Though strategic planning for your
2008 corporate real estate needs
should already be completed, now’s the time to consider retaining a professional consultant year-round.
“Because there is so much to know about
commercial real estate, many companies
just do not have the expertise internally,”
says Kevin McGovern, Senior Vice
President for Grubb & Ellis Company.
“Utilizing a broker throughout the year will
provide a company an outsourced consultant and, in most cases, for no additional
cost to the company because the transactional fees alone are usually enough to provide ongoing services.”
Smart Business talked to McGovern
about advanced planning for real estate
needs.
When is the best time to evaluate real estate
needs?
The simple answer is all the time, but it’s
not a very practical answer. Companies
should examine where they have been and
then determine the best way to get where
they are going. The easiest time to do this
is during the fourth quarter or when planning next year’s budget.
Who is in charge of real estate decisions?
Typically, it is the CEO or CFO for local or
regional firms. Fortune 1000 companies, or
companies of similar size, are large enough
to absorb the salary for a director of real
estate or even an entire real estate department. In any case, a company will want to
have a real estate professional, either internally or outsourced, adhering to the company’s needs year-round — even outside of
the planning period.
What specific services can a real estate consultant offer?
It really makes no sense for a company to
use a real estate broker for a specific transaction only, whereas the company can use
the same broker to advise them on a much
broader level. For example, most tenants
don’t know that a broker can help them analyze the operating expense reconciliation reports that come from their landlord
every March or April. The broker can help
you determine if something needs further
investigating and then guide you through
an audit of the landlord’s books. This, of
course, is possible only if you negotiated
within your lease for the right to do so —
which is what a good consultant would
ensure.
A real estate broker typically gets paid a
commission based on results, and it is primarily the result of a transaction closing. A
better and more intelligent path is for a
company to utilize this broker year-round
as part of the services that come from representing the client during the transaction.
Can a company really include an outsider in
its strategic planning meetings?
You shouldn’t release your most valuable
trade secrets to an outsourced team member; you still have to use common sense.
But you should involve a real estate professional frequently and consistently.
If your current adviser is not capable of
this kind of service, then start taking the
phone calls from the dozens who call you
every week. Interview them and decide on
the right fit for your company. It will ultimately increase your profit and provide
you more time to focus on your core business.
What information should a company share
with a new consultant?
A good consultant will have many different options and ideas, so take the time to
explain the needs of your firm or business.
By knowing a client’s strengths, weaknesses, opportunities and threats, a broker/consultant will be able to strategically position
the company to function within all of your
given parameters. And intelligent creativity
during a lease negotiation will provide you
flexibility when you need it most.
What might a real estate broker/consultant
advise during strategic planning?
Real estate runs in cycles, yet many tenants continually sign their new lease at the
top of the market. Though you will not
always transact a lease at the absolute bottom, you still want to have a consultant
monitor the market on your behalf. When
the time is right, the consultant will advise
the appropriate action, even if it was not on
your current agenda.
Opportunity does not always wait. If a
building’s rental rates are at or near an all-time high, chances are there will be better
days ahead for you to do a long-term lease.
But don’t be afraid to do a long-term lease
when the market dips down, as long as
your long-term business is sound.
Also, a good consultant can help analyze
whether it is better to own or lease real
property. Many data components given to
the consultant from the client and from the
market are plugged into a financial model
that addresses objective and subjective
concerns.
KEVIN MCGOVERN, SIOR, CCIM, is a Senior Vice President,
Transaction Services Group with Grubb & Ellis Company in
Dallas. Reach him at [email protected] or (972)
450-3239.