Finding a suitable property and negotiating lease terms is a serious undertaking. After all, occupancy-related expenses represent one of the largest outlays that most businesses face.
In order to get the most bang for your real estate buck, says Ken Murawski, managing director of CB Richard Ellis, it is important to get a quality broker into the fold early on when you are just beginning to think about your future real estate needs. “A professional can assist at this time by conducting a space needs analysis and helping to establish strategies to minimize space requirements and costs,” he explains. “The sooner a commercial agent is brought into the process, the more value he or she can provide.”
Smart Business spoke with Murawski about the services that commercial real estate agents provide, how to find a suitable broker and the current Cincinnati market.
How can a company benefit from retaining a commercial real estate agent?
A company will always benefit by retaining a commercial real estate professional because he or she understands the ‘real estate game’ just as the landlords in the real estate business. Commercial agents acting as fiduciaries for the company work to ensure that the best deal is attained. And, since occupancy-related expenses rank just behind labor as the second-highest fixed cost of running a business, a solid real estate decision and a solid business decision must be one and the same.
What types of services does a quality broker bring to the table?
A quality broker will bring myriad value-added services to the table for the benefit of the company. These include market knowledge and research, comprehensive property analysis, financial modeling, space optimization analysis, lease negotiations and project management services. These are all things that a company is not typically set up to handle itself. When a company does try to handle a lease or purchase by itself, it will likely leave money on the table for the landlord or seller.
Does the size of the real estate transaction factor into the level of service that is provided?
No, the size of the deal does not really matter. A commercial real estate professional will lead the process and create the necessary leverage for the company to ensure its real estate goals are achieved. In many cases, the value that professionals provide is perceived to be even higher by smaller tenants, mainly due to the company’s lack of knowledge of the market and the process, as well as its lack of internal resources.
How should a business go about finding a good broker?
The commercial real estate business is very much a relationship-based business. All of our professionals work extremely hard every day to build relationships with company owners and decision-makers.
A company selecting a commercial agent should interview several qualified professionals and/or firms and solicit their feedback on such things as market rates, comps, experience, their process for tenant/buyer representation and other resources such as project management and financing. It is very important for a company to not only hire a firm that understands real estate, but look for one that also understands their business and their goals.
What is the current environment for commercial real estate in Cincinnati?
The current environment is stable. In the office sector, although overall absorption of office space is very flat, many Class A buildings have experienced reductions in vacancy. The submarkets along the I-71 corridor namely Kenwood, Midtown, Blue Ash and Fields Ertel/Mason all have seen positive absorption. In Blue Ash, Citicorp recently signed a lease to take 195,000 square feet at The Landings, which is the largest suburban lease in the past five years.
The downtown market vacancy rate jumped up earlier this year due to Convergys vacating 350,000 square feet in the 600 Vine Street Building. Overall, CBD vacancy is at 16.10 percent, which has caused some landlords to lower their rates and provide more concessions. There is currently about 1 million square feet of new office projects under construction.
On the industrial side, the market has maintained relatively steady activity. In 2006, more than 2 million square feet of new industrial space was constructed in the marketplace, which has caused overall availability rates to go to 6.27 percent. Overall, sales and leasing activity is on pace for about a 35 percent reduction from 2005 levels. Although deal velocity has simmered year to date, we have recently seen an improvement in activity as some of the newly constructed buildings come online with larger contiguous spaces available.
KEN MURAWSKI is managing director of CB Richard Ellis Cincinnati. Reach him at Ken.Murawski@cbre.com. or (513) 369-1349.