Commercial Real Estate
Corporate relocation
How to find the best space for your business — and get the most for your money
By Sarah Schwartz
Smart Business St. Louis | March 2008
James W. Mosby
Principal and senior vice president
Colliers Turley Martin Tucker
It’s been said that moving a home is one of
life’s most stressful experiences, but what
about moving an entire corporation?
“For many companies, their real estate obligation is one of their largest annual obligations,” says James W. Mosby, principal, senior
vice president, Colliers Turley Martin Tucker.
“These transactions are often multimillion-dollar obligations, and they should receive
the highest priority and resources possible.”
Thorough planning is key to a smooth relocation, and it’s never too early to start the
process. A carefully prepared strategy executed by a qualified team, including brokers,
attorneys and architects, prior to embarking
on property tours, will greatly ensure the likelihood of a successful corporate relocation.
Smart Business spoke with Mosby about
ways to find the best space for your business,
while getting the most for your money.
What are the phases of a good strategy?
A process we’ve executed with success on
multiple occasions is divided into five phases,
some of which may overlap or take longer
than other phases. Phase I consists of defining your objectives and priorities. What are
the desired space requirements, growth projections, financial goals, location requirements and project timeline? Keep both short-term and long-term needs in mind.
Ninety percent of problems occur because
clients want to skip this all-important step
and move directly to Phase II — market survey and property tours. In the first phase,
market conditions and available properties
are reviewed, with consideration given to
existing spaces, build-to-suit, new construction and sublet opportunities.
During property tours, a range of qualities
to assess functionality are considered,
including location, building and area services, parking, floor plan efficiency, expansion
capability, ownership stability and quality of
building management services. Preliminary
cost estimates are also prepared to begin narrowing down the possible options.
In Phase III, Request for Proposal (RFP)
forms are submitted to selected properties in
order to evaluate all occupancy variables,
including tenant and landlord responsibilities, economic obligations, renewal and
expansion options. Larger tenants or tenants that are adding a significant amount of new
jobs to an area need to allow extra time to
procure incentives. Additional financial considerations such as tenant improvement
allowances, operating expense base years
and moving allowances are evaluated and
negotiated during this phase. A comprehensive financial analysis that encompasses
both qualitative and quantitative elements is
prepared for the selected properties, resulting in projected occupancy costs for each
alternative.
Phase IV begins with space planning and
design. An architect prepares preliminary
plans for the most desired properties; these
are submitted to landlords to allow them to
prepare preliminary construction budgets.
Negotiations continue resulting in a detailed
letter of intent (LOI) defining the terms and
conditions whereby a lease can be drafted.
Phase V consists of construction management so that the space is on time and within
budget. The bid process is administered, a
contractor is selected, permits are obtained
and a construction schedule is finalized.
What role does timing play?
The goal of the entire process is designed
to create leverage for the company to carefully analyze all of its options and make the
best possible decision. Time and the ability
to research many options will create an environment where landlords are competing for
the company’s tenancy. However, not allowing enough time shifts the leverage squarely
back to the landlord. Why? Because the
landlords realize that the company doesn’t
have the luxury of exploring many other
options (if any) and is forced to make a decision. When the landlord doesn’t have to compete with other options, it will exert its
leverage on the company — especially in
renewals.
How much time is required?
Typically, the larger the tenant, the greater
the amount of lead-time required, since
there’s a greater supply of small spaces. If a
company is considering a build-to-suit, the
lead-time is a minimum of 24 to 30 months. If
a tenant is considering existing buildings, it’s
a minimum of 12 to 18 months. But again,
larger tenants — 50,000 square feet and up —
should allow for additional lead times.
What mistakes do you see clients make?
The most prevalent mistake is believing
you can execute this process without retaining qualified individuals and involving them
early in the process. Remember that most
landlords will have assembled a qualified
team. Why wouldn’t a company want the
same advantage? A corporate relocation is a
time-consuming process, but if qualified outside individuals are retained, the burden is
shifted to the assembled team.
Another common mistake is not assembling an internal team tasked with this
responsibility. Equally important is receiving
continual participation from the individual(s)
that will eventually approve the team’s recommendation. Inevitably, assumptions and
decisions will be challenged, but the chosen
direction can be supported through a prepared and planned process. Otherwise,
you’re back to square one, with much less
time and leverage.
JAMES W. MOSBY is the principal and senior vice president at Colliers Turley Martin Tucker. Reach him at jmosby@ctmt.com or (314)
746-0316.
