Budgeting, goal setting, business planning – all are business objectives in the fourth quarter of the year. As businesses plan for 2006, I’d like to challenge all decision makers to not only think about the big-picture changes they want to make, but to also add one more item to the list – real estate.
Whether your organization owns it or leases it, let us challenge you to make your corporate real estate a top priority next year.
There are two main reasons why real estate should be considered in strategic planning. For most organizations, real estate is one of the largest expenses, right up there with payroll. However, few organizations ever make a priority to evaluate and analyze their real estate needs. Often times they end up paying too much for their space or property.
If your lease is expiring anytime in the next two years, now is the time to start developing your corporate real estate plan. You should be planning for your long-term real estate needs. You should also be strategically aligning those needs with space availability in the marketplace. This is one of the quickest ways to control your operating expenses and increase profitability.
These days it’s a tenant’s market. With plenty of vacancy among the multi-tenant commercial buildings, there’s more competition for occupancy.
Two years ago, the vacancy rates were over 20 percent. Now vacancy is around
15 percent, and in another couple years the vacancy will be much lower. It’s a great time to take advantage of current market conditions.
As you formulate your real estate plan, take a moment to consider the
following:
Start early. You start looking 12-to-18 months before your lease expires.
Remember that finding the right facility, negotiating the lease, getting city permits, building the space, and moving can all be very time-intensive steps in the process. Establish a single point of contact.
Relocating your office is a huge responsibility. If you don’t have the time to devote to the daily tasks associated with searching for space and organizing the move, appoint someone. This person needs to have a firm understanding of your company’s operational and business objectives. Just as importantly, they must be well organized.
Make sure you solicit input from your board of directors and/or managers as you get started. Commercial real estate decisions can affect your organization’s bottom line significantly. Your board will have a keen interest in the decisions you are making regarding your real estate, so you want to make sure their input is considered.
If you are a non-profit organization, remember that non-profits are non-traditional space users. If you are working with a tight budget or have unique operational needs, be sure to explore different property types. If you are an office user, for example, make sure you consider retail, warehouse, and office-warehouse spaces. If you are running out of options, expand your geography.
If you can work with a short-term solution, look at subleases. These can provide a short-term lease option, potentially lower rates, and flexibility.
Give yourself options. Make sure you explore multiple opportunities to lease or purchase until you are 100 percent satisfied. Not only will other properties provide leverage in your negotiations, they’ll give you a backup if “Plan A” falls through.
Many times the help of a commercial real estate broker, real estate attorney, architect and general contactor can save you time and money in the long run.
Unless you can predict the future, ask for options in the lease. That way you won’t end up having to relocate when you grow.
Consider a long-term lease. The longer the lease term you can commit to, the better terms you can get. A long-term lease makes it easier for the landlord to keep your rate competitive and still build out your space, pay commissions, etc. Remember there are many ways to add flexibility to your lease. The lease term is just one of them.