Too fast, too dangerous 🏎️

I guess it’s been building for a while, but I’m officially on the Formula 1 bandwagon. I’ve never voluntarily watched athletic events, and I've certainly never spent money on one, but here I am trying to figure out how to make a friend with an apartment along the track in Monaco. Yes, I know there are grand prix races in the US, but I’m in it for the champagne and glamour, people.

 I should give due credit to Dream Space graduate Robert who is opening SimRace Orlando. I learned a lot about racing culture and Formula 1 working with him on his Powerhouse Business Plan. So I was thrilled when my favorite podcast, Acquired, released an episode on the history and business of Formula 1.*

As usual, those four+ hours were fascinating, and among other things, I learned that spoilers have a function beyond just looking stupid. Throughout the episode, my boyfriends the hosts, Ben and David, refer to the Netflix show Drive to Survive as if everyone and their mother binged it during early COVID. I binged nothing, mind you, as working in the coffee industry was deemed “essential.” I didn’t even see Tiger King, people.

Well a few weeks ago, my daughter, Alice, and I started watching season one, and it took me approximately 30 seconds of the opening interview with driver Daniel Ricciardo to know that after 45 years, I’m ready to be a sports fan. I don’t know what this says about us, but I like the team politics and the very handsome…cars, and she likes the crashes. We both like making commentary in German accents.

I’m only four seasons in, but I’m doing my best to catch up before the Miami Grand Prix next month. Already though, there are consistent elements and themes that I find relatable to both life, and say it with me now, retail real estate.

Formula 1 has always been about speed — which car can make it to the checkered flag in the least amount of time. Since its birth in 1950, there have been incredible advances in aerodynamics, tire and engine technology, and computer systems, all of which have enabled teams and the drivers to continuously pursue the singular goal of finishing the race first.

So in learning about the sport over the past 76 years, it’s surprising that the lap times of today are remarkably similar to those of the mid-80's. In 1950, lap times were about 4min 20sec, and thanks to technology and plastics by 1985 they’d dropped to about 1min 50sec, yet today, lap times are around 1min 48sec.

🧐 Why is this the case? With all the available technology and an abundance of resources, why have speeds not increased to infinity and beyond? Simple. Too fast = too dangerous. The sport’s no fun if the drivers are dying all the time.

Drivers and their teams want to go as fast as possible, but at what cost? Since no one can change the laws of physics, in the 1990’s, Formula 1 decided to mandate some controls on certain parts of the car and track designs in service of driver safety. In an age of seatbelt laws and airbags, minimizing fatalities was a smart business move. The best car should be one that goes maximally fast while still being (relatively) safe for drivers. 

  This is a lot like the way the retail real estate system works. 

Established retailers, brokers, and property owners know that getting to a signed lease takes many months — usually six at least. Startup retailers usually don’t know this, and when they hear it? Their response is typically somewhere between incredulity and refusal. NO WAY will it take me six, eight, ten months! I CAN’T WAIT THAT LONG! 

What they don’t yet appreciate is that    all that time — those many months of back-and-forth negotiations and due diligence — these are the system’s safety controls. 

Quick pit-stop refresher:

Search 3-6 months — Scouring the market with your broker for the right space based on your criteria and budget set in your business plan

  LOI 2-3 months — Negotiating the most critical business terms in your lease

  Lease 3+ months — Your lawyer and the landlord’s lawyer duking it out over all the juicy legal bits of your lease

For everyone who simply cannot bear the thought of waiting that long, we’ve written this just for you. Spoiler: the only shortcut is to not negotiate.

Okay, back on track...

Speaking of things that haven't changed much since the '90s, the business of retail real estate still operates a lot like it did back then...and for good reason. While computers, the internet, and cell phones certainly turbocharged the system, there still exist natural speed limits to how fast human to human negotiations can move.** We use email, phone, text, and in-person meetings all the way from the starting grid to the checkered flag.

Most drivers' contracts last for one or two years at a time, and only Red Bull and Max Verstappen (whom Alice really doesn't like on account of "his face," which is just fine if you ask me) have a historically long, seven-year agreement. Seven years is nothing special in retail real estate. 

A commercial lease is always intended to be a fixed, long-term relationship. It’s a binding covenant between a landlord and a tenant, and both parties have a lot on the line – especially indie retailers.

Moving at a pace that balances speed AND caution is in everyone’s best interest. So while it’s certainly possible to race to a signed lease at 200mph in a vehicle without safety features, avoiding pit stops and ignoring safety cars, the risks are serious enough to knock you off the track forever.

* OMG you won't believe it! They just dropped a new episode yesterday, and it's on Ferrari!

**If you’re thinking “No way, Sheila, AI is going to be negotiating these deals for us soon,” I’d guess that you haven’t spent much time explaining the personal guaranty or talking a client down from the ledge at the 11th hour of a lease negotiation. In fact, it sounds like AI’s pretty bad at managing complex emotions.

🏁