“Tenants should be prepared to strike a deal with a landlord or seller far in advance of their projected timing goals,” says Wes Hunnicutt, vice president of CRESA Partners, a corporate real estate service adviser. “Many times, when faced with this scenario, an impulse decision is made without the proper planning and thought process required to make the most educated and important business decision. This places the tenant/buyer at great risk for inefficiencies in the space, building and workflow.”
Smart Business spoke with Hunnicutt about the importance of strategic planning and when the process should begin.
Why is strategic planning important?
In this market, with vacancy rates reaching an all-time low of 6.7 percent for Class A office space, it is critical that tenants begin evaluating their business and surface the internal business factors that are driving their real estate needs. With little space coming on line within the next 18 to 24 months, a softening of the market is not in the foreseeable future. A company’s real estate service provider should be pro-active and intimately understand the company’s direction as it relates to lease expirations, market inventory, and expansion or contraction goals, along with other important key factors.
How will strategic planning shape a company’s future occupancy?
A company should look to its real estate service provider to perform services that extend far beyond surveys, market information, tours and proposals. The companies of today are faced with making difficult assumptions on ‘where the market is heading.’
Professionals providing real estate services can begin evaluating a company’s efficiency in layout, specific placement in product type, and overall company workflow all factors that shape occupancy costs.
This strategic evaluation typically takes place one to two years in advance of any lease expiration. This exercise with the real estate professional and the company will produce the company’s current and future projections for its specific space needs.
Why is it important to begin the process so far in advance?
As vacancy rates and available buildings decline, fewer options are introduced to the market. Larger users of space are typically more impacted due to the already minimal alternatives.
Tenants should be prepared to strike a deal with a landlord/seller far in advance of their projected timing goals. Many times, when faced with this scenario, an impulse decision is made without the proper planning and thought process required to make the most educated and important business decision. This places the tenant/buyer at great risk for inefficiencies in the space, building and workflow. It is essential to have conducted this exercise prior to any consideration of evaluating the market. This will ultimately reduce variation and improve the quality of the process.
Does strategic planning solely emphasize on the amount of space a company should occupy?
Strategic planning will emphasize many different characteristics of an organization. It is oriented toward the future, and focuses on the anticipated future of the organization. The premise is based on the analysis of foreseen and predictable trends, as well as the analysis of internal and external factors that shape the company’s real estate.
Strategic planning will not only shape and define the future real estate goals in an efficient form, but will align an organization with its environment. This will provide a framework and direction to achieve the organization’s desired future.
When strategic planning is most successful, it will influence all areas of operations, becoming a part of the organization’s philosophy and culture.
What would be the first step for an organization to begin this process of strategic planning?
The organization should interview different real estate service providers that are familiar and capable of establishing a comprehensive approach to strategic planning. Once the organization has selected a preferred service provider, the real estate team should become intimate and fully understand the companies’ business goals and objectives. An effective strategic plan develops a real estate model that supports and connects the real estate objectives to the corporate business plan. The organization and real estate service provider will then collectively work together to establish goals and objectives that are important to the company. The strategic planning phase is a process and not an event.
WES HUNNICUTT is vice president of CRESA Partners, specializing in the acquisition and disposition of space on behalf of office and industrial users. Reach him at (949) 706-6600.