Key questions to consider before you relocate your business

Parallels can be drawn between the growth of a plant and a business. Both require care and nurturing in order to develop, and each can eventually grow to a point where they need larger space to thrive, says William D. Saltzman, SIOR, CCIM, Executive Vice President and Director of Office Services at Cushman & Wakefield/CRESCO Real Estate.

Just as a pot can limit the growth of a houseplant, an office facility that doesn’t have the appropriate space and functionality needed to accommodate your business can be as restrictive, Saltzman says. But before you embark on a search for a new business home, you and your team should consider a number of questions.

Smart Business spoke with Saltzman about the most important things to think about when evaluating your office space needs.

Is your business based in the right part of town?

A growing number of businesses are concerned with attracting and retaining top talent. As a result, many firms like the idea of being based in a downtown setting. The whole live, work and play approach that appeals to a growing segment of the workforce has changed the business model of many companies. Employees often prefer the ability to walk to work both from a cost standpoint and for the health benefits they get from the additional exercise. Residential properties are increasingly more available and popular in cities like Cleveland and, with the accessibility of ride sharing services, some are now convinced that they no longer need a car. As you look to hire the next generation of employees, this could be something to think about.

Does your building convey the right image?

Although ‘location’ is often cited as the No. 1 rule in real estate, the impression your space makes when you are visited by potential customers should also be at the top of your list. Some businesses require the prestige of being in a downtown skyscraper with outstanding views, an attractive lobby and amenities such as  a restaurant or fitness center.

Others may prefer the ‘vibe’ of a brick-and-beam working environment that may offer more character than a traditional office setting, improved with painted drywall and a suspended ceiling. By understanding your business priorities, experienced real estate brokers can help guide you in the evaluation to the most appropriate solutions for your space requirements.

Have you thought about hidden costs?

Every company pays close attention to its monthly rent and utility costs. But you need to have a comprehensive understanding of all of your occupancy costs and the relocation process. If there is work that needs to be done before you move in, how much of that cost will be covered by the landlord?

If your current lease doesn’t allow sufficient time to get everything in place to make the move, you could be subject to a ‘holdover’ clause, whereby rent will be charged at a premium in your existing location. These are just a few of the many reasons why you need to pay close attention to the details and work with a broker to negotiate business terms and a lease structure that protects your business interests.

How can you streamline the relocation process?

Start early. Discuss your anticipated needs with your broker. Give thought to items that may have slipped through the cracks in the past, such as offsite storage, public transportation, signage, security, governmental regulations and high-speed connectivity.

If you are evaluating the merits of using  a broker, you need to think about who on your staff would otherwise manage all the aspects of the project, from researching alternatives, selecting a location, negotiating final terms and coordinating the move. How much time will you allocate internally for this work? What is your time worth to you?

The assumption that you can save money by not hiring a broker or using an attorney may be overshadowed by the expertise needed and the time to be devoted to make it a success. A cost-benefit analysis can help you determine if this is true.

Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate

Why a real estate broker is such a valuable asset

Real estate professionals provide clients with indispensable knowledge, tools and techniques that allow them to make a more informed decision when looking to buy, sell or lease a property, says Simon Caplan, SIOR, a partner at Cushman & Wakefield/CRESCO Real Estate.

“The access to market information, the negotiating skills and the ability to manage the various components of the transaction provide the client with tremendous value that is worth its weight in gold,” Caplan says.
Brokers have access to information that allows you to look beyond the basics. Their market knowledge and experience can help you make the right move, Caplan says.

Smart Business spoke with Caplan about the benefits of using a real estate broker.

Why should you hire a real estate broker when buying, selling or leasing a property?
A good broker should always suggest to a seller or landlord multiple ways to improve their property value by making it more enticing to prospective buyers or tenants. You only get one chance to make a first impression.

Good or bad, that first impression can greatly influence a prospective buyer’s valuation of your property. These improvements should be done on a priority basis to minimally make the client’s property equivalent to similar available properties.

This might include things such as cleaning, painting, fixing lighting, replacing damaged or stained ceiling tiles or repairing obvious building code violations. The increase in value achieved through these improvements typically is much greater than the cost of doing the work.

If your property looks like it has not been cared for or has been poorly maintained, most offers to purchase or lease will be below expectations. Your property needs to look sexy and appealing so that prospects want to come back for a second date. A broker should be able to show interested parties why your property is worth the asking price by talking about its amenities, as well as comparing it to recent deals in the same part of town.

What should you know before going to market?
A good broker will want to understand multiple things about you and your company. What are your space requirements? Why are you looking to move? What benefits are you looking to achieve in your new space? What amenities do you require and what constraints are you placing on the search?

Expect to answer a lot of questions from your broker and depending on your requirements, have multiple people in your organization ready to share their perspective on the project to provide your broker with a good understanding of what you want to do.

Once everything is clear, your broker will be ready to start showing you properties. A good broker should be a consultant to you, explaining the good, the bad and the ugly about the properties you tour and in a short time, be able to provide values to the properties that have piqued your interest.

In today’s market, quality industrial buildings are in short supply and are often difficult to find. However, there is a fair amount of office space available throughout the market.

What’s the next step once you have selected the right property?
Initial offers are usually made through a broker’s non-binding letters of intent to negotiate the major business terms of the transaction. Once you have a basic agreement between the buyer and seller or tenant and landlord, a purchase agreement should be prepared and negotiated including all business and legal terms.

What are some key points with regard to your due diligence process?
The due diligence process of checking out the property should be done prior to signing a lease or if it’s a purchase, during the inspection period allowed in the purchase agreement. There are several areas that should be addressed during this process.

Look for potential governmental concerns such as zoning, lot coverage, fire code compliance and economic incentives, as well as possible title issues like liens or easements. It’s also important to do a physical review of the property to examine for structural, mechanical or roofing concerns, as well as possible environmental issues.

Addressing problems at this stage, before you finalize the transaction, can help you avoid a lot of headaches down the road.

Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate

Study your existing office space before looking for a new home

When your office space becomes less compatible with the function of your business, your first inclination is often to start looking for a new home. But you may want to take a second look at what’s possible in your current space before you embark on a lengthy search for new real estate, says Eliot Kijewski, Senior Vice President at Cushman & Wakefield/CRESCO Real Estate.

“Let’s say you have a building that your company has called home for years and it’s a big part of your identity,” Kijewski says. “However, the space has become very inefficient. That’s the No. 1 reason to call an architect and look at what you can do to make the space more efficient. If you’re comfortable with your budget and the rent you are paying, you might be to able afford a little more. But you can get a lot more.”

Lighting, floor plan design and the setup of conference rooms are common areas where relatively small changes can make a big difference in how your team operates. In addition to giving your existing team a boost, an office redesign can become a strong recruiting tool.

“A refresh, a redo, or a new concept attracts talent,” Kijewski says.

Smart Business spoke with Kijewski about how architects and space planners can create momentum for your business.

Where do you begin in assessing your physical office space?

It’s typically about a 90-day process to have a professional look at your space and develop an initial plan. If you’ve been in business for a number of years, and in the same space, it’s likely that your company and its needs have changed quite a bit during that time. Is there space in your building that is rarely occupied or doesn’t fit its current use? Do you have unused space that you no longer need? Is the lighting appropriate for your work environment, both in terms of what employees require to do their work and the atmosphere you want to create for visitors to your company?

Talk to your team. Gather their feedback about what works and doesn’t work for them. Look at policies and procedures that may have become inconsistent with your company’s function. If you’ve moved away from big meetings around the conference room table and tend to have more “huddles” with smaller groups, you may want to create spaces that make those meetings more appealing and productive. This is an important step because you may not always be aware of what different employees need to be most productive. Is your firm moving with changes in the world? If you are hiring millennials, they don’t “office” the way Generation X offices. And Generation X doesn’t office the same as baby boomers. Companies that insist on doing things “the way they have always been done” risk becoming a less attractive place for prospective employees.

The analysis of your space can also be helped by tapping into case histories of other companies in your industry and talk to them about what they’ve done to make their areas more conducive to their work. In addition, you can talk to peers about what architects and/or space planners they consulted with as an initial step to consider who you might want to reach out to in order to remake your space.

What happens when you meet with the architect?

You will want to provide the architect with a sense of what you’ve got and what you’re trying to achieve. It’s an interview, a meeting to discuss the history of your business, your vision and what you’d like to do with your space. It needs to be a three-way partnership between your firm, the architectural firm and your real estate broker. It may turn out to be difficult to achieve the type of space redesign that you feel your company needs in order to be competitive in its industry. At that point, you could begin the process of looking for a new space.

But in many cases, as firms continue to decrease the size of individual offices and technology allows for more functional capacity with less space, companies find that they can use architects to achieve their redesign goals in their existing spaces.

Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate

Breweries can be big business in Cleveland if you take the right approach

Craft breweries have become a popular destination point in Cleveland and surrounding neighborhoods, and all signs point to the trend only growing stronger in the years ahead, says Rico A. Pietro, SIOR, a Principal at Cushman and Wakefield Cleveland.

“With the organic growth of the Ohio City market, there is an opportunity to take advantage of that demand and really imprint Cleveland on a national scale as the home to some dynamic breweries,” Pietro says. “The Samuel Adams model was the blueprint as brewers and producers found that people are genuinely interested in the craft of making beer. With that, there is a chance for these businesses to highlight their production facilities and position them as a marketing piece to get consumers to their end product.”

The good news is that new entrants into the craft beer market can only help this industry grow, Pietro says, as long as they take a strategic approach to finding the right real estate.

Smart Business spoke with Pietro about what prospective breweries need to keep in mind as they search for a location to start their business.

Where do you begin when searching for a location to open a brewery?

The old model for a brewery was to take a 20,000 square-foot location for a restaurant and use the brewery on site. The problem is when you do that, you limit your opportunity for expansion. You want to keep in mind high-identity sites that could serve as a retail platform to promote your brand and have proximity to other business drivers such as shopping districts, entertainment venues or mixed-use areas such as the Ohio City market.

When you’re looking for property in an emerging sector of the market, you should budget or plan for potential growth. The reason is there is such a barrier to relocation based upon the amount of infrastructure you have to provide to produce craft brews. There are also traditional attributes you want to look for in a space such as good truck access to both the building and to major highways for distribution.

How do you balance the desire to transform an undeveloped market with opening in a market that already has a number of breweries?

That’s a fundamental question in real estate. It’s similar to the approach Wayne Gretzky took on the ice: Don’t go where the puck is. Go where the puck is going to be. Get into a building that allows you to make your investment in a good location without paying a premium on rent. People will come to a brewery if you provide an experience when they go there. You can save thousands of dollars a year in rent if you’re not paying retail rates for your production facilities. It’s five times as expensive to put your production facility in your retail location as opposed to being ahead of the curve and looking to create an industrial brewing district.

Whether you want to add a restaurant, a tour of your brewery or provide venues for corporate outings, you can use the production facility as a way to promote your brand. This business model needs to be a little bit more strategic, but it helps to manage your costs by moving the production facilities to a less expensive space. It also provides flexibility to grow as your brand becomes more economically productive. It would be wise to find a real estate professional who understands and can qualify your long-term approach, and is knowledgeable about the brewery business and its growth potential.

How much of a concern is competition?

The craft breweries in Northeast Ohio are more powerful and have a stronger regional and national message if they can be promoted as a brand or sector rather than trying to operate independently. You can create a district that ends up being a primary tourism destination for anybody coming into Cleveland. There is an emerging area on the south bank of the Flats that wants to coin itself as a brewery district. The sum of these breweries is likely to be more powerful as a group than if each business attempted to stand on its own.

Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate

What you should know before you put your property on the market

You may no longer notice the stains on the ceiling tiles from the roof leak in your warehouse five years ago, but it’s likely they would catch the eye of a prospective buyer, says George J. Pofok, CCIM, SIOR, senior vice president at Cushman & Wakefield/CRESCO Real Estate.

“It would instantly put a negative thought in that person’s mind about the property and the potential expense they will likely incur down the road,” Pofok says. “First impressions go a long way when you’re trying to make a sale.”

The act of preparing a building for sale and finding the right real estate professional to help you market the property takes both time and attention to detail.

“You need to engage a real estate professional to help market your property,” Pofok says. “At that point, it’s the adviser’s duty and job to know every detail of the property and assemble that information into a neat, clean property package that presents the building with the best possible image.”

Smart Business spoke with Pofok about how to prepare your building for sale and find the right real estate professional to help you through the process.

Where should you get started preparing your building for sale?

The first step when putting a building on the market for sale is to reach out to a real estate agent that principally specializes in your industry (i.e office/industrial or retail) or geographic area of business. Obtain the adviser’s thoughts on how to prepare your building to be put on the market so that you can stage it appropriately or make certain improvements that will maximize the value of the real estate asset.

Solicit recommendations on what improvements should be made prior to going to market. Not all improvements will translate to an increase in value of the asset, so an adviser may tell you to not do something because you won’t see a return on the investment. Improvements could include landscape cleanup, painting warehouse walls white, lighting upgrades, office cleanup or replacing damaged/stained ceiling tiles. It may be from an old leak five years ago that has since been repaired, but the prospective buyer is only going to see the stains, so you want to get that problem resolved. If you have scrap or trash compactors outside, make sure those areas are clean of debris. When people have an impression of cleanliness, they will think you’ve taken care of your property.

How will the right real estate adviser help you market the property?

Buyers are far more sophisticated than they have ever been before. They are on the internet searching for information and will know a great deal about the property before they call you. The ability to put accurate information in their hands or in the various databases they use is critical. Buyers may pull up a property brochure and be looking for a warehouse with specific ceiling heights, a certain number of truck docks or drive-in doors. The buyer may also have specific power requirements. If you have inaccurate information in those various databases, your property may be overlooked or you’ll be ruled out without even knowing it. Real estate professionals do this on a daily basis, so it’s important to listen to their advice. They won’t tell you how to make your widgets, but they do know real estate. It’s also helpful to work with a team. People want information right away and when you work with a team, there is more than one person who can answer a question, forward information or show you a property.

Is it OK to show the property during normal business hours?

Most companies understand that folks need to operate their businesses. There are often times when watching another company’s process might be beneficial and helpful as potential buyers look at how they would lay out a facility. When I look at the number of deals that I’ve completed on showings after 5 o’clock or on weekends, I don’t know that I’ve actually made one. If people are interested in a property, they’ll typically come during normal business hours.

Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate

Why introspection is often a crucial piece in solving a real estate need

Most companies spend very little time thinking about real estate until it is too late, but rather are intently focused on growing their business and reaching new customers. So when the time comes to consider whether your current space can meet your company’s needs both now and in the future, it’s a good idea to get help early in the process, says Joseph V. Barna, SIOR, a Principal at Cushman & Wakefield/CRESCO Real Estate.

“Let’s say you’re at the near end of your building lease and you realize you’ve outgrown your space,” Barna says. “You call a real estate broker and say, ‘We’ve outgrown our office and we need a new space. Here’s what we need. Go find it.’”

It seems simple enough. But a more introspective approach that takes into account where your company is at, the new challenges you are facing to remain competitive in your industry and the attributes of the ideal space to help you meet those challenges can make a significant difference.

“It’s important to step back and look at all the pieces and then evaluate what the best decision would be for your team and your company,” Barna says.

Smart Business spoke with Barna about some keys to making a more effective real estate decision.

What’s a good first step for a company with real estate concerns?

You have to make sure you have the right team to do the best job on whatever the assignment is going to be. But the key is to get inside that assignment before you bring in the different vendors with individual interests. For example, in order to maximize value, it’s imperative to bring in an experienced consultant before you go out and engage a construction company or an architect. Quite simply, you don’t know what you’re designing yet.

You need to work with your consultant to figure out what your business is, where it’s going and how to get there.

A good consultant can help you back up, get inside your head and find out what’s driving your decision to consider a change. Another thing that you may not understand if you’re unfamiliar with the real estate process is the lead time that is needed to successfully complete a project. If you want to do what’s best for your business, preplanning well in advance is a must.

How do you find the right partner for your company’s needs?

It’s often good to work with a company that is not affiliated with a specific product or aspect of the project, an unbiased third party that can explore all alternatives and share honest opinions about what you need. You want a team with expertise and access to what you need, but one that you trust will make the best recommendation for your business.

You want a consultant who is willing to ask hard questions and build credibility that he or she understands your goals and is willing to do what is necessary to move you toward that desired outcome. The consultant’s expertise may get you to an idea that you had never even thought of before, but that can help you exceed your expectations.

What are some ways that real estate expertise can guide you to a better decision?

For example, you currently occupy 15,000 square feet and feel that you’re out of room to accommodate new hires and need to relocate to a larger space. But an expert might look at what you have and present an alternative manner in which to reconfigure your existing space to meet your needs, improve productivity and employee moral, as well as avoid the cost of a move.

Or you could be in a warehouse and have storage concerns. But you didn’t know about sophisticated racking systems and processes that can enable you to do more with less.

You’re focused on your business and it may be that you simply don’t realize the options at your disposal. In summary, an experienced consultant can enable you to make a more informed decision by identifying solutions you might never know existed.

Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate

What to consider when deciding whether to own or lease your space

A number of strategic decisions should be considered when making the decision to own or lease facilities for your company, says William D. Saltzman, SIOR, CCIM, executive vice president and director of office services at Cushman & Wakefield/CRESCO Real Estate.

“Needless to say, it’s an important decision and a complicated process,” Saltzman says. “The key to making a good decision is to have solid information that is based upon thoughtful, credible assumptions. The more successfully you’re able to anticipate your company’s future needs, the better off you’ll be.”

Smart Business spoke with Saltzman about key considerations when making the decision to lease or purchase commercial property for your business.

What are the pros and cons of owning real estate versus entering a lease agreement?

Leasing provides flexibility. Generally, with leased facilities, business owners can be more nimble. They are able to expand or contract based upon changing needs, and can do so more quickly. The risks associated with ownership are eliminated; for example, the possibility that you may need to sell your property during a downturn in the market. In the event you plan to sell your business, the prospective purchaser may have little interest in owning the real estate.

In leasing, business owners typically avoid the headaches of maintenance, repairs and valuation risk and are better able to concentrate on core business activities without being distracted by the concerns of real estate ownership. Conversely, there are significant advantages to owning the real estate your company occupies, including valuable financial and tax benefits. You can modify the premises for your specific requirements and you’re making improvements in your own asset as opposed to an investment that benefits the property owner. There is also a certain mystique that can be associated with property ownership. Investment in real property conveys financial stability, success and greater control of your company’s future. As a property owner, you have greater influence on the compatibility of adjacent businesses, which is something that would be difficult to accomplish as a tenant.

What’s the key to making strong assumptions about your company’s future?

Take the time to build realistic financial models that are based on thoughtful, informed projections. Adjustment of just a few percentage points in these forecasts can significantly impact the outcome.

Within your business, look at the ways in which your space requirements will change over time. What is the cost and availability of capital today? What are the projected returns from additional investment in your business? If the right facility is available for acquisition at a fair price today and your preference is to own the property that your company occupies, it may be prudent to act now.

You also must consider the residual value of the asset, if you own it. What’s the estimated future value if you hold onto it for X number of years? The analysis should consider total occupancy cost, which includes line items for rent, operating expenses, utility costs and tenant-funded improvements. Evaluate it on a net present value basis to come up with your true occupancy cost over that same period of time. On a purchase, you’re going to look at the debt service, the annual operating expenses and the opportunity cost of that equity that you’re putting into the acquisition. Look at the period of time during which you own the building and assume what the equity reversion is or what the sales price would be at the end of the holding period. What assumptions are you making to reach your conclusion? And what do the numbers look like when you compare leasing the space to owning it?

What is the difference between a triple net lease and a gross lease?

In a triple net lease, 100 percent of the expenses are borne by the tenant, including responsibility for maintenance, repairs, insurance and taxes. In a gross lease, by contrast, the rent paid by the tenant typically includes an allocation for expenses and taxes. In this case, the increased cost of occupancy over the term of lease is limited to incremental adjustments that the landlord passes on to the tenant over that base allocation.

Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate

Take the time to understand the language in your lease before you sign it

Due diligence is a crucial step for any business that seeks to make a smooth transition into newly leased space, says Simon Caplan, SIOR, a partner at Cushman & Wakefield/CRESCO Real Estate.

“When you sign a long-term lease, you are now married and committed to that space and the landlord,” Caplan says.

“You need a strong lease agreement to protect both parties and to ensure that everyone understands how certain responsibilities will be managed. The manner in which this process is conducted can go a long way toward achieving this goal.”

Smart Business spoke with Caplan about subtle, but significant issues you should understand before finalizing your next lease.

What key components are included in most building leases?

The most basic element of the lease is the description of the premises, which should include the size; the location in the building if there are multiple tenants; a description of the common area(s); the amount of parking that you receive for your employees, clients who visit your facility and trucks; and the common area factor of the building, if applicable.

It should also be clear who is responsible for the build-out, or any work that is required to convert the space to fit your needs. Besides rent, other potential add-ons to the lease payments could be real estate taxes, building insurance, common area maintenance and cleaning fees, which all should be laid out.

Make sure that all dates are understood such as lease start, rent start, termination, option notice, payments due, etc. These are all common items to include when leasing space and should not be overlooked.

What are some leasing issues that companies commonly forget to address?

One common omission is an adequate description of the condition of the premises that the landlord will be providing for the tenant.

This would include things like new walls, paint, carpet, cleaning, repairs, etc., to differentiate from ‘as-is condition.’
Understand the operating expenses of the property and how they are or may be passed on to the tenant(s). In most leases, the interior maintenance is the responsibility of the tenant while the landlord is responsible for the exterior, structure, roof, parking lot, etc.

Typically the cost of landlord maintenance and repairs are passed through to the tenant, while the landlord is financially responsible for replacement of capital expenses such as a new roof or parking lot.

Sometimes the landlord is permitted to pass through amortized portions of capital expenses.

A good lease provides detail so that both parties understand who is responsible to make what repairs and also who is ultimately responsible to pay for said repairs.

Insure the ability to get and install high-speed Internet, satellite dishes and other high-tech communications systems in the premises and through the common areas, roof, etc.

Understand the damage and destruction clause regarding timing and responsibility if there is a significant fire, flood or other occurrence at the property. The best advice is to include language in the lease that both parties agree to in order to prevent any misunderstandings should the worst occur.

How can you protect against an unresponsive landlord?

If you are constantly having roof leaks and the landlord doesn’t schedule a contractor to fix the leak(s), after a designated period of time, you, the tenant, should be able to call a roofer and have it fixed. The same applies for any other major maintenance or repair issue. A self-help clause gives you the legal ability to potentially apply the cost towards rent or another financial obligation to the landlord. This can only be done if No. 1, the landlord is unresponsive after repeated notifications to address a problem and No. 2, it’s written in the lease that you have the right to do this.

It’s important before you sign your lease that you determine whether your potential landlord is capable of performing all of its obligations. You can be proactive and work with a quality real estate broker who can pass on the experiences of other tenants with different landlords and give you a sense as to whether you might have reason to be concerned before you sign your lease.

Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate

Take time to identify problems before you close on a real estate purchase

Due diligence is an essential component to any real estate purchase, but Alec Pacella says you might be surprised at how little some people know about a building before they sign the papers to buy it.

“I’ve sold plenty of property where the owner never looked at it,” says Pacella, managing partner and senior vice president at NAI Daus. “To me, that’s unfathomable that somebody could buy a property without seeing it.”

Experts such as structural engineers, land surveyors and environmental assessment professionals are typically brought in to evaluate a facility. But they are looking at the space with a very specific purpose in mind.

“You’re the owner and these people aren’t looking at your building with the same eyes that you are,” Pacella says. “If I’m buying a building, I’ll have the experts make their assessment, but I want to see it with my own eyes. That’s No. 1.”

Smart Business spoke with Pacella about ways that due diligence can reduce your risk when purchasing real estate.

What are some common mistakes that business owners make when purchasing real estate?

There are two parts to your due diligence efforts. One is what you pay for and the other is what you do yourself. The part you pay for is an area that people often overlook. You’re a business owner and you’ve already agreed to pay $500,000 for a building.

Now you’re expected to dole out more cash for a building inspector, a Phase 1 environmental study, a survey of the property.

If you’re in a hurry to complete the deal and get moved in, you might make the assumption that everything is OK and that any problems would have already been brought to light. This can be a dangerous and costly assumption made in a misguided effort to control costs. The effort you make to identify problems with the heating and cooling system or the structural integrity of the building before you buy it can ultimately save you money.

As for what you can do yourself, do a complete visual inspection that includes every aspect of the space. Inspect storage areas, the basement, the roof and the stairwells. Take note of anything that doesn’t seem right.

You should also visit the property at different times. Most property visits in business take place in the middle of the day. Make time to stop by early in the morning or in the evening or even on the weekend. The complexion of the property could be very different. If it’s your building, you want to know what’s happening on or around your property, whether you’re working or not.

How costly is it to not be thorough in your due diligence?

It can be crippling. If there is an easement across your property that you didn’t know about, you might be surprised to look out at your parking lot one day and find several trucks that have arrived to service an area that is only accessible through that easement.

Perhaps your building is located next to a site that was once a gas station and there are monitoring wells that require periodic inspection. Issues such as these can have a long-term impact on your business. In some cases, you can work around the issue. But it’s a lot easier to manage a potential disruption when you can plan for it.

Another useful step that doesn’t cost you anything is to check in with officials of the city where you’re looking to buy a building. Talk to building or zoning inspectors or the local planning commission. Often, they’ll know about the history of your property and anything that might impact it. This could be something from the past or a future project.

If there are plans to put in new sidewalks or a new sewer system, or to rezone a parcel adjacent to your property, that would be useful information to know. In some cases, it might cost you a little more to discover important information. But if it helps you avoid a more expensive headache down the road, it’s money well spent.

Insights Real Estate is brought to you by NAI Daus

The commercial real estate market in Cleveland is ripe with opportunity

Downtown Cleveland’s real estate market is having a great year.

Major employers like Spero-Smith Investment Advisers and Fox Sports Ohio announced they would move downtown from their suburban locations and Benesch became the first announced office tenant for nuCLEus, a planned $300 million mixed-use development in the Gateway District, according to a report from Downtown Cleveland Alliance.

Demand for downtown Class A office space is outpacing the demand for suburban locations and the grand opening of Heinen’s in the historic Cleveland Trust Rotunda led to an influx of 15 downtown retail commitments in the year’s first quarter, per the report.

The confluence of growing confidence in the economy and an understanding that at some point, the Federal Reserve will begin raising interest rates is leading to strength in the real estate market, says Rico A. Pietro, SIOR, a Principal at Cushman & Wakefield Cleveland.

“People likely have never seen a healthier market,” Pietro says.

Smart Business spoke with Pietro about the commercial real estate market and what you should be thinking about as you decide how and where to invest your money.

What is the mindset of prospective commercial real estate investors in today’s economy?

Flexibility is very important in today’s market, whether it’s the terms of the agreement for the space or the space itself. Things can change so quickly in the current economy that business owners don’t want to be locked into anything that could put their company in a restrictive situation. So they are evaluating lease vs. buy options and attempting to make a decision that best fits their needs.

You want to be comfortable with the choice you make and confident that you’ve considered all the alternatives that are available to you. If you’re a startup company, consider leasing space to help you maintain that valuable flexibility. Use your cash flow to reinvest in your company so you can get to a point where you have a good sense for what your company’s space needs will be. At that point, you can more confidently commit to a property on a long-term basis.

The biggest mistake you can make is to buy a property that doesn’t fit your long-term goals. You get a big win by securing a new customer, but then discover you’ll need at least 50 new employees to manage all the business from that account. Unfortunately, you just committed to a building that doesn’t have that much space and now you’re stuck. Whether you’re a startup or an established company, you need to keep the future in mind when making real estate investments.

What are the advantages of leasing vs. buying?

Leasing is less of an economic commitment and as the market does change, you ride the wave. If it’s a down market, you’ll be rewarded with a more affordable occupancy cost. And in the event you sell your company, real estate space that is leased is not a contributing factor in the valuation of your company.

When you buy property, you’re creating value both for the property and for your business. Buying also gives you consistency when it comes to your annual occupancy costs. And if the market is doing extremely well, your mortgage payment remains the same.

What other real estate options exist for today’s business owner?

Many business owners find that they are now using less space in their current location. Employers are moving to a more collaborative concept that combined with the growth of technology and the resulting reduction in hardware necessary to support that technology has freed up space for other uses. A willing business owner could take that space and turn it into a revenue source by re-leasing it to other tenants.

Another option is to take the extra space and use it to bolster your own company’s culture. It could be an area where leaders and employees can brainstorm about projects they are working on. Or you could create a space where employees can get away from their work for a bit to recharge their batteries. If that increases productivity, that can provide a boost to the bottom line as well, even if it’s a little more difficult to measure.

Insights Real Estate is brought to you by Cushman & Wakefield/CRESCO Real Estate