How can you decrease costs, increase
options, minimize disruptions, and
maximize synergies on your next real estate deal without spending an extra
dime? Plan ahead. Just as in financial
investing, time can act as your most powerful ally or your strongest foe in the real
estate process.
“Remember that your landlord does this
every day,” says Kevin Carroll, first vice
president with CB Richard Ellis. “If you
start negotiating with him 90 days before
your lease expiration, he knows that time
is not on your side and you are less likely to
move. If you wait too long, you lose leverage, which ultimately will cost you money
in the form of a higher rental rate, smaller
tenant improvement allowances, and less
concessions.”
Smart Business spoke with Carroll
about how to plan for success on your next
real estate project.
When should businesses start addressing
their lease situation?
The timing depends on many different
factors, but the most significant one is the
size of the tenant. Typically, the larger the
tenant, the sooner they should start analyzing their real estate situation.
Smaller tenants should start evaluating
their real estate situation a minimum of six
months in advance of their lease expiration
date. Larger tenants, those with size
requirements of 50,000 square feet or more,
may need to start as soon as one to two
years in advance.
It is important that you allocate enough
time to identify space, negotiate a lease,
construct the premises, and coordinate a
move in the event that you decide not to
renew your current lease. Many companies
start with the intention of renewing so they
don’t begin the real estate assessment
process early enough. Later they find out
that there are better alternatives available
and end up having to move quickly.
Why is it beneficial to begin the process
early?
When companies are not in a rush, they
tend to make smarter, better-thought-out
decisions. Executives should take time to
think about their company’s goals and objectives and structure a real estate situation that will facilitate achieving those
goals. They should ask themselves questions about where the company is today
and where it is headed in the future.
Starting early gives them a chance to consult with others in their organization and
determine how their business plan will
affect their real estate requirements, such
as location, future space needs, etc.
What professionals should be involved in
real estate projects from the beginning?
I would encourage all companies to hire
a real estate professional to guide them
through the process and help them assemble the appropriate team of vendors.
In addition, companies need to identify
an internal point person to handle the project, whether they are pursuing a renewal
negotiation or relocation. That person may
work with a team to develop and present
alternatives to the business owner or a
committee for feedback and final decisions. In the event of relocation, the team
should clearly outline who will coordinate
vendors for phones, data, furniture, the
physical move, and other issues that will
arise. Typically the ‘quarterback’ of the real
estate team is a facilities manager in a large
organization or an office manager or CFO
in a smaller organization.
How can businesses ensure they follow the
correct timeline throughout the process?
An organization can often follow a simple
timeline marked with significant milestones, which their brokers can provide for
them. This timeline includes discovering
options in the market, analyzing proposals,
developing space plans, estimating construction costs, selecting a property, starting the construction process, etc.
As most of the professionals in a company are already dedicated to their work, outside expertise can keep an organization on
schedule while the company continues its
day-to-day functions. Many of the vendors
a company uses during the process will
instinctively fill this need. For example,
most architecture firms will provide a
detailed schedule to their clients and make
sure the company stays on track.
How can companies make up time if they
start the process late?
Companies often start the process late
because they are so focused on their core
business that they do not take the time to
devote to analyzing their real estate situation. If all the key players concentrate on
the real estate situation, they can often
make up for lost time. However, this shift
in focus usually requires more attention
and time than they can afford to pull away
from the core business. Businesses should
avoid this situation if at all possible.
In summary, what is the main point you
would like to give to companies as their
lease expirations near?
Get ahead of the game. Whether you plan
to renew your lease or relocate, hire a seasoned real estate broker and educate yourself on the market. Outline your requirements and find out what alternatives are
available that fit them. Tour spaces and
solicit proposals from the landlords of the
buildings you like best. At the same time,
solicit a renewal proposal from your existing landlord. A broker will be able to guide
you through the rest of the process to
ensure a successful renewal or relocation.
KEVIN CARROLL is first vice president with CB Richard Ellis.
Reach him at (404) 504-7918 or [email protected].