To Lease or Not to Lease
There are many reasons businesses lease real estate. Not the least of these is the fact that someone else may own the prime location a business has to have. Other reasons to lease are: the “flexible financing” it provides, the relatively short-term commitment it requires, or the ease with which a lease can meet the space needs of a rapidly growing company,
Know anyone who has relocated their business recently? It does not always go well. Some people would rather have major surgery than move again. Of these, some tenants were just plain unlucky. Others could have managed the process better and saved themselves and their companies lots of lost workdays — and stress.
Planning, Planning, Planning
Regretfully, there are no rules etched in stone about when to begin planning a company’s move. The rule that may as well be etched in stone, however, is that your current lease has an expiration date; and your landlord may rent your space to someone else after that date. In other words, you could be out on the street — unless you plan ahead.
A Year Ahead?
The actual timing is driven by many variables: space availability in the market, company size, necessary specialized improvements, etc. But try starting as much as a year ahead. Doing so will give the company a sense of the market, give them a chance to learn what the supply of available space is and how much it costs. If you use a real estate brokerage firm, it will also give you a chance to see how you and your broker work together. The bad news is that neither landlords nor brokers are going to brim with excitement when they hear from you at this early stage. But the interests of the company are at stake, aren’t they? Think of this period as the insurance premium you pay toward your successful move.
Comparison Shopping
Look at enough properties to make a useful comparison of them to each other. Include your current space. Compare price, amenities, construction quality, neighbors and parking. Also, check out the landlord. Who owns the building? What is their reputation in the market? If you are a tenant, who will you call when the property needs maintenance? Try talking with neighboring tenants about their experience in the buildings.
Homing In On The Right Address
One or two of the prospects will rise to the top. When the tenant is required to pay the cost of utilities in these suites, check to see if it is separately-metered (i.e., gas, electricity, maybe water), and that the respective meters serve that space alone. Scaled, “as-built” architectural drawings of the space can enable you to verify the landlord’s square footage calculations. “Rentable” and “usable” square footage are terms you should understand; they can have substantial economic consequences.
This Is The Dirty Part
If suite construction is necessary to remodel the “number one” space to suit your needs, take the time to understand the process. There are enormous pitfalls in time, money and frustration here which people you know have fallen into. You can avoid the pitfalls if you are working with competent professionals. Depending on the terms of the prospective landlord/tenant relationship, get a “comfort level” with the owner’s ability to deliver the specified improvements — on time. Ask to meet with the architect, maybe the contractor, too. Be certain everyone agrees your projected move-in date is realistic. Ask for a construction “time line” against which you can measure progress when the work begins. Be wary of “change orders.” That’s where the budget begins to fall apart.
Attorneys Have A Place
Real estate, whether it is owned or rented, continues to get more sophisticated. A real estate broker’s market savvy may save you time, perhaps money. Also, find a good attorney with real estate experience in your market. The attorney’s job is to solidify all the good intentions you and your broker and your colleagues brought to the table in a legally binding document — the Lease.