. It was written by a residential real estate broker who entered the field with zero sales experience and a number of personal challenges that would not promote a long-term real estate career.
With these setbacks, he was able to build a residential real estate company in Fort Collins, Colorado that currently has over 300 brokers and is now considered one of the most successful real estate companies in the U.S.(based on deals closed per agent). On average, his agents close 27 deals each per year. The average deal closing across the country per agent is less than 4 per year.
He has trained all of his managers and agents in the art of “Ninja Selling”– which is a lot like a religion. His program offers discipline, hope, and understanding of what a salesperson needs in order to be great. The program emphasizes commitment to serve your clients while also creating a reinforcement mechanism that keeps you focused on your business and personal successes.
Every day, you are asked to start your day with a recommitment to the following:
- Ask yourself, what are you grateful for today? Think about what makes you happy and appreciate that.
- Avoid negative thought and introduce some positive action to your day. For me, this was turning off the morning news and instead listening to a TED talk or reading an inspirational book on my way into work.
- Restate your business and the personal goals you’ve established for yourself. Rather than stating goals as if it’s a list of things you’d like to accomplish, you state your goals as if you have already accomplished them. For example, I say to myself “I weigh 175 pounds, I shot on average 85 in golf, I make 500k a year.” In order for these goals to actualize, you need to state them every day for 30 days straight. You cannot miss a day– period.
- Focus on helping two people in need each day. It could be as simple of offering a positive thought to someone whose personal life is in turmoil that day. Or, it could be helping someone complete a project. This recommitment focuses on giving back to others.
The above will create a balanced approach to your sales career while also grounding you in life with an understanding that success comes with commitment, which also comes from serving others. The power of Ninja Selling can be found in all of us.