By: Scott Pick, Senior Vice President, Jones Lang LaSalle
As a lease expiration date approaches, many mark their calendars in dread of the administrative tasks ahead. And although moving is complicated, it’s also a unique opportunity to reinvent your culture, address your space utilization and ensure your strategy is aligned with organizational objectives.
At Jones Lang LaSalle, my business partner, Brian Conroy, and I follow a strategically crafted roadmap to guide our clients through the process. This is the third post in a blog series; each post will serve as a stop on the way to your destination – success.
Next Stop: Conduct Market Research to Identify Opportunities
After years of experience in the commercial real estate (CRE) field, we’ve found that office space has far-reaching impact on business success. It has great influence over employee productivity, brand image, and corporate culture. So, before you begin the search for space (or enter into renegotiations), we recommend that you have a cohesive team in place, as well as strategically appointed objectives and requirements, to guide smart decision-making.
With a strategic and collaborative list of deal drivers, the appointed CRE team will have a solid understanding of which assets and locations will be suitable to optimize your next move. At this stage, your business is prepared to enter the market to conduct research and to seek prospective opportunities. Below, I’ve outlined four steps to guide your search for suitable solutions within the market.
Keep in mind that while these steps provide a preliminary framework, the process will evolve to accommodate and serve the needs of individual business objectives.
Step 1: Decide Primary Capital Budget
I recommend that my clients settle on a baseline budget before entering the market. An accurate understanding of your baseline budget will save you time in the long term—allowing you to eliminate opportunities that are not an optimized solution for your business.
To understand your current occupancy spend, compile a comprehensive list of current expenses. Include rental rates, operating expenses, parking, utilities, janitorial expenses, etc. A complete understanding of your baseline will allow you to align your future budget with your business and real estate objectives. Are you cutting costs? Or perhaps growing your business? Are you trying to enhance your brand? Factor these considerations into the budget, along with uncertainties as they pertain to your business.
Step 2: Conduct In-Depth Market Research
With a baseline budget and a solid list of deal drivers, you are likely ready to begin analyzing the market to uncover related trends and data. Keep in mind: When you invest in a building, you also invest in a community. Ensure that the location aligns with your business and real estate objectives.
Don’t just look at current market conditions, but also look to the future and examine your exit strategy. Your real estate professional should conduct research that not only fully evaluates current conditions, but also uncovers market forecasts. JLL’s Property Clock is a useful tool in determining a particular market’s current state, ranging from landlord-favorable to tenant-favorable conditions. Visit JLL Senior Vice President John Sikaitis’ blog post to learn how to read the clock for details that will factor into the present and future value of your chosen location.
We also recommend conducting research on individual industry trends to remain competitive in your market. A good place to start is JLL’s Industry Research. Internal experts have compiled information on many industries, including banking and finance, construction, energy, federal government, healthcare, high-tech and more.
Be sure to document all research for your records. Proof of key trends and market direction may help drive organizational consensus, and validate critical decision-making.
Step 3: Determine Your Best Available Space Options
With sufficient insight into the market, begin evaluating available options. Develop an executive summary of all properties, and document all data and facts for your records (to help drive organizational consensus). Ensure that your business drivers align with the real estate opportunities. Below are a few overarching details to include in your preliminary analysis:
- Space efficiencies
- Location / market state
- Landlord / asset / landlord portfolio
- Budget implications
Always seek areas of leverage for use during negotiations. While seeking space options, ask your team, ‘which options make the most sense, and more importantly, why?’ A thorough analysis of your options will guide strong decision-making with support company-wide. Understand the ‘why?’ and it will lead you to the best solution for your business.
Step 4: Tour the Market
With strong background research in hand, begin touring buildings on your short-list. We recommend that an architect is involved during the early stages of the process. (He or she will be a critical resource as you begin to evaluate spaces and buildings.) It’s key to involve an expert who understands pre-lease initiatives, infrastructure, base building conditions, etc. The right partner will be able to identify opportunities that will require a higher budget in order to engineer the space for your particular needs. This is just one reason why forming the right team is critical to end success.
Each available asset has different risks or costs that must be factored into your decision. With due diligence, research and the right team, you can uncover all associated risks and make a smart decision for your business.
Stay tuned for the next post in the Roadmap to Success series— Evaluating Options and Driving Organizational Consensus – to be presented by my business partner, Brian Conroy.
A real estate professional can help you align business drivers with your real estate choices. Please contact your JLL broker, or myself, if you’d like assistance with your office relocation or renegotiation at email@example.com.
About the Author
As senior vice president, Scott is responsible for driving the tenant representation group, representing corporate clients in Northeast Ohio. He specializes in corporate real estate, tenant representation services, portfolio management and more. View Scott’s full bio.