Stop Renting Forever: Why Business Owners Should Consider Owning Commercial Real Estate

Amy Calandrino (00:00)
Absolutely. And that was a huge part of why I got into the type of advisory brokerage work that I do is far too many business owners get so comfortable like in their leases and just sending this check versus when they start to cashflow to start thinking strategically about their long-term goals for their business and their family.

Dylan Silver (01:58)
Hey folks, welcome back to the show. Today we’re joined by Amy Calandrino, a commercial real estate advisor with Cushman & Wakefield. She helps entrepreneurs and investors use commercial real estate to grow their companies, create operational stability and build long-term wealth for future generations. Amy, thanks for joining us today.

Amy Calandrino (02:19)
I’m so happy to be here.

Dylan Silver (02:21)
Now, I’d like to start the show by asking you if you think maybe too many businesses and business owners spend years renting the space they operate on instead of owning the space that they operate on.

Amy Calandrino (02:37)
Absolutely. And that was a huge part of why I got into the type of advisory brokerage work that I do is far too many business owners get so comfortable like in their leases and just sending this check versus when they start to cashflow to start thinking strategically about their long-term goals for their business and their family.

Dylan Silver (03:04)
You know, it’s an interesting niche within real estate owning the space that you operate on, right? Because I think it’s more common, it’s drastically more common for these businesses to be renters, right? Is there a reason for that? Is it just simply easier to rent than it is to own?

Amy Calandrino (03:24)
Well, unlike a first time home buyer for commercial real estate for a business, you have to have three years of being in business before you can buy unless you were maybe to do an SBA loan. But you’re giving away your house, your not even born child, and so many things. They really got their tentacles into you. And I mean, I would do that if I felt really confident about the idea.

Generally, there’s a lower barrier of entry to renting, just depending on how strong your business plan is. Because I mean, obviously, if a market’s super competitive, then it is still going to be hard to find a place to lease and differentiate yourself against the other people. But yeah, that tends to be the propensity. And in some particular cases, it actually makes sense for a business to continue renting ad infinitum all forever, right? Because they’re just looking to not

suck all that capital out of their business and then to scale, you know, majorly and like, and just keep going and they’re adding dozens and dozens and dozens of locations and trying to find the land and develop and own would probably cause friction in it. But if it’s more of like, you know, a local business and you know, they’re going to do one location now and another location in a year and another location a year and they have more of like a sustainable model.

that promotes this, then they should consider ⁓ owning their own real estate and then not having to be, you know, someone else be their landlord. They could be their own landlord.

Dylan Silver (05:05)
You mentioned the startup costs of owning your own real estate and having to be in business for a certain number of years. I could see that being a barrier to ownership on the commercial side. On the flip side though, certain spaces, think, especially if you have a corner.

know, lot somewhere that is very, very popular. If you look at that building as not just a space to rent, but a space to own, you’re able to do so much with that. Do you see that this mentality of owning that, you know, corner lot or that building that you’re in, is that really?

limited to the people who are thinking about it from the real estate lens or do you also see people coming from other segments of industry who then decide, you know what, I’m going to buy that, know, strip mall or what have you.

Amy Calandrino (06:44)
Yeah. So you’re asking me, if I understand this correctly, is the people that are buying the places that, my clients are at, the retails and the office people, whether there’s, there’s investors that come in and buy it, or what was your specific question? Can you clarify that? Okay.

Dylan Silver (06:59)
Sure. Do you

find that most of the people who end up buying these strip malls and corner ⁓ lots that might be high demand, are they themselves real estate investors by trade, if you will, or are they operating as a retail business of some kind and they decide to go ahead and dive into commercial real estate investing?

Amy Calandrino (07:05)
Mm-hmm.

So business operators owning their own real estate are the exception, not the norm. So that’s why I actually probably call my client a bit of a unicorn. I there’s so many businesses that they’d rather lease. And I mean, that can make sense too for corporate institutional clients that are taking down hundreds of thousands of square feet.

You know, there are some corners. I’m working with a client in particular in Winter Garden and it’s an engineering firm. And in 2009, when there was a down cycle, they bought this building that was at this prominent corner and they had a dream of doing a historic renovation to it. And then, you know, taking from the being downstairs, moving upstairs and

the person downstairs funding the renovation and they’ve had this idea. then obviously interest rates have changed, construction prices have changed. And now I’m guiding them through that process and we’re close to getting a lease signed and that particular tenant will then allow us to get the funding from the bank to get the funding. And so my client is going to leave the building and then come back and it’s going be beautiful and new. it’s actually this big corner, beautiful building.

But that’s not the common place. Typically, you know, it’s some local, you know, developer or some institution or REIT that owns these strip plazas, these other things, and they have businesses that come and go and lease space there. And those people are looking to maximize the amount of, you know, rent, you know, that they can charge. so.

Sometimes in that case too, when you have those kinds of owners, you may see a little bit more churn sometimes too.

Dylan Silver (09:08)
What’s the lending space look like for folks who are, you know, don’t have a connection to a commercial lender and they’re looking to buy a strip mall or an area where they could have, you know, several commercial tenants? What would the process look like for them? What’s that process like?

Amy Calandrino (09:28)
Well, it’s all about relationships. And so if they’re not occupying 50 % of it, then this particular business owner maybe wants to take one suite and then rent out all the rest of the suites, it would fall more under an investment loan. ⁓ often I would start with your local community banks. They’re not going to be judging you just for your financial statement, but judging you based on your character and as far as what is your track record and what your

what you’ve been able to achieve with your business. so I think especially if you’re a first time investor, ⁓ starting with them and going there, because if you’re more smaller, small local business or small local family, going to the big banks may be just a bit of a process to kind of go to. Or

I recommend sometimes people hire a broker. I’ve personally utilized a mortgage broker for

the purchase of my buildings. And what’s great about that is I think it’s worth the money because I make money doing what I do in business and spending time sending out my application to 20 different banks and beating them all up and negotiating with them. That person more than pays for their fee.

Dylan Silver (11:22)
Now, when you are looking to purchase a commercial property, what has been your experience, especially for newer commercial investors, with how much they need to be putting down?

Amy Calandrino (11:36)
Yeah, so if you’re owner, occupier, and it just depends on ⁓ my primary practice of real estate is in office and in retail, mixed use. If you’re like a doctor or like a dentist, sometimes you can get 0 % down, even for like conventionals with banks or 10 % down. If you’re more of like a lawyer or just a traditional business, let’s say I had like a pharmacy.

⁓ had a hair salon, those kinds of things. Those are maybe 15 % to 20 % down. ⁓ so I would say traditional owner occupied, they call it O O C R E owner occupied CERI. that is 15 to 20%, but then there are some exceptions. If you’re medical or something like that, you may be able to get down to anywhere from zero to 10 % sometimes depending on the lending institution.

Dylan Silver (12:29)
Are there specific lenders that those medical professionals would work with or can they go to the same folks that everyone else would and just have access to different programs?

Amy Calandrino (12:41)
My recommendation would be to perhaps if you’re looking at a particular property, let’s say you’re looking to buy a medical office is look who the listing agents are frequently on those medical offices and maybe ask them because they will have seen which bankers come through and which ones don’t. like, which, you know, generally, you know, if you’re, if you’re,

You have as much pipeline as I do and as many clients as I do. And this is like my full-time vocation. I’m, continually meeting with my top bankers and finding out what are the programs they have, what interest rates are they at? Like for instance, there was a bank earlier this year that was 4.99 % on an owner awkward loan and that was great. So I sent it out to, know, like, Hey, if anybody’s looking to buy, this is where we’re at. So, ⁓ I’d kind of go from there. It’d be kind of hard to.

try to call every single bank and figure that out.

Dylan Silver (13:40)
We were talking in the green room. You’re in Orlando. I’m such a big fan of really every Metro in Florida. What trends are you seeing specifically in the Orlando commercial market right now?

Amy Calandrino (13:55)
Yes. So specifically in the Orlando commercial market, we don’t have a lot of development, but there is a lot of demand. And so we just haven’t kept pace. I mean, there’s a few different factors relating to that. think a bit of it has been the interest rates that we’ve had. We also were impacted by the global pandemic back in like 2020 that halted a lot of the retail development and then

you know, we haven’t necessarily caught up by the time people were going to start developing again, then we had interest rates go up in 2022. I think things are starting to kind of equalize and we had some high interest rates, but as far as a general norm, we are at sub 5 % vacancy rate for retail. And then just depending on where you are, like the central business district, we’re above 10 % vacancy for office.

But then if you go to specific niche neighborhoods like Winter Park, we’re at 4 % vacancy rate for office and in top tier buildings we’re at 2 % and then the retail vacancy rate in office last retail in Winter Park last time I checked was at 3.3%.

Dylan Silver (15:10)
Okay, so it seems like a strong market, but still ⁓ a lot of demand ⁓ from people to have new development. It’s just not for a variety of reasons happening.

Amy Calandrino (15:14)
Yes.

Dylan Silver (16:05)
I’m curious to get your feedback on a different side of the commercial space, commercial residential, like multifamily ⁓ and new developments in

you know, housing at large. Are you seeing that there’s a lot of interest from folks in new condos, townhomes, apartments, or is there more interest in the opposite side and, you know, building out subdivisions?

Amy Calandrino (16:30)
so it’s not as much my, ⁓ forte, but I can tell you generally in the multifamily market, think every developer and their brother and their sister and their cousin got the memo that we had a shortage of multifamily here in Orlando. So then there was a big boom of multifamily here and, ⁓ we’re seeing now here in Orlando and in other

markets, those variable interest rates coming to roost. we also have seen ⁓ not the rent growth that people had been forecasting before because there’s just a lot of supplies. So I think we kind of got in over our skis a bit. On overall, I’m talking about the larger ⁓ multifamily landscape. As far as new development is concerned for housing, ⁓ we don’t have

And much in the core of Orlando have large tracks of land, you know, available. You’re tempting to go outside the core. ⁓ but you, we are seeing it. ⁓ the land team in my office at Cushman & Wakefield, ⁓ work with a lot of developers to help them get the land. And then you are seeing some smaller projects. Like there’s one outside of winter garden. That’s more of like a town home with, ⁓ with, with some houses. ⁓ you’re seeing a lot of.

⁓ infill. So as far as multifamily, single family, I’m probably going to have a listing coming up soon for like two acres that you can put about 50 units of townhouses on. ⁓ that is still very desirable because people want to like live in the core. So I, I don’t know if that answered your question. think mall large scale units, like apartment buildings, ⁓ that, that market’s still kind of correcting itself on infill boutique. ⁓

Dylan Silver (18:11)
No, yeah, absolutely.

Amy Calandrino (18:24)
residential development, I think is still in demand if the numbers can work in pencil. And then ⁓ we are seeing around some more larger track developments happening in Orlando.

Dylan Silver (18:38)
We are actually coming up on time here, Amy. Any new projects that you’re working on and then also anything you’d like to mention directly to our audience.

Amy Calandrino (18:40)
Yes.

Well, I think just if you ever need anything in Orlando related to commercial real estate, I like to tell people think of me as your four one one. So even if I’m not the right person, I’d be happy to direct you to the right person to talk to. I’m really easy to reach. You can go to my website at CREOrlando.com or AmyCalandrino.com.

Either of them have all my contact information there. I’m also pretty active on social media, so feel free to check out my LinkedIn, my Instagram. Those are the two platforms as well as Twitter where I stay pretty active. And again, just happy to be a resource if you know of anybody wanting to have any sales or leasing needs or development needs here in Orlando, I’m happy to help.