Matching space needs to business needs is critical. Help your broker help you.
By Jim Schnur, CCIM
President and Designated Managing Broker
Integrated Real Estate Solutions
What’s the most important question a commercial real estate broker can ask a client in connection with leasing, buying, or building?
– How much space do you need?
– What’s a good location for your business?
– How much do you want to spend?
No, it’s none of those. In fact, the most important question isn’t about real estate at all. It’s about you and your company, firm, or organization.
Not: How much space do you need?
But: Tell me about your business.
Understanding what your company is trying to achieve, and how, should always be the starting point. A broker who wants to learn your business goals, challenges, and opportunities understands that space needs aren’t just about space. To provide the best value, the space must serve your business in as many ways as possible today and tomorrow.
Feeling squeezed? Perhaps you don’t need more space at all, maybe just a reconfiguration of the space you have. Can you outsource some services or functions more effectively—storage, surprisingly, is often overlooked. A broker with experience on “both sides of the desk” as a buyer of real estate services and a seller of such services naturally sizes up engagements from an overall business perspective. On larger projects the right broker can even serve as an “integrator” who identifies and manages other necessary vendors. The goal is to structure a transaction that enhances your overall business strategy.
A smaller professional services firm came to us recently in need of “more space” and was undecided about what to do. When we asked about the business (not the real estate), we learned that the company:
– Worked from a strategic plan forecasting significant growth in the next three to five years.
– Had just signed a two-year design contract with a large corporation.
– Was already hiring more “creatives” in a highly competitive market.
– Hoped to add two or three salespeople who would probably travel a lot.
Each piece of business information impacted the real estate advice we provided.
Since the forecast was growth, leasing was clearly the best approach. But what kind of lease and for how long? A stable two-year contract and a valid growth plan told us the firm likely would need more space, eventually, and roughly according to the plan’s timetable. While a three-year lease term offered the most flexibility, that’s usually the minimum even for basic landlord-provided improvements—painting and carpeting, for instance—and there’s not much room to negotiate rent.
Five years seemed ideal for this firm, providing reasonable flexibility for growth and allowing us to negotiate lower rent and more concessions. Reconfiguration, including outsourcing storage and “touchdown” work stations for the mostly out-of-the-office sales force, would accommodate the firm’s work space needs for the near and mid-term.
Understanding this business as a business is enabling us to do our job well, and we’ll learn even more in the next couple of years. Finally, although we had to move quickly to satisfy this company’s shorter term needs while planning for the longer term, we’re now in position, and will have plenty of lead time, to help the company make future space decisions even more efficiently. (To learn how much lead time is ideal, see our last column “When Real Estate Won’t Wait.”)
Are you excited, or concerned, about how changes in your business might affect your real estate needs? Please contact us at 847-550-0160 or email. We’ll be happy to offer our perspective.