You’re watching a football game on television. One team kicks off and a flurry of activity ensues. Guys are running everywhere and the ball’s on the move. They settle down. The two teams square off. They run plays to outsmart and out-maneuver the opponent. The offense works its way down the field, reaching the 50 yard line, the 40, the 30, then the 10, and they land on the 5. The game’s moving quickly, when at the 5 yard line, first down, and they can’t budge. Huh? They’ve made it all this way and now they’re stuck and have just run through 4 downs with 5 yards left to go.

How many deals have you seen end this way?

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We lost sight of the basics were were taught as kids. In fact, did you know that every day more money is printed for Monopoly than the U.S Treasury? It took an email chain with a list of factoids to get me thinking that perhaps we went wrong with commercial real estate investment decisions that weren’t well informed and thatstrayed from the fundamentals of financial analysis for commercial real estate.

What made Monopoly a great game wasn’t the goofy dog, iron, or wheelbarrow…

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Play not to lose? Who would do that? More people than you may realize. How many times have you heard the excuse, “Our marriage is terrible. I’m not happy. But we’ve been married for 25 years, so why get a divorce? Only if it could be like it was when we first met.” Or, “Sure, when I bought this building it was going to be worth 50% more than what I paid, but since I lost those tenants, I’m negative every month. Not a big deal, the market will turn around and I’ll get back to where I was, eventually.”

Sound familiar?

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The battlefield is quiet. Buyers have retreated and sellers have dug in. There’s chatter in the trenches. “They’ll come to us when they’re ready,” the sellers banter. “They can’t hold out forever. Eventually they’ll need a property and will come knocking on our doors for what we’ve got.” They feel proud of what they own, but inside they’re nervous because they know they can’t hold on forever. The supplies are bound to run out.

“Those sellers are crazy,” the buyers ramble. “We get better returns buying

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A few weeks ago I had the privilege of teaching with one the CCIM Institute’s most experienced and knowledgeable instructors. He has spent a career mastering one of the most important, and often overlooked, components of commercial real estate analysis: identifying and quantifying demand.

He says that demand for space is 80% of the real estate decision and that financial analysis is the other 20%. Too often, investors and users focus on the 20% without really digging into what drives the numbers, who’s going to be using the space, and why the proposed use makes sense.

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