Corporate relocation Featured

7:00pm EDT February 24, 2008

It’s been said that moving a home is one of life’s most stressful experiences, but what about moving an entire corporation? “For many companies, their real estate obligation is one of their largest annual obligations,” says James W. Mosby, principal, senior vice president, Colliers Turley Martin Tucker. “These transactions are often multimillion-dollar obligations, and they should receive the highest priority and resources possible.”

Thorough planning is key to a smooth relocation, and it’s never too early to start the process. A carefully prepared strategy executed by a qualified team, including brokers, attorneys and architects, prior to embarking on property tours, will greatly ensure the likelihood of a successful corporate relocation.

Smart Business spoke with Mosby about ways to find the best space for your business, while getting the most for your money.

What are the phases of a good strategy?

A process we’ve executed with success on multiple occasions is divided into five phases, some of which may overlap or take longer than other phases. Phase I consists of defining your objectives and priorities. What are the desired space requirements, growth projections, financial goals, location requirements and project timeline? Keep both short-term and long-term needs in mind.

Ninety percent of problems occur because clients want to skip this all-important step and move directly to Phase II — market survey and property tours. In the first phase, market conditions and available properties are reviewed, with consideration given to existing spaces, build-to-suit, new construction and sublet opportunities.

During property tours, a range of qualities to assess functionality are considered, including location, building and area services, parking, floor plan efficiency, expansion capability, ownership stability and quality of building management services. Preliminary cost estimates are also prepared to begin narrowing down the possible options.

In Phase III, Request for Proposal (RFP) forms are submitted to selected properties in order to evaluate all occupancy variables, including tenant and landlord responsibilities, economic obligations, renewal and expansion options. Larger tenants or tenants that are adding a significant amount of new jobs to an area need to allow extra time to procure incentives. Additional financial considerations such as tenant improvement allowances, operating expense base years and moving allowances are evaluated and negotiated during this phase. A comprehensive financial analysis that encompasses both qualitative and quantitative elements is prepared for the selected properties, resulting in projected occupancy costs for each alternative.

Phase IV begins with space planning and design. An architect prepares preliminary plans for the most desired properties; these are submitted to landlords to allow them to prepare preliminary construction budgets. Negotiations continue resulting in a detailed letter of intent (LOI) defining the terms and conditions whereby a lease can be drafted.

Phase V consists of construction management so that the space is on time and within budget. The bid process is administered, a contractor is selected, permits are obtained and a construction schedule is finalized.

What role does timing play?

The goal of the entire process is designed to create leverage for the company to carefully analyze all of its options and make the best possible decision. Time and the ability to research many options will create an environment where landlords are competing for the company’s tenancy. However, not allowing enough time shifts the leverage squarely back to the landlord. Why? Because the landlords realize that the company doesn’t have the luxury of exploring many other options (if any) and is forced to make a decision. When the landlord doesn’t have to compete with other options, it will exert its leverage on the company — especially in renewals.

How much time is required?

Typically, the larger the tenant, the greater the amount of lead-time required, since there’s a greater supply of small spaces. If a company is considering a build-to-suit, the lead-time is a minimum of 24 to 30 months. If a tenant is considering existing buildings, it’s a minimum of 12 to 18 months. But again, larger tenants — 50,000 square feet and up — should allow for additional lead times.

What mistakes do you see clients make?

The most prevalent mistake is believing you can execute this process without retaining qualified individuals and involving them early in the process. Remember that most landlords will have assembled a qualified team. Why wouldn’t a company want the same advantage? A corporate relocation is a time-consuming process, but if qualified outside individuals are retained, the burden is shifted to the assembled team.

Another common mistake is not assembling an internal team tasked with this responsibility. Equally important is receiving continual participation from the individual(s) that will eventually approve the team’s recommendation. Inevitably, assumptions and decisions will be challenged, but the chosen direction can be supported through a prepared and planned process. Otherwise, you’re back to square one, with much less time and leverage.

JAMES W. MOSBY is the principal and senior vice president at Colliers Turley Martin Tucker. Reach him at jmosby@ctmt.com or (314) 746-0316.