After years of working in newspaper real estate, we tend to see assignments come in seasons. Lately, BellCornerstone, having helped repurpose more than 1,000 newspaper buildings across North America, is doing an awful lot of work selling properties in tertiary markets.
Tertiary America is made up of thousands of smaller cities and communities outside major metropolitan areas, sometimes with populations of just 2,000 or 3,000 people and sometimes 25,000, 50,000 or more, but often an hour or two from a major airport or economic center. These aren't suburbs waiting for the city to reach them; they are independent communities with their own employers, institutions and identities, and very often the newspaper has been part of that identity for generations.
There is a lot to like about these markets. They have history and character, but more importantly, an economic resilience that can be easy to underestimate, with longtime employers, deep community roots, lower costs and real-estate activity driven more by need than speculation.
Ironically, those same strengths can make selling real estate more difficult. Businesses stay put, buildings change hands less frequently and new companies don't arrive in waves, so even a healthy economy may produce few businesses looking for 10,000+ square feet.
Stability and liquidity, as it turns out, aren't necessarily the same thing.
Newspaper buildings compound the challenge because they were built for a specialized purpose and are often an unusual combination of office and production space. They are typically well-located, well-built and equipped with infrastructure that would cost a fortune to reproduce, but finding a single user who needs both types of space, in those proportions and in that location, can be wildly complex in a smaller market.
And “large” is relative. In a major market, 15,000 or 30,000 square feet may not seem noteworthy, while in a tertiary market finding one business that needs that much space can be difficult. More often, we find interested users who like the building and economics but need only a fraction of it, turning the assignment into a puzzle: Can we aggregate enough demand, divide the building intelligently or find the uncommon user who can make the whole thing work?
Add the size, specialization and significant office component, and you have what we call the Triple Threat: Large, Specialized and Office-heavy.
We use LoopNet and Crexi, put signs in front of buildings and work with local brokers, but the eventual buyer frequently isn't shopping for the property. Historically, 60% to 70% of the buyers we have generated for newspaper properties have come from BellCornerstone's proactive outbound efforts rather than conventional inbound inquiries (waiting for someone to find the listing and call).
If six or seven out of 10 buyers have to be generated, waiting for the right person to find the listing isn't much of a strategy.
Local brokers can be an important part of the solution, and we frequently include them because they know the building, community and local landscape. What they generally haven't done is sell specialized, office-heavy newspaper buildings in tertiary markets across the country.
The local broker knows the local market. Our job is to find the best buyer for the building, and very often that buyer isn't local at all.
That buyer may be 50 or 100 miles away, in another industry or not looking for real estate at all. Finding them means expanding the search geographically and across industries, identifying companies whose operations fit the building and going directly to them.
Then we call them.
Some of our best transactions have started with someone telling us they weren't looking for real estate. Maybe they hadn't considered expanding, were operating an hour away or suddenly realized the building could solve a problem they had learned to live with. Sometimes the ultimate use is something none of us predicted.
In tertiary markets, sometimes you have to find the demand and bring it to the property.
There is no magic formula, and these buildings can take time to sell. Lowering the price isn't necessarily a silver bullet because a company that needs 5,000 square feet doesn't suddenly need 25,000 because the building got cheaper. Even a fully leased property presents challenges because an investor still has to ask who the next tenant might be five or 10 years from now.
The process requires patience, realistic pricing, creativity and persistence, which is why we strongly recommend starting while the building is still active. Occupancy demonstrates usefulness; vacancy invites questions and gives buyers time. A lack of immediate activity doesn't mean a lack of value. Sometimes the eventual buyer simply hasn't been introduced to the opportunity yet.
Tertiary America is filled with terrific communities, durable businesses and remarkable newspaper buildings that, for the right buyer, offer infrastructure and replacement economics difficult to replicate.
After more than 1,000 newspaper buildings, we've learned that the right buyer may be farther away and harder to find than anyone would like.
Our job is to find them.
Brian Rossi is CEO of BellCornerstone. For a Confidential, No-Obligation Conversation, contact Brian at 315-935-3162 or brossi@bellcornerstone.com.
