Prioritize Real Estate in Your 2006 Business Plan
Budgeting, goal setting, and business planning are business objectives in the year’s fourth quarter. As businesses plan for 2006, I’d like to challenge all decision-makers to think about the big-picture changes they want to make and add one more item to the list—real estate.
Whether your organization owns or leases it, let us challenge you to prioritize your corporate real estate next year.
There are two main reasons why real estate should be considered in strategic planning. Real estate is one of the largest expenses for most organizations, right up there with payroll. However, few organizations ever make it a priority to evaluate and analyze their real estate needs. Often, they end up paying too much for their space or property.
Read More: Commercial Real Estate Misconceptions: Your Location Was a Lie?
Plan for Lease Expirations
If your lease expires in the next two years, now is the time to start developing your corporate real estate plan. You should plan for your long-term real estate needs and strategically align those needs with space availability in the marketplace. This is one of the quickest ways to control operating expenses and increase profitability.
Take Advantage of the Current Tenant’s Market
These days, it’s a tenant’s market. With plenty of vacancies among the multi-tenant commercial buildings, there’s more competition for occupancy. Two years ago, the vacancy rates were over 20 percent. Now, they are around 15 percent, and they will be much lower in another couple of years. It’s a great time to take advantage of current market conditions.
Start Early and Appoint a Single Point of Contact
Start early. You start looking 12 to 18 months before your lease expires. Remember that finding the right facility, negotiating the lease, getting city permits, building the space, and moving can all be very time-intensive steps. Establish a single point of contact.
Relocating your office is a huge responsibility. If you don’t have the time to devote to the daily tasks associated with searching for space and organizing the move, appoint someone. This person needs to have a firm understanding of your company’s operational and business objectives. Just as importantly, they must be well-organized.
Read More: Become A Commercial Real Estate Negotiation Expert
Involve Your Board of Directors
Ensure you solicit input from your board of directors and/or managers as you start. Commercial real estate decisions can affect your organization’s bottom line. Your board will be keenly interested in your decisions regarding your real estate, so you want to ensure their input is considered.
Explore Non-Traditional Options
If you are a non-profit organization, remember that non-profits are non-traditional space users. If you are working with a tight budget or have unique operational needs, be sure to explore different property types. If you are an office user, for example, make sure you consider retail, warehouse, and office-warehouse spaces. If you are running out of options, expand your geography.
If you can work with a short-term solution, look at subleases. These can provide a short-term lease option, potentially lower rates, and flexibility.
Explore Multiple Opportunities
Give yourself options. Make sure you explore multiple opportunities to lease or purchase until you are 100 percent satisfied. Not only will other properties provide leverage in your negotiations, but they’ll also give you a backup if “Plan A” falls through.
Many times, the help of a commercial real estate broker, real estate attorney, architect, and general contractor can save you time and money in the long run.
Unless you can predict the future, ask for options in the lease. That way, you won’t end up having to relocate when you grow.
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Conclusion
Consider a long-term lease. The longer the lease term you can commit to, the better terms you can get. A long-term lease makes it easier for the landlord to keep your rate competitive and still build out your space, pay commissions, etc. Remember, there are many ways to add flexibility to your lease. The lease term is just one of them.
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