White paper client guide to relocating the office


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White paper client guide to relocating the office

  1. 1. A Client Guide to Relocating the Office colliers international | baltimore www.colliers.com/greaterbaltimore
  2. 2. colliers international | Baltimore | P. 2A Client Guide to relocating the office Introduction The process of identifying a new location and negotiating a lease for office space can be both frustrating and confusing. Why? Because it takes considerable time and effort to not only understand the real estate office market and the options available, but also to deal with the myriad of internal issues as well (e.g. personnel, technology, furnishings, etc.). However, with advanced planning and expert assistance from a variety of professionals, new facilities can be selected which have a positive impact on your company and its bottom line. In navigating the minefields of the office relocation process, care should be taken to make certain that everyone involved in the process focuses on the business reasons behind the real estate decision. “It’s the business, stupid,” and not the real estate which should drive a firm’s real estate decisions. It is the purpose of this white paper to help you better understand the office relocation process and how to manage it more efficiently and more effectively. With this greater understanding, the final results should be better, the move easier, and the transaction less complicated. Robert A. Manekin sior Managing Director & Principal | Baltimore Bob Manekin, author of this white paper on A Client Guide to Relocating the Office, is an industry veteran with 37 years’ experience in tenant representation, general brokerage, development, property management and consulting. A former attorney, Bob heads Colliers’ Baltimore Law Firm Practice Group and has represented a significant number of Baltimore law firms. Bob also has extensive experience working for health care organizations (Mercy, Sinai, St. Agnes) and major companies like CIGNA, FedEx, UPS and First Data. He is currently an adjunct faculty member at Hopkins Carey Business School and has lectured on real estate topics at MIT, UNC’s Kenan Flagler School of Business, Maryland Continuing Legal Education (MICPEL), and numerous trade & industry groups.
  3. 3. colliers international | Baltimore | P. 3A Client Guide to relocating the office Office Relocation Process The decision to relocate Think about it. Does anyone really like to move? Of course not. Moving can be time consuming, disruptive, distracting, disconcerting and just not fun. That is why companies move as infrequently as possible. That is why the decision to move should be carefully analyzed before making the “go” decision. That is why you need clearly articulated goals as to what a move is trying to accomplish. There are a number of reasons why companies decide to move. These reasons include, in no particular order: (1) the need for more space, a need which cannot be accommodated at the present location; (2) the need for less space; (3) changed commuting patterns of staff; (4) outmoded, antiquated or uncomfortable premises; (5) changes in business practices and conditions (fewer or no private offices for example, or more but smaller private offices); (6) a desire for locating in a more prestigious building; (7) the desire to locate in a less prestigious building; (8) the requirement for greater access to internet services and broadband capacity; and (9) the desire to occupy newly built out space. The list goes on. But one thing is certain... do not relocate unless you have to! The most economical solution in office leasing is usually – though not always – the “stay put” scenario. Keep this in mind as we address the relocation process... and remember, only move if you have to! RETAINING PROFESSIONAL EXPERTISE Unless your firm has an in-house real estate department, you should utilize the services provided by an established real estate brokerage firm. Furthermore, in retaining that firm, make certain to select a professional based on the following criteria: (1) marketplace experience and expertise; (2) ability to assess the market and develop comprehensive market surveys; (3) capacity to develop and explain financial analyses of lease proposals; (4) understanding of construction costs, methods and scheduling; (5) general reputation in the marketplace; and (6) professional education, expertise, industry designations or recognition, etc. The specific individual assigned to your account should be interviewed to better understand his/her experience and knowledge. As “chemistry” is important, make certain that the person designated gets along with the people in your firm involved in the relocation process. And, naturally, secure several references from the broker’s / consultant’s prior clients, preferably those in fields similar to yours. While the real estate broker is the quarterback of your team, remember that there are other players you need to have join the efforts. Probably the next most significant discipline is space planning, as the architect / planner will not only help you quantify the square footage needed, but help you determine the efficiency of different properties. In addition to the space planner, other team members will be needed to address – at a minimum – legal, information technology, finance, and furniture issues. Your broker can help you identify those disciplines you may to work on the project.
  4. 4. colliers international | Baltimore | P. 4A Client Guide to relocating the office IDENTIFYING AND SELECTING ALTERNATIVES In selecting buildings to consider, much thought should be given to (1) the kind of property (Class A office, Class B office, flex, adaptive reuse space, etc.), and (2) the preferred location (downtown CBD, suburban business park, etc.). Furthermore, your brokerage representative should solicit information from you and others in your firm regarding specific space needs, goals, and criteria (e.g. location, square footage, price range and timing). Next, based on those requirements and his/her market knowledge, a comprehensive report is prepared that includes information about all the buildings which might meet your stated requirements. The purpose of this survey is to be as inclusionary as possible, identifying as many alternatives as exist in the marketplace. Once a comprehensive list of alternative properties has been developed, a “windshield tour” is prepared to see the properties under consideration and educate the client as to the market. In addition, the tour will eliminate buildings not really viable candidates, and usually identify several others which are desirable in terms of architecture, space planning, ancillary retail, parking, public transportation, etc. The role of the experienced broker in this stage of the process is to expose you to every building that conceivably meets your needs, not simply expose you through time-consuming space tours to every building. Once the tour has been conducted, it will then be possible to narrow the scope of the available universe to a short list of three (3) to five (5) buildings best suited for your company and its specific requirements. SPACE PLANNING Your firm may have unique requirements in terms of its buildout (e.g., private offices vs. open plan workstations, special air conditioning or security considerations, above standard electrical consumption, computer rooms, upgraded carpet or wall covering, etc.). Therefore, it is essential that you retain a space planner to help develop your firm’s space program. Your real estate advisor should be able to help you prepare for such a meeting. Depending on the size of your requirement, the space planner will usually take three (3) to five (5) days to complete a preliminary program for your review and ultimate approval, including an estimate of the square footage to be leased. THE INITIAL REQUEST FOR PROPOSAL Once the universe of potential locations has been reduced to a manageable number, your broker will solicit proposals from the selected buildings by sending a Request for Proposal (RFP) to the Landlord or his agent. The proposals should request information on such business issues as floor, square footage, lease term, rental rate, rental abatement, etc. Less obvious, but just as important, will be construction workletters, cleaning specifications, escalation provisions, costs for after hours use of heating and air conditioning, and options (expansion and. renewal, etc.). A good broker understands that the RFP lays the foundation for subsequent negotiations on both the business and legal terms. Therefore, the RFP should be carefully crafted to address major business and legal “flash points” of critical concern to your organization, (e.g. rent, improvement allowance, contingent liabilities, options).
  5. 5. colliers international | Baltimore | P. 5A Client Guide to relocating the office ANALYZING PROPOSALS AND COUNTER OFFERS After you and your agent have received and analyzed initial responses to the RFP, counter offers will be prepared and submitted. These counter proposals will frame the parameter of your position and provide the basis for ongoing negotiations. To facilitate the monitoring of those negotiations, your advisor should prepare a comparison of all of the economic variables (rental rate, concessions, etc.) to assist you further in the selection process. FINANCIAL ANALYSES Once counter offers have been submitted and the business terms are ninety percent (90%) understood, a financial analysis of the proposals should be prepared by your real estate advisor. It is the purpose of this financial analysis to: 1. Create a meaningful comparison among the top choices. 2. Provide both aggregate and net present value calculations for analysis. 3. Incorporate proposed square footage to determine which building is more efficient, from both a square footage and economic perspective. There are a variety of software programs available for performing these analyses. Many organizations utilize Excel spreadsheets developed in-house. Other organizations use commercially available programs specifically designed for analyzing lease costs. In either event, your advisor should provide you with samples of the program utilized to make certain that you are comfortable with how the assumptions and information will be provided. LETTER OF INTENT Once the lead property has been determined, it is recommended that a letter of intent be drafted between the parties. This letter of intent will not only summarize the agreed-upon business terms, but should also address certain legal issues before attorneys get involved. Most letters of intent usually focus on the business terms. Good tenant representation brokers understand that addresses more items that can be in the letter of intent, shortens the legal negotiations associated with the document itself. Consequently, it is not unusual to see a letter of intent in larger transactions addressing such issues as default, condemnation, personal liability, etc., items typically considered to be “legal,” but converted into more business items. DRAFTING AND NEGOTIATING THE LEASE Unless the tenancy is in a single use or single purpose building to be built, most leases reflect forms previously drafted by the Landlord and approved by the Landlord’s lender. Accordingly, these forms are written to benefit the Landlord more so than the Tenant. The concept of “balance” is a relative one, and therefore it is suggested that both your real estate advisor and lawyer review the lease. In this manner, both legal concepts and market practices will be identified and addressed. To accelerate the lease negotiations, it is suggested that your real estate advisor’s responsibility be clearly articulated to not only your attorney, but the Landlord as well. In this manner, faster and better communication will result in a speedier lease negotiation. Having used a comprehensive letter of intent, the parties will be able to quickly identify those issues needing more work while moving past those issues that have been previously identified, agreed upon, and in need of wordsmithing. While the lease is being negotiated, construction documentation should be prepared as it becomes an exhibit to the lease and will expedite the tenant construction phase of the process.
  6. 6. colliers international | Baltimore | P. 6A Client Guide to relocating the office CONSTRUCTION DOCUMENTS The space planner usually assist in developing the working drawings (architectural and engineering) to be used for obtaining pricing, building permits, and actual construction. Special consideration must he given to certain details, such as number and location of telephone, computer and electrical outlets, elevations of kitchen cabinets and/or other millwork, location of exhaust fans, finish selections, etc. In “second generation” or “relet” space, the documentation process can be more complicated because the buildout may include extensive demolition and/or relocation of existing items. Your broker should be able to read and understand construction documents. Each architectural or engineering drawing should include a list of symbols, which will help explain what is shown on the plan. Remember, ask if you don’t understand something! You should review these documents and “sign off’ only when you are certain they are complete, accurate, and reflect the business terms of the lease. CONSTRUCTION PROCESS After construction has begun, you should meet regularly at the site with the building’s leasing agent and the construction manager to make certain that the original schedule is being met. Before accepting the space for occupancy, insist on preparing a “punch list” of items which may still need to be completed. During this time, you will also need to coordinate the installation of your telephone system and any other “special” systems (computer networking, large copiers, etc). MOVE-IN During construction, attention starts turning towards the coordination of the move. While move-related issues should have been addressed throughout the process, they clearly need to be the focus of someone’s attention now. Not only should you have gotten competitive bids from moving contractors, but people in your organization should be preparing their individual work areas to facilitate the move. While no one likes to move, moving does have the benefit of assisting companies in accelerating the “file minimization process.” Stated another way, it is a wonderful time for people to go through files and throw out outdated, unnecessary and superfluous materials. One of the greatest challenges associated with the move itself typically relates to the coordination and set up of furniture prior to the movers coming to pack and unpack boxes. Accordingly, one of the most important and sometimes “unsung” heroes of the move process is the furniture vendor responsible for obtaining and/or relocating furniture for your employees. This requires following a myriad of details, especially when systems furniture is involved. With seemingly more components than a PC computer, coordinating the relocation and installation of systems furniture requires a significant amount of detail-oriented coordination. This is something that should be handled by a skilled professional and not a member of your organization (again, unless you have a department for this type of work). CONCLUSION Relocating an office creates stress because it occurs so infrequently and people usually lack the knowledge and wisdom gained from prior experience. By retaining skilled advisors, designating responsible parties internally and following a structured process, relocating can be quick, efficient and relatively painless for everyone concerned.