The Moving Process
A Move Away from Relocation Headaches
When companies face the question of relocating, they have to make a multitude of complicated decisions. Whether the relocation involves 2,500 square feet or 250,000 square feet, evaluating alternatives remain the same — a complicated, painstaking, and time consuming process.
Leasing office space can be regarded either as a necessary evil and expense or as an important vehicle to achieve corporate objectives such as employee attraction and retention, company image, and profit maximization.
Allowing plenty of time is a basic but essential element in the process; users occupying less than 20,000 square feet should allow at least six to nine months from the space survey until the move-in-date; users who need more than 20,000 square feet should plan for a lead time of approximately nine to eighteen months or longer.
Part of this time is needed to sort out the many questions and alternatives that present themselves. For example, should a company investigate just a few building alternatives, or should it investigate everything so as not to miss a “good deal”? If the current building is satisfactory, what is the best strategy for negotiating with the current landlord and achieving the best renewal rates as possible? After alternatives are narrowed down to a few, how should they be evaluated so that a true comparison can be made? The factors to evaluate include location proximity to amenities, net rent and additional rent per square foot, tenant improvement allowances, building infrastructure (in order to meet your company’s technical/wiring requirements), building services (operating hours, HVAC specifications, etc.), parking, and options for renewal and expansion. Furthermore, during recent years the evaluation process has become more complicated due to the large amounts of office space available and the differences between the quoted rental rate and the lower rates that can potentially be negotiated.
Choosing to Stay or Relocate
Sometimes, a company decides that its present building is adequate and chooses not to move. But even this decision warrants careful thought and planning by the tenant. If the present building works and the economics are competitive, usually both the tenant and the landlord gain by retaining the existing tenancy. The tenant representative’s job is to utilize its past experience and market knowledge to ensure that the tenant is well represented in the deal.
Part of being well represented is being well informed. When landlords know that relocation alternatives are abundant and tempting, they are likely to give more concessions. Since tenant representatives are involved in the commercial real estate market place on a daily basis, they have intimate knowledge of the current market rental rates and most recent market transactions and are therefore better able to represent a tenant’s needs than an internal negotiator.
The Reports Are Useful
Tenant representatives can provide users a number of useful reports: discounted cash-flow analysis of the various alternatives and evaluations of free rent and tenant improvement costs that go beyond standard building allowances, parking costs, base rent increases, additional rent calculations, and options to renew and/or expand.
Who’s Got the Time?
Most office decision-makers do not have the luxury of devoting substantial portions of their time to successful office relocation. This is another way that tenant brokers can help. They can do the majority of the information gathering while decision-makers do just that — make decisions.
How Important is Experience?
Tenants usually relocate within a specific market once every five or ten years. Obviously, they cannot compete with the in-depth market knowledge of the office leasing specialist who is involved with the market place on a daily basis. Experienced brokers know not only what is available but also what specific landlords are willing to do in terms of rent, terms, concessions, and a host of other factors. Brokers who know details of prior transactions have invaluable resources for negotiations that are not available by simply asking landlords what they are willing to do. Furthermore, landlords know that tenants with experienced tenant representation are aware of competing buildings and can switch negotiations if transactions do not proceed smoothly. This alone can save tenants substantial amounts of time and money.
No Easy Road
Office leasing is many times more complex than in the past; alternatives are everywhere, and lease contracts that used to be few pages long now commonly number 20 or more pages. The bottom line effects of an improperly negotiated lease contract can have long term devastating effects on the tenant. Experienced tenant representatives understand the needs and requirements of tenants and landlords, and they are able to serve both parties fully.