Is Your Aging Medical Facility Still Relevant?

Over the last decade, new design and construction has altered the physical characteristics and functionality of the medical building. From a healthcare systems standpoint, the motivation to renovate or build new facilities has been attributed to increased patient demand, technological advances, renewed branding efforts and access to inexpensive capital.

From a small to mid-size provider standpoint, the location attributes have been the greatest influence for continued patient demand and satisfaction. Now, larger, better capitalized systems and retailers have entered the marketplace to capture greater share of the patient marketplace.

To remain competitive, a medical facility owner and/or operator will be required to renovate or be faced with reduced patient volume within the building. Less rent, weaker leases and hemorraghing property values will be exacerbated by relentless commercial real estate up and down cycles.

In this article, we drive the debate for medical tenants and landlords to address their compelling inquires of whether to RENOVATE OR RELOCATE. Below is a progression of helpful tips that gain momentum towards relocating as the reader moves down the list.

  1. Existing structure(s) are less than 25 years old with several years of additional life remaining.
  2. The building engineering and technology infrastructure is functional with space and capacity to upgrade.
  3. Administrative and clinical space supports efficient and cost-effective operations and modern standards.
  4. There is room to increase the square footage of the user, either horizontallyBlog pic or vertically.
  5. Supportive partners or referral affiliates remain in place.
  6. The present facility offers greater opportunity than space located elsewhere.
  7. The facility is significantly dated and requires excessive capital to modernize with marginal potential return.
  8. Floor-to-ceiling heights are inadequate for modern ventilation requirements.
  9. Column spacing is too tight and inflexible for efficient space planning, particularly with planning of large diagnostic and treatment departments like imaging and surgery.
  10. Building systems such as HVAC and power are insufficient to support modern health care spaces with increased air changes and advanced imaging modalities.
  11. The facility has already been structurally maximized to remove inefficiencies. 
  12. No contiguous real estate is available for key tenants expansion.
  13. The incremental growth of old business functions causes functional inefficiencies for coordination of new programs. 
  14. Access to capital, rebranding initiatives, technology and/or increased market share will forward income generation.

For a dedicated list of factors for repurpose, redevelopment, renovation, relocation, replacement, expansion, purchase and lease representation of a medical building, contact MREA at 713.701.7900.

Tenant Needs Within A Medical Office Building

waiting roomAs a truism, the quality of a medial tenant will have a significant bearing on the process of procurement or assignment of healthcare real estate space. This is especially true when considerations are addressed for a tenant that is renewing, expanding, contracting, or relocating within a medical building.

In each circumstance, the overall design of the facility and potential costs associated will account for whether the leasing process will be simple or challenging, on a relative scale. With this in mind, a healthcare real estate advisor has the ability to influence the process positively due to their unique concentration within health care and commercial real estate.

The Renewal

Upon the majority of renewals, the size and layout of the medical office is not altered and the suite design or reconfiguration is avoided. Other times, tenants will request these or other modifications to their space.

Typically, a broker will request the approval of the landlord to determine how the costs will be distributed and who will be responsible. In some cases, the landlord will have budgeted this expense and can absorb the costs. But, most of the time, they will not. Thus, a certain percentage of the cost will be provided. In other cases, the tenant will be responsible for all modifications.

Rental market conditions should dictate who assumes financial responsibility for alterations. To determine market conditions, a good barometer procure a specialist that is educated on the short term availability and effective price of comparable lease space.

The Expansion

Expansion is typically a costly and difficult undertaking for medical tenants. This, due to the increase in overall space, and consisting of additional construction costs, as well as management and accounting requirements. For a tenant to address an expansion request properly, the expenses need to be determined beforehand to limit the administrative liability associated with the request. Space planners or property advisors are very helpful for this logistic exercise. Again, and similar to renewal, the determination of costs should be based on comparable rental market conditions.

One of the main reasons tenants relocate is because their existing floor plan no longer meets the functional needs of the user. Thus, the requirement of expansion should be addressed prior to conclusion of lease. Running up against deadlines will not expedite or provide leverage for expansionary discussions.

If expansion is required in the midst of tenancy, commonly, the lease term will be extended for additional years. Under this circumstances, the costs will be attached to an amended lease and rate will be blended. Another potential outcome may be the continuation of the existing lease and expansionary space rental separated. The former homogenized term typically will favor the landlord, but is generally accepted in investment real estate.

The Contraction

A healthcare space contraction may become necessary because of several factors. Most commonly, it occurs with reorganization, subsidiary or referral base relocating, financial constraint, or regulatory requirement. While this pressure creates an uneasy position for the tenant, the landlord has the potential to react positively through status review.

If contraction request is made by the tenant during the midst of the lease term, a subletting consideration should be addressed via all parties to the original lease. Alternatively, if the contraction request is made towards the end of tenancy, the tenant’s advisors should be aware of the potential re-use of space, any limitations in plumbing or electrical, and costs associated with construction. An expert opinion for the effective contraction of space should be sought.

The Relocation

Too often a medical tenant will need to expand but the adjoining spaces will be occupied. Within most leases, a relocation clause exists that allows the landlord to, essentially, move a tenant into an alternate space. For expansionary needs, this clause may be utilized effectively by the landlord, while hesitantly by the expansionary tenant. To alleviate tenant concerns, the expansion space may include space planning costs, moving expenses, additional rent, and tenant improvements with above standard features.

Customarily, relocating within the building has challenges, but specialized relocation experts can be of considerable service to a landlord or tenant within medical space. The impact of change, via relocation, within or away from a desirable situation, has unique ramifications to both parties to the lease agreement. Understanding the advantages and disadvantages of relocation within a building will provide confidence when addressing landlord/tenant responsibilities.

A Healthcare Real Estate Success Story

Given economic and regulatory uncertainties, a provider of healthcare services retains our firm to improve relationships with the physician practices that occupy several medical office properties around their hospital campuses.  This essentially enables the provider with an opportunity to obtain positive economic outcomes such as tenant retention, property referral, good will and financial clemency.

Additionally, the provider wants to measure its own operations through the simple method of acquiring physician input regarding service delivery, as well as report on the present adequacies when compared to other like providers so as to audit possible tenant separation.

MREA collaborates with the client to coordinate a proprietary satisfaction assessment specifically geared towards to medical tenants.  This includes:

  1. Tenant survey of satisfaction with building services, property management performance and lease renewal intentions
  2. Action planning reports for each hospital campus, region, service provider and the national portfolio, highlighting performance trends, strengths and weaknesses
  3. Comparative performance analysis of year-over-year results and versus report
  4. In-depth, statistical analysis of property and tenant characteristics influencing satisfaction, retention and relationships
  5. Recommendations for the enterprise and each service provider to improve customer service delivery, strengthen relationships and boost retention
  6. Customized presentation of the results and recommendations to each service provider’s national account management personnel and property management teams

While we will keep our results confidential, based on assessment the client:

  1. Targets improvement initiatives toward highly influential property management practices, such as frequency of proactive communication with tenants
  2. Requests action plans for improvement from each hospital campus and service provider
  3. Increases tenants’ satisfaction with management by 10% to exceed benchmarks
  4. Improves tenants’ likelihood of renewal rate by 5%
  5. Identifies “at-risk” tenants whose lower satisfaction level and higher likelihood of defection warrants immediate property management follow-up
  6. Strengthen physician relationships with property management and hospitals

We are proud to offer this service as part of a growing list of healthcare real estate competencies located here.

6 Sublease Tips For Existing Tenants

With an abundance of rent space about to wash ashore, it may be wise to address your excess space or locations, before the next wave of renewals and relocations batter the Houston commercial real estate market.  Because this market currently favors landlords and tenants that control space within a well leased and managed or highly trafficked location, depending on the nature of the business, we suggest taking advantage of an engaged subleasing market to locate other potential users. When analyzing space to sublease, the following factors should be considered:

Space to Sublease

  • How much space is to be sublet?
  • What is the average transaction size in the market?
  • How many competitive blocks of similarly sized space exist?
  • What is the absorption of those sized units in the marketplace?

Once all of these questions have been asked and answered, the user will have a better understanding as to how long it should reasonably take to lease the space.

Configuration of Space

  • How is the space configured?
  • What is the utility of the layout?
  • Is it primarily offices or substantially open space?

The configuration of the space will also determine how easy (or difficult) it will be to lease. For example, a medical office space consisting of nothing but private consulting offices will be extremely difficult to sublease, as most office space users seek a balance between private offices and public workspace. Accordingly, subleasing that type of space will take longer than space with a better balance of private offices and workstation areas.

Furniture, Fixtures, Equipment, Etc.

In certain circumstances, the configuration of the space may be enhanced by leaving the furniture and fixtures in place. In this manner, a prospective user will not have to incur the additional costs and longer lead times associated with obtaining new and/or used furniture for this requirement. Consequently, in subleasing space, consideration should be given – and value should be sought – for subleasing space complete with furniture for both private offices and workstation areas if that represents a competitive advantage.

Lease Term Length

There is a traditional “predisposition” to find a subtenant whose needs with regard to term coincide with the term of the prime lease. However, this is not always possible. Accordingly, in marketing the space, the minimum term acceptable should be understood and dealt with. In certain circumstances, a landlord may be prepared to offer a longer term to a creditworthy subtenant, thereby creating an opportunity for the current user to eliminate all liability. Term is a critical factor and always needs to be viewed.

Rent

Simply stated, sublet space should be priced to move. The longer it takes to sublease, the more expense incurred and the less the percentage of recovery. In most markets today, it is virtually impossible to make money on a sublease transaction. Accordingly, and to repeat a theme, the goal is to move the space to minimize loss, not maximize potential (and actually illusory) gain. To that end, a rental structure should be developed which provides the marketplace an incentive for taking the space.

Improvements

In the real world, sublet space does not usually offer 100% of what the new user requires. Accordingly, money is needed for recarpeting, repainting, some construction work, etc. Many firms subleasing space prefer to grant free rent as opposed to providing cash for improvements. Irrespective of the approach taken, one thing is certain – firms subleasing excess space need to be prepared to address the concept of providing monies for improvements to the space if they expect to successfully sublet the space.

10 Lease Renewal Reminders

1.   The most important consideration any tenant may do is to hire a tenant representation broker, especially when relocation is an option.  Working for both landlords and tenants, I can say for certain that having a tenant broker can provide a tremendous advantage during a renewal negotiation. Just by placing a tenant broker on your team can increase the leverage in your lease negotiation. In the Greater Houston market, it is traditional for the landlord to pay your commercial broker’s fees, so it is imperative to be informed about the commercial real estate marketplace through brokerage representation.

2.   Second – begin early.  You do not want to subject your company to a position where it is down to the wire and the terms will not be favorable. Most tenants neglect this point and end up signing a poor deal only because they were not familiar with the process and had no time to negotiate a better transaction. “Early” can even mean over nine months or greater in advance of the lease termination, especially for those spaces that are large, and whose lease documents were written previously in a complex manner.

3.   On that note, review other options.  Even if you are not considering other space, you should always keep your eye on other space.   Have a number two and three pick for that “just in case” scenario. Performing proper due-diligence to see what the competition is offering for incentives is our job as tenant representatives. And, you will be surprised at what we can uncover. The simple fact that you have options lets your landlord know that you have alternatives.

4.   Negotiations do not take place casually in your office or at showings. Even the largest companies make this mistake.  Stop talking and start listening for negotiable items.  So often, emotions and ego enter into negotiations and they will typically lead you to nowhere.  Remember, these are business decisions that need to be handled behind the closed doors of your business operation.

5.   Always have you landlord present you with the first proposal. This not only will lay the groundwork for a possible counter proposal by your team, but it will reveal what position the owner is angling.

6.   Once you get your proposal from the landlord, always counter. Even if it looks like a great deal with everything you want, 99% of the time you can get more if you simply counter. In addition, you should always ask for more than what you want, that is, if you have a leg to stand on.  Typically a back and forth takes place, so do not begin by asking for too little.

7.   You should not put stock into how long you have been at your current property, how many times you have paid your rent on time, or how little you have called to report problems at your space. None of these items will present you with a better deal.

8.   You should avoid having side conversations or direct conversations with your landlord or their representative. This can hinder your tenant representative’s negotiation power and can muddy the waters if things were promised in a side-conversation that your representative was not privy.

9.   Your business should try and keep only those who need to know on a “need to know” basis. Rumors spread fast, especially among co-workers. You do not need the latest updates on your renewal negotiations to be made aware. In the end, this will hurt your negotiation efforts.

10. Lastly, I always recommend to my clients that you seek the assistance of a real estate lawyer before signing any legally binding documents. A good time to bring in an attorney is often when a lease document is produced for the tenant’s review. It is the attorney’s job to find the glitches, problem areas, and other questionable sections in the often lengthy lease document, that may not be in your best interests. If there are any, they should produce alternatives to the lease section language or suggest deleting it all together.

3 Tips For Startups When Leasing Space

Yes, in 2011, we have been receiving more inquiries from startups.  With this in mind, we have documented a few ideas for business owners to take advantage of a weakened commercial real estate environment, while preserving cash and protecting themselves in a situation where future funding may be a concern.

Tip 1: Find Turnkey Space!

Truth in any space relocation is that the simple act of “moving” is expensive! Not only does the search for office space rob operating officers of hours that they should be spending growing the business, but it also creates several additional expenses. These expenses, for example, include having to pay movers, order new telephone systems, purchase new furniture, add telco/data cabling, request new service contracts, change paper advertising, etc.

These expenses can range from ten thousand to one hundred thousand dollars, depending on the space requirement. The best way to reduce expenses is to find a commercial space that is already furnished and comes with a telephone system. In an environment of shrinking balance sheets, opportunities are available via other businesses that are downsizing and trying to sublease space. The majority of sublease spaces have furniture and phone systems in place, in which these companies would rather include, as it would create an additional expense for them to be removed. The most attractive feature regarding subleases is that the rent is typically discounted when compared to space offered by landlords, as the tenants have greater motivation to lease.

Tip 2: Negotiate Low Rent Today and Let it Increase in the Future!

Most businesses today have had the feeling that if they “burn” through current funding too quickly, they may not be able to come-back for more. So they find themselves hunkering down wherever you can. Most business owners are not aware, but they can actually negotiate an extremely low rental rate today, one that landlords would of laughed at just a few years back. This is true. The reason: The landlord’s sweet spot and what they are most concerned are “Effective Lease Rates”. An Effective Lease Rate is the “average” lease rate over the life of the lease term.

Tip 3: Negotiate Termination Options!

Many office lease obligations could create a situation where the owners are held personally liable. If provided with this conundrum, sometimes it is best to negotiate a lease-termination option with the landlord, one in which the landlord and tenant determine how losses will be reimbursed, sometimes at significantly discounted payment(s).

If you should have any inquiries regarding this article or commercial real estate interests, please do not hesitate to contact Robert S. “Bob” Lowery.

7 Strategies to Implement Prior to a Lease Renewal

Be Prepared To Walk Away

The biggest mistake many tenants make is not developing legitimate alternatives to their first choice, whether a new space or a lease renewal. If a landlord believes you’re not willing to relocate to a comparable property, you lose your negotiating leverage.

Begin the Process Early

Time should be your ally, not your enemy during negotiations. Landlords know that the managers of other buildings can take six to nine months to create a space plan, obtain construction pricing, agree on a rental rate, prepare a lease document and ready the space for occupancy. If you wait too long before asking for a renewal proposal, you’re telling the landlord that you’re not considering any other options.

Capture the Big Picture Before You Start Negotiating

Is the building being sold? Is the largest tenant moving out? How much free rent did the last tenant get? Does the building have HVAC or parking problems? What is the landlord’s financial situation? Candid, complete answers may not be forthcoming from the landlord or landlord’s broker. A large commercial brokerage that has access to such items is mandatory, as they will impact your lease decision and negotiation.

Make Sure Landlords Are Competing For Your Business

The key to a successful negotiation is creating competition between your current landlord and other landlords in the area. You should have an experienced adviser providing the comparable market research, lease comparables and the negotiating expertise to create a competitive advantage.

It’s In Your Best Interest To Have A Professional Negotiate On Your Behalf

Unless you’re a commercial real estate professional, it’s not a good idea to negotiate a lease deal directly with the landlord’s broker. An experienced tenant representative will help ensure that you receive the best possible rates, terms, incentives and lease clause protections. Remember, the landlord’s representative negotiates leases every day; you may do it once every 5-7 years!

Hire A Tenant Representative

Occasionally a landlord will “try to save you some money” by discouraging you from engaging a tenant representative. Don’t be fooled. He’s not doing this out of the goodness of his heart. He knows that without a tenant representative you’re more likely to be in the dark about market rates and complicated attorney drafted lease items.  Also, you are far less likely to shop the market or consider other lease or purchase alternatives. This equates to more money in the landlords pocket.

Make Sure You Are Comparing Apples To Apples

Business owners who are not experienced with commercial real estate often find it difficult to perform a true “apples to apples” comparison of different facility choices. Lease terms such as full service gross, modified gross, triple net, tenant improvement allowances, rental abatement, escalations, base years, operating expense stops and loss and load factors can obscure the true amount you’re paying and make legitimate comparisons difficult. A good tenant representative will sort through all this for you.

Time Is Money When Leasing Commercial Real Estate

In my twelve years in commercial real estate, I have never seen a better opportunity for tenants to reduce costs and secure better space – at the same time!  With a few exceptions in and around the Houston area, today’s commercial leasing market is a tenant’s market.  Tenants should not shy away from renegotiating their leases early to take advantage of the favorable market conditions.

It’s All About Leverage

I have been saying the same thing to my clients for many years; lease negotiations are largely about leverage.  In a landlord’s market, the only leverage a tenant has is to begin negotiations early and keep all options open, including moving to new space.  For example, if a tenant has been leasing 20,000 square feet of office space for the past fifteen years it is unlikely that the tenant wants to move.  Landlords know this.  Therefore, the landlord will wait until as late as possible to approach the tenant about renewing its lease.  Waiting serves the landlord’s interests, because at some point there is not enough time for a tenant to find new space, negotiate business terms, engage legal counsel to document the deal, complete improvements to the new space, pack up their existing space, retain a moving company, and move into the new space.  Depending upon the size, type, and complexity of the space, negotiations should begin anywhere from two years to a few months in advance of commencement.  Many small commercial tenants believe that they can pack and move into a new space that does not require improvements quite quickly, however, they frequently forget that at least a few months must be allotted to finding the new space, negotiating the business terms, completing legal documentation, and moving.

Leverage shifts to the landlord in negotiations when the landlord knows the tenant does not have sufficient time to move before the expiration date of the tenant’s current lease.  Unless there is a provision in the tenant’s current lease to the contrary, the tenant will likely become a holdover tenant on the first day after the expiration of the term.  In the best case scenario, the landlord will have to provide a thirty day notice to quit which would not be effective until the last day of the calendar month following the thirty day notice.  Accordingly, in the best case scenario, a tenant would have sixty days to vacate if landlord delivered such a notice on the first day after the expiration of the term.

Early planning and action shift negotiating leverage to the tenant and save tenant money in the long run.  For example, if tenant’s lease is set to expire on December 31, 2010 then the tenant should begin (or already be in) the process of renewal or new lease negotiation now.  The tenant or representation should begin by sending out a request for proposal to its current landlord and to at least three other landlord’s with suitable space available.  The proposals received will form the basis of tenant’s decision to move or stay and will help shift leverage to tenant in its negotiations.  Making it known to the current landlord and others receiving the request for proposal that all options are being considered.  To keep confidential the fact that tenant is exploring all options is to negate the leverage obtained by starting early and exploring options.

How to examine a proposal and what information to request be included in a proposal is the topic of another article, but suffice it to say for purposes of this article that the tenant should negotiate each possibility seriously to obtain the best possible business terms.  Such terms are not simply about rent, although that is the single largest business term, but also about obtaining other tenant friendly provisions or rights.  A tenant’s current lease may not permit assignment or subletting without landlord’s consent, which consent may be withheld by landlord for any reason or no reason at all.  Such a provision is not tenant friendly or reasonable, in my opinion.  The tenant should state in its request for proposal that the right to assign and sublease with landlord’s consent, which shall not be unreasonably withheld, delayed, or conditioned, is an important business term to tenant (there are many variations of this provision that may be important for one reason or another to the tenant, but for example purposes, I have kept this simple).  Any proposals received that include this provision can then be used to negotiate such a change in the tenant’s current lease if the current landlord submits a competitive proposal.

Multi-Track

In my experience, the average new lease acquisition unfolds something like this:  A prospective commercial tenant will look at various spaces and make a decision about which space best suits their needs and desires.  Based upon that determination, the tenant makes the decision to lease that space and requests landlord’s form lease.   The tenant then goes back to the office and waits for the landlord’s draft lease.  Several weeks may go by before the initial draft is received.  During the wait period, the tenant is comfortable that she has found the space she wants and all other leasing activities have ceased.  Either through communications between tenant and prospective landlord directly or through brokers, the message is communicated that the tenant is excited about the new space and ready to move.

The landlord’s draft lease arrives and it is a typical landlord oriented lease.  During legal review, many issues arise that tenant’s counsel advises against, but tenant reminds its counsel that this is the space tenant wants and there are no other options being considered.  In addition, it is most likely too late to consider other space because now there are only two or four months left until expiration of the current lease as opposed to the six, nine, or twelve months that were left when tenant first began to search for new space.  Tenant’s counsel negotiates the best deal possible considering that landlord is not willing to negotiate too much because landlord knows the tenant really loves the space and does not have time to find and negotiate new space before its current lease expires.

The point is that the tenant should always be multi-tracking its negotiation process.  The tenant should begin early and always continue negotiations with current landlord and prospective landlords until the tenant’s attorney is comfortable that the form of lease is negotiated to a point where the remaining issues are not significant.  This way the tenant can say to the landlord “the first one to give me a lease that my attorney says I can sign wins”.  With that pressure and leverage, the deal will move faster and most landlord’s will be more willing to negotiate.

Yes, this multi-track approach may result in a longer period of time spent up front, however, it should result in a better rental rate and better lease terms for the tenant, which will more than pay for itself in the long run.

Example

An office tenant’s lease was set to expire December 31, 2010.  The tenant has a small space of approximately 2,500 square feet, but it is in a Class A Building in the Energy Corridor, so even that small space equates to significant dollars.  In December 2009, the landlord approached the tenant about renewing for ten years.  The tenant was receptive and asked the landlord for a proposal.  The proposal was promptly faxed over to tenant and stated that renewal would be for ten years at $25 per square foot with a formula for escalations.  The tenant was inclined to agree and execute a renewal amendment because, as the tenant put it to me, “the landlord is a good guy and I trust him.  He said this is the going rate now”.  The tenant’s wife convinced him to call me just to be sure everything was okay.

The tenant reluctantly called me and faxed me the landlord’s proposal and their current lease.  I quickly determined that the landlord had other vacant space in the building that was advertised at $22 per square foot.  I brought this to the landlord’s attention and he dropped the proposal to $22.  That saved the tenant approximately $75,000 over the term.

I then suggested to the tenant that they look at other spaces on the market.  They did and found two spaces that they loved.  They received proposals from both of those landlords one of which was at $22 per square foot and one of which was at $21 per square foot.  I then reviewed their current lease and made a list of provisions that were deficient or unfair to the tenant.  We redacted the proposals from the two vacant spaces so that the landlord and address were not visible and sent them to the current landlord.  The tenant told the current landlord that while they would like to renew in place, they were willing to move if they did not get terms they considered favorable.  The landlord did not cave right away, but the tenant’s determination to move if the current landlord did not improve its proposal led to a ten year renewal at $20 per square foot, an increased base year for taxes and expenses (left out of landlord’s original proposal), release of tenant’s personal guaranty, and other changes favorable to tenant.  I have no doubt that without the credible threat of moving, the tenant would not have been able to negotiate such a good deal.  In the end, the tenant will save around $125,000 over the ten year renewal term and have no personal liability.

Cautions

Shifting leverage by shopping around and knowing the market conditions is one thing, but taking the opportunity to renegotiate other terms of the lease is another.  Tenant’s must bear in mind that a landlord may perceive renegotiation of lease terms other than base rent and length of renewal term to be a renegotiation of the entire lease.  Accordingly, the landlord will feel free to review the lease for provisions that the landlord would like to see amended to suit the landlord.  There is not much that can be done about this except to plan carefully with your legal counsel and utilize whatever leverage can be mustered.

To a large extent this is a game of chicken.  Most tenants do not want to move and most landlords do not want to lose a tenant.  However, there is no greater leverage for a tenant than a credible threat of moving.  In some cases, tenants really do find better space and end up moving and that’s okay.  However, without the credible threat the landlord has no fear of losing the tenant and little or no motivation to negotiate a good deal for the tenant.

There are many good brokers serving the commercial leasing community, however, it has been my experience that tenants should not share their strategy with their real estate broker or anyone outside the immediate circle of decision makers.  In far too many instances, brokers and others, whether accidental or otherwise, have told landlords or landlord’s broker that the tenant is looking at other space, but they are not serious.  Clearly, this negates the entire strategy.

Conclusion

While the principles espoused above work in all market conditions, the current conditions are exceptionally favorable to tenants.  Landlords in most markets today are desperate to keep tenants and sign up new tenants.  What I suggest in this article is not intuitive to most tenants, but if kept in mind I am reasonably certain that tenants will get a much better lease deal than waiting for the landlord to approach the tenant a couple of months prior to expiration.  Knowledge of the market place and time to pursue all options equals leverage for the tenant.

“Give me a lever long enough and a fulcrum on which to place it, and I shall move the world.”- Archimedes

This article was republished from Robert S. “Bob” Lowery’s original post, “Tenants: Leverage is Key”, published on May 14, 2010.

When Buying or Leasing a Property, Select a Broker that…

  • Choose a broker who represents your interests, not a landlord / seller to avoid a situation of dual-agency.
  • Select a broker specializing in tenant or buyer representation.
  • Select a broker who has experience in your area of the city.
  • Select a broker who has experience in representing your type of organization.
  • Choose a broker that has a clearly defined and coordinated plan to achieve your goals.
  • Choose a broker with a high degree of responsibility and communication skills.
  • Choose a broker who has the necessary tools and support you will require for the highest level of service.
  • Choose a broker that you trust and you connect with personally, but also one you can deal professionally.

Original Post by Robert S. “Bob” Lowery, here.

The 10 Golden Rules of Office Moving

On average companies only move office every 7 years and the vast majority of people assigned to manage the move are doing so for the first time. There are so many things to consider when you move office. At the same time you have to continue to run your business and focus on your existing workload and commitments. No wonder moving is ranked as one of life’s most stressful events. So, for most companies, the prospect of moving office is a daunting process. But like any process it can be broken down into a series of simple tasks and checks. By following these Golden Rules you can ensure your office move is on time, to budget and hassle free.

1. Assess your needs and current situation

You need to be clear about the purpose of your office relocation, (e.g. lease break, lease expiry, planned growth or contraction), in order to define your needs and map out the appropriate office move plan. There are some big decisions that must be agreed as the starting point and which will form the basis of the subsequent planning process including the details of the existing lease and notice period and your current obligations and liabilities.

2. Be clear about your requirements

A clear understanding at the outset of your basic strategic and operational requirements will make the whole moving office process go more smoothly – and save time. Don’t worry too much about the technical specifics (as that is part of the advice given by the external property move professionals), however, you must have an overall idea and consensus from the decision makers about the key drivers of the office move including:

* Where you want to move to * How much space you need * When you need to be in by * What key features you need your new office to have * What your planned business objectives (including growth plan) the move needs to satisfy * Type and length of lease you want

3. Build the right office move project team

An office move is a major undertaking and a collaborative effort is needed for a successful outcome. Putting together the right project team is critical and should include people who will help facilitate all aspects of the move. It will need to comprise both internal and external members. A Project Leader must be put in charge of the move process as soon as the decision to move office has been made. This person must have enough time to devote to the office move project and should: have the trust of senior management; the authority to act on behalf of the company; be senior enough to be able to make decisions; be a good organiser of people and processes; have experience of setting and working within budgets; and be a good communicator.

4. Start early

There’s a lot to do, so the earlier you start the greater the chance of achieving the smooth move your company expects. It is impossible to plan too far ahead. Once the Office Move Project Leader has been appointed work should start. You should start reviewing your options 9 – 18 months prior to your lease expiration regardless of whether you are considering renewing, renegotiation or relocation. It is vital that you allow enough lead-time to increase the amount of leverage and competition between the various options, which can result in substantial savings for you.

5. Create a realistic budget

Creating a realistic office move budget is a critical planning tool that will help you assess your costs and manage them throughout the process.

6. Engage the right office move professionals

The whole moving office process can be complex, stressful and time-consuming. After people costs property costs are most company’s next biggest expenditure. The decisions you make will have an impact on your company’s profitability. Working with the right professional team is the single biggest must-do for any company thinking of moving office. They will guide you through the process, save you money in the long run and also make sure you don’t make any critical mistakes.

7. Don’t sign any lease documents without getting legal advice

Your property solicitor will negotiate the detail of the lease documentation to minimise your exposure to potential liabilities, and subsequently, to advise you on the implications of the detailed terms in the final documents to ensure you are aware of your ongoing responsibilities.

8. Communication

Internally, change can be unsettling for staff and this can certainly be the case with an office move. At the same time as the office move process is going on, your company has to continue to run its business and focus on its existing workload and commitments. However, moving office is a great opportunity to affect positive change management, improvement in business performance, increased morale and momentum. Externally, there are many moving parts to an office move and you need to ensure that everyone involved in the project is regularly updated, especially if there are any changes. If you keep the lines of communication open to all interested parties, internal and external, your office move will have a much greater chance of success.

9. It’s a process

The prospect of moving office may seem a daunting process but like any process it can be broken down into a series of simple tasks and checks. The intelligent use of your project planning documents, spreadsheets and checklists will not only help you plan the office move, but also act as your road map to carry out the many tasks involved with the project. Don’t try and reinvent the wheel when you can use tried and tested moving office tools and guides.

10. Take advantage of the opportunity

Clear out old files and purge all storage areas of unneeded items prior to moving. Also consider scanning any documents no longer needed in hard copy (remember to dispose of unwanted files securely). Secure storage and/or archiving of documentation is a flexible, safe and cost-effective solution to free up valuable and more costly office space. It can be accessed at any time by arrangement and provides excellent off-site backup for damage limitation in case of fire or other disaster.

* Upgrading – Moving office is an opportunity to update to modern, efficient and space-saving equipment. * Review existing suppliers – Moving office can provide a trigger for renewing/switching supplier contracts on favourable terms. * Don’t forget your customers – Moving office is a great opportunity to communicate positive messages to your customers and maximise the brand and image of your business.

This was a prior post by Robert S. “Bob” Lowery on http://leasinghouston.org.