One relocation team member you need to identify and hire early in the process is your real estate broker. They will streamline the process of finding appropriate space options based on the criteria that you have identified, such as the following:
Geographic area, possibly based on management-identified criteria, client locations or staff commuting patterns or staff surveys
General size range of space requirements identified through working with your architect or designer, the impact of a remote-work program, future staff growth projections, etc. The right of first refusal for an adjacent suite might be an important consideration for potential, future growth.
Building exterior aesthetics and branding
Building shape and floor footprint compatibility with your programmed space requirements (ie the desired number of floors and useable square feet per floor)
Desired amenities in the area and in the future building, such as:
What amenities or building features do you currently have that are important to have in your next building?
Nearby locations to eat lunch
Shared tenant conference facility and fitness center in the building
Sustainability programs and features such as building LEED certification and Energy Star rating
Proximity to rail or other forms of public transportation
When must you be out of your current space or have your existing lease renewed by?
Plan to hire your real estate broker no later than a year prior to a small suite relocation, 18 months prior to a medium-size suite relocation and at least two years before a large suite relocation. If you are looking for a real estate broker to help you re-negotiate a new lease for a space that you currently occupy, you can reduce the above time frames by 20%.
One helpful exercise is to look at the relocation schedule from the date of the move-in and work backwards using realistic time frames along the critical path. This approach will dictate when you should begin the relocation project. (Be sure to get realistic time frames for each step from your project team members or industry professionals.)
Do you have an annual budget dedicated to office space, which would also include pro-rated utilities, real estate taxes, building insurance and any other normal fees such as janitorial services if you have a triple-net lease? Do you anticipate that your budget for real estate will increase as your business grows?
Understand how decisions for selecting your broker and other outsourced team members will be made. Is it you alone or will it be by an internal committee or even outsourced to a project management company? This decision-making process will need to be communicated to the real estate brokers that you interview as well as any other project team members that you hire.
To make the most effective use of everyone’s time, you need to keep moving forward in the process and not reversing course due to internal team politics or miscommunication.
Some tenants may ask the question… “Why do I need a real estate broker at all? I can find space and negotiate a lease.”
The reality is that tenants don’t have the time, the experience and usually the inclination to take on the responsibility of finding the right office space, negotiating a lease, and coordinating all the tasks involved in moving to a new location – given their primary responsibility in their organization. Unless one is involved in negotiating leases on a regular basis – not once every five or ten years – you will not be up to date on market conditions for rental rates and concessions, which can change dramatically in a few months.
The broker is constantly negotiating lease transactions. He or she is cognizant of the deal structures being negotiated in the market, including concessions being offered. Some tenants erroneously believe using a broker, or a tenant representative, will cost them money. The fact is, the broker commission is a “sunk cost”. A commission is still being paid to the Landlord’s representative (or salary and bonus) if the tenant negotiates directly with a Landlord’s agent. Moreover, the Landlord’s agent has a fiduciary responsibility to obtain the best lease terms for his client – the Landlord! A tenant should select a tenant representative who has the tenant’s best interests at stake, not the Landlord’s interests. There is a fee sharing arrangement between the Landlord’s agent and tenant representative which is why the commission is a “sunk cost” in a lease transaction. The most important questions a client should ask is the experience of the broker in negotiating leases in the submarkets that the tenant has interest and whether the broker has any conflicts of interest – like exclusive agencies with Landlords for spaces and building potentials of interest to the tenant in that market. A broker can’t have two masters!
You can find the best broker for you in a number of ways:
Referrals from other industry friends or partners.
Attending real estate industry events.
Personality compatibility with your team members and positive gut feelings
Evaluating the broker’s experience and creative approaches when interviewing the short-listed brokers.
Other resources that the broker can bring to the table such as project management services, original industry research/trends studies and similar project portfolio.
I want to thank John Lench, Managing Director with Newmark Knight Frank and Phillip Naithram, Senior Associate with Edge Commercial Real Estate for their input for this blog article. (did they approve being mentioned?)