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Five Key Factors to When Searching for Commercial Space

Now is an excellent time to be in the market for commercial real estate of any type, provided you are a tenant or buyer. ; It is a textbook buyer’s market. The recession and subsequent market conditions have had a significant impact on the commercial real estate industry.

In the past year, there has been a surge of supply and a major reduction in demand for real property. Landlords and sellers have been forced to reduce rent and sale prices and take a much more aggressive approach to attracting users and making deals. The old adage that “half of something is better than all of nothing” has truly come back into the mindsets of savvy property owners.

Not all companies suffer in bad times. There are a number of companies who are experiencing some level of success and thriving while the majority still struggle. For those experiencing growth in spite of the recession, the careful consideration of expansion or relocation of office space and industrial facilities is vital to continued success.

Regardless of whether you are thriving at this time or not, there are five key factors to consider when seeking office or industrial property in any market.

CONSIDER YOUR LOCATION. Location is perhaps the most critical element for a new or existing business to consider. When starting a new company, geography may be less of a factor. A new business owner may have certain personal reasons for selecting a first location, such as convenience, commuter transportation cost and proximity to restaurants, banking and similar services.

An existing company may be locked into a specific geographic area due to the risk of losing key employees unwilling to relocate to a less convenient location or assume a more costly employee commute. In addition, key clients or customers may take their business elsewhere if a business moves out of the area.

MAKE THE MARKET WORK FOR YOU. Tenants and buyers can take advantage of current economic conditions. The ability to add value by buying or leasing “low” during a recessed commercial real estate market is another important factor which company owners, whether new or established, need to consider.

Property can be acquired with significantly lower occupancy costs and under easier terms now being offered. Some aggressive landlords are even offering signing bonuses to new tenants. This allows companies to grow without being subject to the high rent and sale prices that dominated the market 12 to 24 months ago.

It is important for users to set and stick to a budget. Regardless of how good of a deal you can dictate, the cost must make sense and be reflected within your budget.

PRIORITIZE YOUR CRITERIA. ; Prioritize your search criteria, including location and the timing of your move. Do some advance research and space planning to determine what type and amount of space required by your company. A good first step is to consider how you would most efficiently redesign your present space if you could magically lift it up and plop it down into a new one.

Once you achieve a sketch concept of the maximum potential efficiency of what you are presently using, take it a step further to include prudent use of additional space. Knowing the anticipated number and type of new workers and what furniture, fixtures or equipment, if any, will be required for them will be critical information to consider.

If your requirement is industrial in nature, among the many criteria to consider are clear warehouse height, loading/truck court/turnaround area, utilities, fire safety/sprinkler, electrical/plumbing/mechanical loads and zoning approval for your use.

Prioritize your criteria with some flexibility built in to make the most efficient use of your time. ;

A word to the wise — once you have a grasp on your physical space and facility needs, engage the services of an architect or professional space planner to confirm or adjust your expectations.

TIMING IS CRITICAL. Expansion and/or relocation will take lots of planning and time, not to mention expense. You must know when current leases expire, when and if you need to provide a landlord with certain notices and how that relates to a move out date.

The timing factors that come into play for users contemplating new space are too numerous to articulate here. Take into account the time needed to execute an agreement, for a landlord to make repairs, for delivery of space in an agreed upon condition and for any specialized tenant improvements.

TAKE TIME TO EDUCATE YOUR CONSULTANTS. It is crucial to give your consultants the time needed to learn aspects of your business that are relevant to their services. A Tenant Representative/Buyer’s Broker should have a solid understanding of your business and the rationale behind your Facilities decisions. The more knowledge you provide, the more credibility they will have when speaking to property owners on your behalf, and the further they will take you in the negotiation of terms favorable to you. ; ; ; ; ; ;

When you decide to relocate or expand, do some advance planning, know where you want to locate, your time constraints and how much space you need. Create a realistic occupancy budget in light of the present economy and most importantly, prioritize your criteria, building in some flexibility. Rarely do things go according to plan.
Steven Cornblatt is a Principal with Trout Daniel & Associations. He can be reached at 410-435-4004 or [email protected]