Posted on May 12, 2014 by Admin
Every business is unique, with unique real estate needs. Likewise, every site selection proceeds according to the distinct characteristics of the business and market in question. However, most successful site selections usually progress through 10 broad steps. Below, I outline these steps and the time they should occur.
Please note that, for the purposes of this article, I assume an office size of approximately 10,000 square feet. If the tenant is looking for fewer square feet, then less time is required for each step; if the tenant is looking for more square feet, then more time is required. The time frames also assume that the properties already exist. If a facility is to be newly constructed, please add 9 months to one year to the time range.
1. Select a tenant representation commercial real estate broker who specializes in relevant property type and market. 10 – 12 months before lease expiration date.
2. With your tenant representation broker, develop facility/site criteria. Based on your criteria, develop a list of properties to tour. Tour selected properties, taking detailed notes. Develop a short list of 5 or so properties based on tour results, preliminary financial information provided by broker. 10-12 months before lease expiration date.
3. Using financial analysis, narrow alternatives to 2 or 3 options. 8-10 months before lease expiration date.
4. Begin the space planning process. 8-10 months before lease expiration date.
5. Submit a Request for Proposal (RFP) to final 2 or 3 alternatives, creating competitive bidding environment. Submit RFP to current landlord if renewal is a possibility. 6-8 months before lease expiration date.
6. Receive and evaluate initial proposals from landlords. Update financial analysis with new data. Re-tour if necessary. Reconsider priorities. 4-6 months before lease expiration date.
7. Empower your tenant representation broker to negotiate on your behalf and to create a competitive bidding environment. Use market research to inform your negotiation (click here for more). Enter the negotiation with clear objectives (click here for more) and uncover the landlord’s hidden agenda. 4-6 months before lease expiration date.
8. Once both parties reach a general consensus on economic terms, sign a nonbinding Letter of Intent (LOI) to document the agreement. 4-6 months before lease expiration date.
9.Receive the lease and check it for accuracy. Retain an attorney who specializes in commercial real estate to negotiate the contract. 3-5 months before lease expiration date.
10. Begin construction on space as soon as lease has been signed and final space plan approved. Choose a move coordinator, hire your moving company, and plan your move choosing your move coordinator. 2-4 months before lease expiration date.
Source: Oak Brook Office Report Blog
Real estate is usually the second or third largest expense item for companies. Logically, then, many businesses focus on economics in a site selection process. On occasion, however, a business will focus exclusively on the rent at the expense of other important variables. There are other quantitative factors which also impact a business’ real estate costs, as well as qualitative factors worth serious consideration.