For The Best Results, You Need A Great Coach

I imagine many of the readers of Lease Intelligence play golf, tennis, or another competitive sport.  The joy of getting better over time is the great allures of playing sports.  But certainly, there are aspects of your game that you would love to improve.  The difficulty of breaking through these performance barriers is a trade-off frustration.

Imagine if you had a dedicated, professional coach watching your every move.  Do you think your performance would be better?  And what if that professional coach was available at no cost – completely free to you.  Would you be all over that opportunity?

That is what an experienced tenant representation broker is – your business’ free real estate coach.

My friends, tenants are getting “the shaft” every day.  Many of you have heard me chant this over and over again.   Sometimes, they get it from the landlord.  Candidly, a lot of the time it’s self-inflicted – they don’t know what they don’t know!  Yet they go it alone, making mission-critical real estate decisions and negotiating a lease without the help of a good coach – their advocate – making sure that lease is well negotiated and tailored to their unique needs.

This is how we approach things at The Tenant Group – it is why the company was formed in the first place and why I joined their ranks last month.  Listen, we enjoy what we do.  It’s fulfilling to us.  It is our passion.  What looks like a minefield to the tenant is a road map to us.  

You call me…invite me over to your office…we sit down and talk.  We put your objectives and priorities on the table and we see if we’re a good fit.  I mean, my clients love me but I’m not right for everybody!  But in any event, don’t go it alone.  You really do need an advocate when you’re looking to lease or buy commercial real estate

Don't Be Paralyzed by Fear

In every lease I negotiate, I find my years of experience managing properties for the landlord of immeasurable value.  My understanding the landlord’s business guides me to negotiate where I know I can get great results for the tenant and helps me set the tenants expectations where I know the landlord will be immovable.  This varies from deal to deal and an experienced tenant rep broker can tune in to the economic forces at play in every situation.

One of the more challenging terms to negotiate is the rent for future renewal options.  Most landlords default to “fair market value”.  I always try to fix the option rates for my clients, but sometimes the landlord digs in his heels and the best I can do is negotiate in the lease language to insure “fair market value” must be arrived at fairly and cannot be set arbitrarily by the landlord.   As lease terms get longer and options are further out in the future, it is time to concede that “FMV” is really just fair to the landlord.  I have to explain to my tenant clients sometimes the fundamental principle of the landlord’s business: with the risks they assume when they invest in property, they are entitled to reap the rewards of an improving market. 

 I had a client who was looking to lease retail space in downtown L.A.  We negotiated a ten year lease and managed to cap the rent increase for the first five year option, but the landlord held firm on FMV rent for the second option.  We are talking about 15 years down the line.  The tenant was mortified.  “The landlord could double or triple my rent!  I can’t stand it!”  I had to talk my client off the ledge.  I did so by explaining that fair market rent is what a reasonably successful tenant can afford to pay on a sustainable basis.  To set the rent at a higher level only guarantees that the landlord will have a failed tenant and a vacant store.   And if this client’s business was still in this location 15 years from now, chances are he is operating a reasonably successful store!

Risk is inherent in commercial real estate whether you are a landlord or a tenant.  Don’t be paralyzed by irrational fears.

Search For Answers

I wish I could tell you I have all the answers but I do not.  (Alert the media!)  Grave concerns perceived by my clients show up during lease and purchase negotiations that I cannot resolve with persuasion or market knowledge.  Do you have kids?  Ever notice how your child will take an outsiders advice more seriously than yours?  OK, now we’re on the same page.

When negotiations get into crunch mode and the deal is on the line, the tenant may begin to wonder whether their broker’s advice is offered in their best interests or in the interest of closing a deal and collecting a commission.  That is when I often call in outside experts that can provide facts and perspective that will lead to a wise decision by the tenant that really does support their objectives.  These outside resources include attorneys, accountants, bankers, architects, contractors, and entitlement consultants.   And as a tenant advocate, I have a large stable of them.

In one recent deal, my client was negotiating to purchase a property for development in a , shall we say,  “controversial” submarket from a seller who had been pursuing entitlements to do his own development.  My client maintained what I thought was an overly pessimistic opinion of whether and when the entitlements could be secured.  The parties were at an impasse and talks stalled.  I knew that arguing my case would only have been self-serving.  So I got permission from the seller to have his entitlement consultant meet with my client.  The informed intelligence of this consultant answered my client’s questions, put his mind at ease, and got the negotiations moving forward again.

A good tenant broker will search for clarity…and go to the ends of the Earth to find it.

The Best Way To Negotiate The Base Year For Operating Expenses

In a recent post, I reminded all tenants to pay close attention to landlord communications about operating expenses.  Today, I am going to share with you one very easy (and almost always successful) negotiating tip that will definitely save you money.

If your lease is Full Service Gross (typical for office buildings) or Modified Gross (office buildings and industrial properties), certain expenses are passed through to you only to the extent they increase over the cost incurred by the landlord in the first year or “Base Year”.  The Base Year is usually defined as the calendar year in which your lease commences.  No problem so far. 

The lease goes on to say that you will be billed for increases in those expenses in subsequent years.  That’s logical…but look out.  Let’s say your lease commenced in July of 2015.  Chances are that would make 2015 your base year and allow the landlord to start billing  your share of operating expense increases on January 1, 2016.  What was touted as a base “year” only really got you six months of protection. 

How to avoid getting the shaft?  Simply have your broker-advocate insist on lease language that says you will not be responsible for any pass through costs for the first 12 months of the lease term.  That right there would likely save a class A office building tenant $.45 per square foot over that six month period.  If your leased space is 10,000 square feet, that’s $4,500.00, thank you very much.  (Call or email me for a quick explanation of the math.)

A penny saved in smart lease negotiations is a penny earned for your business.

Pick Your Landlord Wisely

When you are looking at a number of potential locations, it is not unusual to become  preoccupied with data comparison: square footage, load factors (don’t know what that is?  You need an advocate who does!), base rent, concessions, operating expenses, and on and on.  Sometimes the distillation of this data will point you to a preferred site.  But there is another often underestimated factor to be considered: the landlord.

Evaluating the landlord is more art than science.   Consider that a “Class A” office building is often defined by size and on-site staff.  But it’s the landlord’s attitude toward the building that puts the “Class” in Class A.  Does the landlord have a reputation for seeing tenants as their most precious commodity or as a nuisance?  This attitude doesn’t appear on the page of their counteroffer or even on their website.  But a seasoned broker knows or can see the telltale signs in the management of the property.

Sometimes the magic is in matching the agendas of the two parties.  I recently ended a one year search for the perfect building for an aerospace manufacturing client.  The building I found was not at all remarkable from the outside but a new owner had just taken over the building and in an effort to restore the building’s value and curb appeal, had his checkbook out and was undertaking property-wide upgrades.  I caught him at the perfect moment.  I introduced the tenant and suggested he redirect his capital investment to tailor the building for their needs.  Done deal and our search was over!  It helped tremendously that this landlord takes great pride in their investments and holds them for a long time.

I am presently working with a unique, niche bakery searching for the perfect location in downtown Los Angeles.  We looked at several properties.  One stood out in both of our minds.  The reason?  In the tenant’s words (reflecting on the landlord), “He is cool, and he gets it.”  That may sound esoteric but it is absolutely on point.  So much more can be accomplished with a landlord who is truly enthusiastic about the tenant’s business, especially with retail real estate.

Don’t miss the forest for the trees – choosing the right landlord is crucial! 

The Complex Economics of Choosing a Location

When you ask most businesses what first comes to mind when you say the two words “location” and “economics”, they might answer high rent versus low rent.  This answer is on point and shows up right on page one of the lease.  But stopping the analysis there could be a costly mistake.  There are many aspects of location that can have a real impact on your economy – your business’ bottom line.   

The City of Los Angeles has its gross receipts tax – a controversial charge levied on all businesses operating in the City at varying rates up to 5%.  That top tier will be reduced to just 4.75% in 2016.  Oh, happy day!  That alone might motivate you to consider other surrounding incorporated cities like Burbank, Pasadena, Glendale, El Segundo, Culver City, and West Hollywood.  On the other hand, the city, bowing to this competitive disadvantage has established a three year moratorium on the tax for new businesses starting in or moving to the City of Los Angeles.  Indeed, there may be very compelling reasons to locate in downtown L.A. or Century City, but it’s always best to be forewarned and to include city taxes in your occupancy cost analysis.

California’s Proposition 13 has been on the books now for 37 years but remains a double edged sword for commercial real estate tenants.  Given that increases in real estate taxes are passed through to tenants in most cases, the cap on year over year property tax increases set by Prop. 13 is a blessing.  But you can get blindsided by huge increases when the property you are leasing is sold and reassessed.  How to protect against this?  Have your broker research how long the current landlord has owned the property.  If it has been more than 10 years, the increases in the event of a sale are likely to be big.  And do not believe the landlord or their agent when they tell you that they plan to hold on to the property forever.  It’s an all too familiar refrain that you cannot hold them to!  

It pays big time to have an experienced real estate broker in your corner bringing up these challenging issues and advocating your best interests when negotiating your lease.  

Two heads are better than one and might just spare you a migraine.

"Creative Office" Moving From the Fringe to the Middle

Once and for all, let’s put the worn out term “Creative Office” behind us.  Used to describe the workplace of technology startups and flip flop-wearing millenials, the term was abused and perverted by the real estate profession, I’m sorry to say.  First and worst of all, they tried to define creative office by a type of building (old, obsolete industrial buildings) and where it was likely to be found.  The archetypal locations in the Los Angeles region have been Santa Monica, Venice, El Segundo, Culver City, Hollywood, and the Arts District in downtown L.A.  But the misguided definitions of building construction and zip code missed the point.  The emerging new concepts about the communal office are about the people and the work – and it can take place anywhere that a community can thrive.  

The “Creative Office” cliché is being crushed in downtown Los Angeles.  In the midst of a breathtaking renaissance, young entrepreneurs and professionals are flocking to the city’s long forgotten core to live, work and play…and eat…and drink (craft beer, anyone?)  And in everyone’s view is Bunker Hill, home to the city’s largest concentration of skyscrapers.  Where better to challenge the notion that the new office space paradigm is exclusive to low-slung, worn down buildings?

If the primary creative office precept is collaboration, then it can flourish in a dense, vertical downtown community brimming with cultural institutions and richly programmed public spaces.   It is starting to happen.  Brookfield Office Properties’ experimental  DesignHive of six bleeding-edge spec suites in two of their Bunker Hill Towers is a must-see.  I would be happy to give you a tour.

Another perception that is being trashed is that “Creative Office” is just for technology companies.   I have accounting and insurance clients that are shifting to more open plan, team work layouts.  No longer relegated to the “creative” pigeon hole, a new paradigm of productive office space is here.  All aboard

Operating Expenses Can Be a Minefield

If you are a tenant at a property with a single building, your share of operating expenses and property taxes is an easy concept to understand.   But in most multi-tenant office buildings, leases are structured as “Full Service Gross” where the rent includes the tenant’s share of operating expenses for the first year, or “base year” of the lease; in subsequent years, the tenant is charged only for increases over those base year expenses.  Are you confused already?  It’s not unusual.  All the more reason to have a knowledgeable advocate in your corner. 

The calculation of these increases is where tenants can be cheated.  For instance, what if you leased space in a building that was 50% occupied.  Would the building’s electricity expenses be lower that year than in a future year when the building is 85% occupied?  Absolutely yes.   Let’s do a little quick math.  If you occupied 5% of the building and the base year electricity cost was $25,000, 5% would be $1,250.  In that future year with the occupancy up to 85%, the electricity cost is $42,500 and your share is $2,125.  Therefore, your share of the increase over the base year is $875. 

But wait.  Look at a utility bill in each of the two years.  The utility’s rate per kilowatt hour has not changed!  If this doesn’t seem fair, you are right – you are being ripped off!  A well written lease should state that occupancy-sensitive operating expenses (like utilities and janitorial services) for the base year and all future years must be adjusted to reflect an occupancy constant like 90% or 95%.  If that rule is in the lease and properly adhered to, the increase of electricity costs over the base year charged to you in the scenario above would be zero.

A good real estate broker with some property management experience will have your back.  Be sure you have one looking over your shoulder.   It could save you an arm and a leg. 

Property Management is an 80/20 Proposition

Most commercial tenants think of property management and say “thank goodness the landlord takes care of that!”  That is largely true in multi-tenant buildings but to think it is entirely so is to put your financial bottom line into the hands of the landlord or property manager – at best a well-intentioned stranger and at worst a totally indifferent one.  While it is true that a tenant in a large class A office tower does not have to perform janitorial services or maintain the building’s heating and air conditioning systems, they do assume significant repair responsibilities inside of their premises and have important administrative duties relating to property management.  

Think about it: for every bill you receive, whose responsibility is it to review it for accuracy and actually cut the check?  There is not a lot of review required when you get a utility or cable TV bill at home, but what about that annual operating expense reconciliation letter you get from the landlord?  Does it accurately reflect the terms of your lease; in particular, the special operating expense lease provisions a well-informed real estate broker should have negotiated on your behalf?

80% of property management is shouldered by the landlord, but 20% is the tenant looking out for their own interests.  

Who is looking out for yours?

The Market Dictates, Not The Landlord

In a previous edition of Lease Intelligence, I touched on the challenges of seeing through proclamations made by the landlord or their agent about the value of their building and getting to the real deal.  This prompted a number of comments from readers including “how can you tell the difference between their proclamations and the truth…and what are the cues?”

There is no fairy dust or magic wand that comes with a real estate license or an advanced commercial real estate designation, such as CCIM.  The weapon that cuts through the landlord’s bluster is nothing more than solid research, preparation and experience.  If the landlord’s side tells the story of the top of their submarket, your broker should counter with the bottom of that same market.  If the landlord’s line is “The market has gotten tight – no more free rent” your broker needs to cite a recent deal that came with several months of free rent.  True, no two deals are made in the exactly the same circumstances but your broker should know how to leverage the facts to your advantage.  The objective is to neutralize the landlord’s claims – or their ego, just in case they really start believing their claims as unassailable truth.

Once the landlord’s side hears the sharp “clink” of your advocate’s sword striking theirs, the posturing shifts and the parties start to search in earnest for where the deal really is.  Think of natural market forces like the referee in the duel.  The objective is not necessarily to slay your opponent but to come to a fair, balanced outcome. 

Good, old fashioned preparation.  And a sharp blade of hardened steel.

The New Tenant Creditworthiness Game

Landlords will forever insist on seeing financial statements before finalizing a lease deal with a tenant, whether they are a small business or a publicly traded company.  And they should.  But what does a tenant do if their ship has been tossed – and perhaps badly damaged – in the hurricane of the recent, extended recession?  And, I mean, who amongst us didn’t suffer?

I have represented tenants who, in some instances were looking to downsize for the sake of their very survival.  It was unlikely their financial statements were going to inspire many landlords to spontaneously break into song.  So, did this tenant need to resign themselves to rejection?  Absolutely not.

Landlords suffer a parallel fate as their struggling tenants.  They naturally prefer tenants that have capital reserves that will better insure that their rent will arrive in the mail every month.  But in challenging economic times they are forced to look beyond the numbers, and good brokers can coach their tenant clients how to tell their story in a persuasive way.   It requires taking the time to learn about the tenant’s business and ask some difficult questions to get to the truth.

I recently negotiated a lease for a client – we’ll call him Stuart – who is a prominent, established interior designer for large homes and hotels.  His industry was decimated by the recession and the very fact that he survived at all was a testimonial to his reputation and perseverance.  We presented the landlord with a couple of years of personal tax returns.  This gave the landlord the facts.  They are what they are.  Starting off with honesty is always the best policy.  But what we submitted with the numbers was Stuart’s story: his 30 year history in the business, his impressive resume of clients worldwide, and his nimble resizing of the company to insure its continued viability.  We worked together on the story so it hit what I knew from experience would be a landlord’s hot buttons .  We proceeded to final lease documents without a single question from the landlord.

The facts + a success story that harkens back to better times = the new creditworthiness. 

When "Triple Net" Isn't Really Triple Net - Kellogs Swale Tale in Detroit

Can the landlord force their tenant to cure all latent defects at a property under a NNN lease?  The answer is yes…if you let them!  Tenants take this on the chin day in and day out without a good, experienced broker in their corner who can come out swinging!

Properties can have latent defects even if they are brand new.  The benefit of brand new is that there are construction warranties in place.  Did the broker make sure those warranties were addressed in the lease to protect their tenant against construction defects?  If not, the tenant just got the shaft!  If the warranties have long since expired, did the broker get wording into the lease that latent defects would be the landlord’s responsibility?  Admittedly, those assurances are hard to get, but you gotta ask!   Putting protections into the lease regarding premature and extensive repairs to a property that is being tendered in “good operating condition” is the stuff of another blog post, but I wanted to share an interesting story that involved my client, The Kellogg Company. 

Kellogg was 3 years into a five year lease at a free-standing, single tenant facility in the greater Detroit, Michigan market.  This was a classic triple-net situation: the tenant was the only one using the property.   I got an email from Battle Creek: the Detroit distribution center manager was complaining that a broken concrete drainage swale running down the middle of their truck court was breaking up and causing damage to their trucks.  After reviewing their lease and finding what I expected – pure triple-net without any carve outs – I took a few minutes to reset the client’s expectations; after all, it was their truck traffic that caused the damage.   But before I came to any final conclusion, I asked them to take several photos and send them to me.

What the photos revealed was that the concrete swale was poured with the rebar very close to the surface which arguably caused the concrete to “spall” or fracture.  The rain and freezing temperatures took care of the rest.  I presented the problem to the landlord thusly: the faulty construction of the swale was the root of the problem.  And the tenant was considering their options with respect to renewing this lease.  Can you guess what the outcome was?  Problem solved…and at no cost to the tenant!

The moral of the story here is that the tenant or their broker must give these situations a closer look before incurring the cost of repair.  And if you think you need the leverage afforded by a Fortune 100 tenant, that’s not necessarily the case.  So long as the tenant has held up their end of the lease and paid their rent on time, they are golden. 

Nothing is absolute when it comes to the landlord-tenant relationship.

Tenant Improvement Allowance: It's Not Just How Much But When

How does it feel when you negotiate $100,000 of landlord-funded tenant improvements in your lease, you use $75,000 to get the premises ready for your occupancy, and then find out there isn’t any allowance left a year later when you have to replace the broken down air conditioning unit on the roof?  You just got the shaft, dear tenant…twice!

Most leases are drafted by the landlord and so are skewed heavily in their favor.  Language in the “Work Letter”  – the lease addendum that addresses tenant improvement construction –  typically states that the landlord allowance is for construction and improvements to the premises that relate to the initial space plan and that are performed prior to the lease commencement date; in other words, “use it” for only this work and within this time frame “or lose it”.  Most tenants and many inexperienced or oblivious real estate brokers don’t give this much thought.  The tragedy is that most landlords don’t even pay close attention to this detail; that is, until the tenant surprises them down the road with a request for funding for subsequent improvements, and then they turn the tenant down flat.

I’m giving away a valuable trade secret here, so pay attention!  Try deleting the language that puts time restraints – direct or implied – on the use of tenant improvement dollars provided by the landlord.  It is amazing how infrequently I find landlords rejecting this change to the lease.  The poor soul at the top of this article could have been $25,000 to the better if his broker had done this for him!

There are other improvements that the typical Work Letter states cannot be paid for by the landlord’s tenant improvement allowance, including furniture, fixtures and telecom systems.  These too can be negotiated in your favor by a savvy, experienced broker.

 A good tenant advocate knows that everything in your lease document is negotiable

Corporate Image: Inside vs. Outside - Does Your Broker Get It, or Even Care?

Did you sign a lease for a beautiful new building only to watch employee morale disintegrate after you moved?

Your corporate image and culture is projected in many ways, including your branding and marketing materials, but perhaps in no way more dramatically than in your place of business.  Tenants, be they retail, office, or industrial in nature, choose buildings based on their outside appearance  or “curb appeal”.  While there is no discounting the way a building looks from the street, experienced and knowledgeable real estate brokers know that what you see isn’t always what you get.  Poor brokers and naïve tenants overlook the fact that there are two distinct audiences for corporate culture:  the outside world (their clients and the public at large) and, no less important, their employees. 

On the outside is the architecture, the building skin of granite or glass, the expansive lobby and the corporate identity (not necessarily theirs) on the top of the building.  But what is important to your valuable employees?  Think ease of parking, the speed of the elevators, the smell of the bathrooms, the design of the suite, and the amenities in the neighborhood.  What do you think it does to productivity to have your employees chronically complaining that they are too hot or too cold in their work area, or worse, going home feeling sick because they are hypersensitive to these temperature extremes?  Or when they take longer lunch breaks because the food amenities located in or nearby the building are lousy?  Or when there are no places nearby to network and socialize after work?

How else does a building impact your business operations?  Is that impressive grand lobby in your three story suburban building inflating your rentable square footage and costing you more relative to other alternative buildings?  Are you setting yourself up for surprise billings from the landlord because they are doing a poor job managing building operating expenses?  It might surprise you to learn that these are all things a good real estate broker can identify before you sign your lease.

Think about it: those companies rated as “the best places to work” in your local business journal never cite the exterior appearance of the building.  It’s all about happy employees.  And happy employees make for happy clients.

The Myth of "No Free Rent"

Did you sign a lease only to feel your stomach turn when find out that you left several months of free rent on the table?

Tenants are understandably intimidated by improving market conditions.  Space is actually getting leased up again.  Rents are slowly climbing out of the doldrums of the last recession.   In a few  submarkets they are rocketing up.  Tenants can be intimidated by pronouncements of landlord rep brokers that “we have offers on the table”, “the space won’t last long”, “the premises are being leased ‘as-is’”, and that “the landlord is not offering any rent concessions.”

Those pesky brokers – are they lying?  No – they are just doing their job; that is, to gain the best advantage of improving market conditions for their clients, the building owners.  They are professional salespeople.  And the best ones are great salespeople.  Most tenants are blinded to the fact that they need an advocate who understands the landlord’s position in the market and who isn’t cowed by the pronouncements of their brokers.  Consider: When two professional brokers get down to negotiating a lease, the sales-y rhetoric evaporates and is replaced with the language of the deal.

Let me tell you: in all but the most in-demand micro-markets and neighborhoods, rent concessions are still on the table.  Quality tenants are still highly valued.  There are many concealed flex points in the economics of the lease that allow a good agent to tailor the deal to your specific needs.  

It is wise to have an agent who knows whether that building you really like is really as hot as the owner’s broker would like you to believe it is. 

Making Landlords Love Free Rent

I recently negotiated a lease for a retail tenant with twelve months of free rent up front.  You might be wondering what I slipped into the landlord’s coffee before we started negotiating but that wasn’t the case at all.  The key to negotiating free rent was not to argue the tenant’s financial weakness and need but rather their strength and intelligence. 

As we have all observed, the most vulnerable time for a retail business is in its first couple of years.  In most retail leasing situations, the tenant invests a significant amount of capital into the premises for FF&E, or furniture, fixtures and equipment.  And then there is the investment in marketing and advertising that is absolutely necessary to draw customer traffic to their new location.  As the tenant’s broker, I confidently touted the strength of the client’s business based on its one other established location and convinced the landlord that by allowing the tenant to preserve his operating capital for marketing and promotions, he would be giving them enough “runway” to get the business off to a successful start, greatly improving their chances of enjoying a reliable rent stream over the long term.  It didn’t hurt that this particular landlord had just cancelled a lease for a restaurant tenant that never even opened because they ran out of capital – I researched the situation and worked it to my client’s advantage.

An experienced tenant advocate knows that the objective is not a generic “good deal”, but a deal geared to the tenant’s long term success. 

Facing Your Fears - Buying in a Hot Neighborhood

So you want to buy a building in El Segundo?  Talk about a submarket that went from sleepy to Silicon Beach in a heartbeat!  Like the Arts District in downtown Los Angeles, the small industrial buildings in its cozy neighborhoods have a huge appeal for creatives.  (I mean, who wouldn’t want to call “Smoky Hollow” – a funky 15 block enclave along the southern edge of the city – home?)   New ideas seek a new neighborhood.   Creatives want to create their universe.

Needless to say, values have shot up and every building owner has stars in their eyes.   There are real and there are false indicators of value in a resurgent neighborhood.  Be careful.  Don’t buy without an experienced, sober broker working on your behalf. 

First of all, accept the fact that a hot neighborhood is a seller’s market.  There isn’t much negotiating on price but even in the hottest neighborhoods, there is a range.  Some factors clearly weigh on a property’s value.  For example, parking can dictate whether an industrial building is a viable candidate for adaptive use to creative office.  If the site is tight, a good broker can persuade the seller to consider a price at the lower end of the range and can press for more flexible deal terms. 

Ultimately, it is the energy of the people and businesses migrating to the area that creates relative value.  Does that transformative energy matter to your business?  If not, I can find you a building in Gardena that is much cheaper.  Are the businesses migrating to the street creating a critical mass that will embody a unique culture and panache to the address?  That might be crucial if hipness makes you more competitive in the race to recruit top creative talent. 

The big question that keeps buyers awake nights is “will it continue to appreciate?”  Buying to make money on real estate frontiers is for visionary risk takers who get into these neighborhoods early when naysayers think they are crazy.  Buying when the resurgent neighborhood is in full swing must be for sound reasons related to your business.   The upside will take care of itself.