Hot spots? Featured

8:00pm EDT September 20, 2006
Relocating your business is a massive undertaking. A myriad of elements must seamlessly dovetail to lessen the impact on the bottom line. Moving day is not the time to discover that crucial features of the new location are unsuitable for your operation.

“Choosing the right location for your business is a major decision that requires time and expertise to achieve an optimal outcome,” says Patrick Duffy, president of Colliers Arnold.

“We assisted a financial institution when they needed a new ‘money center’ for the transfer of cash. The initial instructions we received were focused on cost of the real estate and proximity to highways, but after talking with their operational team, we learned that work force training and security issues were so intense, the primary driver was actually employee retention after the move. We identified a cost-efficient location with good access to the highway network, and most importantly, within an acceptable commute zone for their existing employees. Turnover after the move was minimal.”

Alternative location analysis involves a matrix of many factors. Every company is different, so their criteria will vary based on their unique set of requirements.

Smart Business asked Duffy to explain the key elements of a successful site assessment and why you should not sign a lease or purchase agreement without one.

How does geography impact site selection?
Determining if your business is driven more by proximity to your customer base, your employees, modes of transportation or perhaps other support facilities can be the primary driver for site analysis. For example, retailers are definitely more interested in locating near their customers; high-skilled labor-based companies tend to be more interested in being near their employees; manufacturing and distribution users need employees and need to keep transportation costs down by locating near convenient shipping routes such as interstates, rail, airports and seaports; doctors tend to congregate near hospitals; lawyers settle near courthouses.

What factors should be considered when selecting between several viable locations?
Assuming that you have multiple alternatives in your target geography, narrowing the list to the best option requires both a quantitative and qualitative approach. When deciding between alternatives, the base lease rate (cost per square foot of space leased) is not always the primary driver.

Total cost of occupancy includes all costs associated with leasing the space over the term of the lease. The base lease rate is the main cost. Other charges including taxes, insurance, maintenance, landscaping, management fees, after-hours a/c charges and parking fees differ from property to property and landlord to landlord. Escalation charges (rent increases over time) are also negotiable and can obviously have a significant impact on the total cost of occupancy over time.

When is bigger not necessarily better?
The efficiency of buildings and space can also vary greatly. In office space, the relationship between the floor space that a tenant can actually use (inside the walls) and the square footage he or she pays for (including the common area use like lobbies and common restrooms) is measured by an add-on or load factor. Load factors vary from city to city, ranging from approximately 15 percent to 23 percent. They have a real impact on the effective cost of occupancy. Calculating the cost per useable square foot as a base of comparison allows for a more appropriate benchmark based on cost per square foot.

Even within the determined useable space, the efficiencies of space vary. Odd-shaped buildings or buildings with narrow or overly wide floor plates can create inefficient areas within the tenant’s space. Many times, we use floor plans with desks, delineated to determine how many people can actually occupy the space, and use cost per person as a point of comparison. In industrial buildings, we may lay out rack systems with sufficient spacing for forklift equipment to determine the efficiency of the space for a particular user. Retailers typically have a set plan for product display that requires a certain number of aisles with specific spacing.

What additional features might help identify a superior location?
On the qualitative side, a building or space that is more aesthetically appealing may help attract and retain valuable employees or customers. Ease of access (ingress/egress) may make the location more convenient. Proximity to restaurants for efficient lunch breaks may be a decision point.

What is the typical timeline for a successful relocation?
In a relatively tight market, which exists in Tampa Bay today, you should start your relocation planning at least 12 months in advance of your planned move date. This will allow time to determine your criteria, search the market, negotiate a lease or purchase contract, and build out the space to meet your needs.

PATRICK DUFFY is president of Colliers Arnold. Reach him at (813) 221-2290 or PDuffy@colliersarnold.com.