Old Real Estate Maxim Still Rules

 When I was in business school, now decades(!) ago, I had a professor whose current work then was focused on how CEOs decide where to locate company headquarters.  His conclusion, after much research, was that the biggest factor in choosing a location was where the CEO him/herself wanted to live.  

While that isn't a shocking result, it is a little surprising that big organizations, with all kinds of considerations for transportation, labor force, infrastructure, taxes, and a myriad of other factors, would in the end have personal preference of one person as the greatest determinant.  We can see evidence of this still, in the recent behaviors of business executives during the pandemic.

Connecticut has been the beneficiary of a move out of New York City, and thousands of people have moved here in the past six months.  Yet we didn't expect that companies themselves would move, and that's turning out to be the case.  And that isn't just in the office arena--manufacturers and other seemingly less mobile property users are also in the mix.

We are getting showing requests and offers from buyers out of state, who are looking to locate where they plan to live.  There are many reasons for their choices, but it points to a brighter future for Connecticut than was predicted while tax policy and weather was causing a rush to warmer climates and distant vistas.  Now, the proximity to major metropolitan areas, combined with family dynamics, is helping us catch us with the economic progress made by other areas over the past two decades.

There are good reasons for this to continue.  Our location between Boston and NYC is obviously key.  Company owners and investors don't necessarily have to live here, but they will have employees and tenants who do.  Many family business owners also want to be where their children and grandchildren are, whether or not those generations are in the company or not.  The current focus on low density and outdoor space work in our favor, and our natural assets have become more important to real estate decisions.

Looking forward, we can see from the residential market that supply may become a limiting factor.  While none of us expected it, this uncertain age has become one of increased real estate activity, and a good time for sellers to consider putting properties on the market.  Who knew that the old research about company location would be so relevant now?

Quantifying the Qualitative

We spent time this morning in a sales meeting, talking about how to help buyers and sellers evaluate multiple bids or properties.  We are beginning to develop spreadsheets, which we can use to list all the factors important in choosing a property, as a way to help buyers decide when and on what property to make an offer.  There are obvious factors that matter in all real estate decisions, like location.  


So, here's the rub.  Location, which we would weigh very heavily in any purchase decision, is not a black and white criterion, as, say, town/city sewers would be.  It's influenced by a buyer's own opinion about what he/she would like to be near--open space, public transportation, good schools, or other factors.  Then why is it still useful, when someone is using opinion to come up with a weighted number for location?


Because it helps us, and ultimately the buyer, to begin to narrow his/her list of important considerations.  He/she may come in asking for something at a certain price, but decide that, in order to get other benefits, the price range has to increase.  Or, for instance, square footage could matter less than how that square footage is laid out.  Sometimes we even see cases where people end up choosing the exact opposite of what they came in saying that they wanted to buy.  Those people may just have a gut reaction (which is admittedly very hard to pin a number on), which is both persistent and consistent, and that may end up being the tiebreaker.


And what does the agent add to the process?  It ends up being very useful to have seen this played out many, many times.  We begin to develop a sense of what will ultimately prevail, and often long before the buyer sees it.  Also, in the same way that teaching something is the best way to learn it, it's helpful for the buyer to have to explain to us what he/she is thinking, and that explanation frequently crystallizes his/her thinking.  


Where are we going with this?  We're still working on templates for both residential and commercial buyers, plus ones for sellers in multi-offer situations.  Like as not, it will always be a work in process, but will become a valuable timesaving, clarifying tool for our clients.