In today’s episode, Bob & Jan discuss when to begin the renewal/relocation process.
Several factors to consider:
- Is the organization changing rapidly and not sure how much space they will need?
- Company is unsure of the right location for their client base and employees.
- There is a chance the organization will be acquired or might be acquiring themselves.
- Company is confident the economy will experience a downturn bringing lower rental rates OR an upturn bringing higher rates.
- Client has a renewal option which must be exercised by a certain date.
- Missing a renewal option date could allow the landlord to lease the space out to another tenant, forcing client to move whether they intended to or not.
- The client wants to shrink the size of their space and are willing to sign a longer term lease to accomplish that.
- Client might consider buying a building instead of leasing.
- Client is doing a 5-year or longer forecast and wants to know what to assume for future occupancy costs.
- They want to consider changing their office culture in order to attract the right employees.
- Occupancy costs are generally the second highest expense behind payroll/benefits and should be managed proactively.
- The average project from the start of the search to the signature on the lease is six months. Purchases generally take even longer.
- If the tenant decides they are better off relocating and the new location requires interior construction, that could add two to six months to the project timeline.
Why use a tenant rep broker?
- A tenant rep broker will almost always save you money (whether through face rate rental price, expenses, tenant improvements, etc).
- The rental rate already includes a fee for the tenant’s agent which the landlord pays. If the tenant doesn’t use an advisor, it’s like paying for a service without getting the benefit.
- Using an advisor provides professional distance from the negotiation for the CEO. This allows all items to be considered collectively instead of sequentially.
- An advisor negotiates many leases a year and is an expert on industry trends, terms and practices. That knowledge is used on behalf of the tenant and levels the playing field with the landlord.
- An advisor is a fiduciary to the tenant and must put the tenant’s interests above his own. Loyalty is critical.
- The advisor saves the CEO time that he would otherwise have to invest himself in dealing with every aspect of the search (if there is one) and negotiations.
Bob Gibbons is a Real Estate Advisor & Tenant Advocate (also known as a tenant rep) with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.