Right to the source Featured

8:00pm EDT April 25, 2008

The process of selecting the right building in which to run a business consists of many steps, not the least of which involves identifying whether or not a site is suitable for a company’s specific needs within its industry. The best place to start may be with a landlord that specializes in the product type that your company requires.

“There is specialization in the industry,” says John Behm, managing principal with CresaPartners in Philadelphia. “And that could be a good thing for tenants if it’s properly identified and properly used.”

Smart Business learned from Behm about how landlords factor into site selection.

Should tenants seek out particular landlords?

This should never be the start of the process. Rather, the tenant should be inwardly focused at the outset. Once the basics are understood and the general location established then it is wise to examine landlords that may have an expertise with your particular need. Typically, you will find clusters of property that suit your needs in the area chosen. If this is not the case, we suggest examining your criteria again to see if the fundamental assumptions are valid. This is not to suggest that one should always follow the herd, but if you would be the only retail business in the midst of an industrial complex, you may have gone off track somewhere.

How can tenants identify the appropriate landlord for their business?

There are certain owners, or landlords, that have a self-defined niche. So if a particular company is in the initial stages of looking for space, there are resources, particularly through the real estate community, that will be able to guide them to those landlords that have an expertise in the product type they need. There are owners that have developed and manage product across many sectors, but it is difficult to be the best in all categories. There are certain owners who clearly have an expertise in specific building types, such as suburban office, office towers, retail, industrial, warehouse, lab etc. The best in those categories very rarely try to compete in all categories. They tend to stick within their own niche. This discipline should also be applied to all members of your project team, as well, such as your architects, contractors, movers etc.

What criteria should tenants look at within their own business?

For somebody that’s not fundamentally versed in commercial real estate, you want to develop a project charter, which is meant to clearly define the business needs in as much detail as possible. This would include the fundamentals of location, budget and type of facility, but it should also address access, image, culture, etc. Once this is completed and the business has affirmed those project parameters, a real estate adviser should be able to recommend the buildings that meet the business’s criteria and, specifically, those owners that should be considered who have a demonstrated history and experience in your industry.

Is the process any different for small businesses?

For small and medium-sized business owners where their facility is their only presence, it is critical that this be executed properly. This type of owner does not have the luxury of moving operations to another better-suited facility if a mistake is made. A lease is often a long-term relationship between companies. As with any business decision, you want to make sure that your partner is an expert in providing the services you are contracting for — in this case, your real estate. It’s not a one-way street.

What should tenants expect as far as accessibility to the landlord in the negotiating process?

It all depends on the people that are working for that particular owner on that particular project. It’s not unreasonable to expect the favorable experience found during the courtship with your landlord to continue throughout the course of the lease. Good negotiations are not confrontational. In helping to manage this process, a good real estate adviser will help with setting and implementing your expectations. We have found through our experience that the most well informed business is able to then make educated decisions. The results can be demonstratively different from a business that forfeited representation that could have provided specialization on its behalf.

JOHN BEHM is a managing principal with CresaPartners in Philadelphia. Reach him at (610) 825-3939 or jbehm@cresapartners.com.