How to navigate today’s commercial, industrial real estate markets

Commercial and industrial real estate activity has remained very strong with no real end in sight. It has been a landlord/seller market for a while, but now it’s time for tenants/buyers to do their homework and bid aggressively before an attractive opportunity is lost.

“We are continuing to see more and more multiple offers,” says George J. Pofok, CCIM, SIOR, senior vice president for Cushman & Wakefield/CRESCO Real Estate.

“There has even been significant movement in the class C-type buildings that have previously been on the market for an extended time. This is because inventory levels are so low. Companies that need additional space may choose a less-than-ideal building since it is their only option.”

Smart Business spoke with Pofok about how to navigate today’s commercial and industrial real estate market in order to take advantage of available opportunities.

What are the real estate options today for a company looking to grow?
While new construction may cost $60 to $90 per square foot for industrial use, if a company is able to acquire a lesser quality building in the low to mid-$20s per square foot, and spends another $20 per foot to renovate, it’s definitely a savings. With that being said, those types of deals are becoming extremely scarce with recent activity.

What about new construction?
Given the tightness in the market, companies should explore new construction opportunities. While speculative new construction had been dormant during the last economic slowdown, over the past year or so there have been five new speculative construction projects with three additional projects under construction.

The market can even continue to support additional new construction projects.

The cost of new construction might be higher today than it is for existing buildings, but in the long run, companies may save on aspects such as costs for utilities and taxes.

What advantages might a speculative construction project offer?
The speculative product is more for the warehouse/distribution/light assembly type of operation rather than heavy manufacturing, but it is definitely a good option.

Buildings constructed today typically are more energy efficient, have higher ceilings, and more docks and drive-ins compared to those built 10 to 20 years ago.

While the norm in the past may have been an 18-foot ceiling, today’s buildings are being developed with 30 to 32-foot ceilings so companies can rack more product in a smaller footprint. For example, with an 18-foot ceiling, companies may have required 50,000 square feet of space. But if they can take advantage of the higher ceiling/cube height, they can reduce their footprint to 30,000 square feet.

What steps should a company take when exploring existing space?
Companies should do their homework before they get into the market. They need to secure pre-approvals from a lender and have completed their own internal analysis as to their specific facility needs — docks, drive-ins, ceiling height and perhaps a location analysis of employee drive times.

It is extremely important to start early. There is a longer lead time required for manufacturing operations vs. warehouse / distribution operations.

A manufacturing operation has to build inventory so that it can shut down and move equipment before it can ramp up production again, so additional time is needed. But a warehousing operation only needs a short amount of time to relocate racking and product to the new location.

In addition, once a company identifies a building that fits its needs, it should take action. The company can’t wait two or three weeks because that space likely won’t be available long in today’s environment.

How does a company prepare for competitive bidding?
The broker should advise the company that the market is tight and it should be ready to be aggressive with an offer once it has found the space it desires. The offer should also be as clean as possible — free of demands such as an extended due diligence period or a larger-than-typical share of the due diligence costs. A seller might not look favorably on those types of requests, so the fewer strings attached, the better.

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

How to negotiate a sale-leaseback so that both parties benefit

There has been a steady flow of sale-leasebacks in Cleveland as local, regional and national investors find themselves flush with cash, but with limited properties to buy.

“There’s a lot of activity from outsiders looking in,” says Joseph V. Barna, SIOR, a principal at Cushman & Wakefield/CRESCO Real Estate.

The reason, he says, is because it’s so competitive in the major markets.

“If a property becomes available in Los Angeles, Dallas or Houston, there could be 30 investors chasing it who are all capable of writing a check. That’s led investors to look to secondary markets, such as Cleveland, where they’re able to transact at higher capitalization rates with less competition. Cleveland has become a sweet spot because there’s a good mix of opportunity and competition.”

Smart Business spoke with Barna about how sale-leasebacks are being used to satisfy investors’ appetites while offering sellers significant benefits.

What are the conditions that create an ideal situation for a sale-leaseback?
In a sale-leaseback, owners sell their property to an investor while retaining the benefits of using the property, typically on a long-term lease of 10-20 years. The structure is increasingly popular because it allows owners to use the real estate without tying up debt and equity capital.

Companies best positioned to consider a sale-leaseback are those that have a lot of equity in the property and can benefit from freeing that up — for instance, to make an acquisition, pay down debt or as part of an exit strategy.

How do investors determine if a sale-leaseback is a good deal?
For investors, a sale-leaseback is primarily a financial transaction based on cash flow. However, there have been times when a building owner has a 100,000-square-foot property that it leased back for $6.50 per square foot in a market that’s seeing $4.50 per square foot as average.

Investors see that rate and buy at an 8 percent capitalization rate, looking only at the cash flow and failing to take into account the intrinsic value of the real estate. The building owner gets an above market cash influx from the deal, then eventually files for bankruptcy and goes out of business. The investor is now sitting on an empty building and will inevitably take a major financial hit because it takes time to re-tenant at a fair market rate.

Sometimes investors are so eager to push their money out the door that they’ll actually gamble a little on the risk side, increase the capitalization rate and still get burned. Even when the lease is up, tenants often leave and they can’t replace that cash flow because the market is down and the rate was well above market.

Ultimately, the investor needs to understand the intrinsic value of the property, as well as local market conditions before investing.

What should get close attention as the parties structure a sale-leaseback?
A seller will be asked to maximize the property’s value by signing a 10- to 20-year lease. Before doing that, it’s important that they understand their company’s future growth potential, which will determine whether the property will meet the business’s needs for that duration.

Companies that are expecting to grow should plan for an expansion of the physical space. In that case, before making the deal, determine a formula for rent that accounts for the addition. If there is a realistic chance that the business is likely to contract, look into the rights to sublease, or include a cancellation clause as part of lease structure.

Who should companies work with to execute a sale-leaseback?
Logical team members include a trusted real estate consultant with experience in sale-leasebacks, a financial adviser to ensure the projection and assumption are correct, and a legal adviser with a specific focus in real estate.

Investors should also talk with ownership to understand their short- and long-term objectives. These deals can be a benefit to all parties involved, as long as both sides are open and honest about their intentions when negotiating terms.

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

Buyers should use the due diligence period to confirm their expectations

There’s a lot of discovery that takes place before buying a commercial property. Smart buyers and their brokers do their homework to understand as much as they can about their options before setting foot on a property.

Walkthroughs offer a chance to inspect for any issues that could affect their occupancy and operating requirements. But once a purchase agreement is signed and they enter the due diligence period, it’s their last chance to ensure they’re getting the right deal and not making a costly oversight.

“This is a buyer’s last chance to walk away,” says Simon Caplan, SIOR, a principal at Cushman & Wakefield/CRESCO Real Estate. “It’s a final opportunity to get up close, bring in experts and make absolutely certain the property best meets their needs.”

Smart Business spoke with Caplan about the due diligence period and how buyers can use it to protect their interests.

What should buyers understand before visiting a property?
Before going on location to inspect a building, talk with the real estate agent. He or she should have the fundamental property information, including a list of recent capital improvements.

Make sure it’s zoned for the type of use planned. If materials need to be stored outside, determine if that’s permitted. Many communities won’t allow that and it can be costly if other plans need to be made for a solution.

Check the access to roads and highways. If the company will rely on trucks to bring in or ship out goods, it’s important to understand if any restrictions exist, the direction trucks can travel on the roads that feed into and out of the property, and the proximity of highway entrances and exits.

Once at the property, what should buyers be sure to inspect?
During the initial visits, buyers should bring their internal experts to inspect the property to ensure it’s fit for their intent. Manufacturers, for example, will want their plant manager or engineer along to make sure the building has enough space and the right layout to accommodate the company’s requirements. They should also check that the building is equipped with enough electrical power to operate the equipment.

Prior to making an offer, they should approach a prospective property armed with a good idea of its condition, recent capital improvements and a sense of how much they’re willing to invest to fix existing issues and to set up for their own use.

Once the purchase agreement has been signed and the due diligence period officially begins, bring in professionals to take a closer look at any issues that were caught initially. For instance, bring in a roofing contractor to look at the condition of the roof, a building contractor to inspect any structural issues, and an HVAC contractor to check out the equipment.

An issue that’s recently become a sticking point is a building’s fire suppression sprinkler system. An update to the fire code a couple years back has meant that many buildings are no longer up to code. Bring in an expert, or a municipal representative, to look it over before moving forward with the purchase because the systems are expensive to replace.

How does a municipality’s zoning factor in to due diligence?
A municipality’s building and zoning codes play a big role in how a property is utilized. Invite municipal inspectors to walk through the building, regardless of whether it’s required, to check for code violations. It could save a lot of hassle later.

Additionally, look at zoning with an eye to the future. Explore whether any potential expansion of the physical building is allowed and to what extent.

At what point does an issue become a deal breaker?
If the costs of repairs or upgrades are significantly above the buyer’s reasonable expectations, provide the seller with a list of any major, unexpected issues found during inspection along with copies of quotes from contractors. It’s rare, but there is a chance the seller will either fix the problems or adjust the sale price to compensate.

The due diligence period is not a time to renegotiate the deal terms, but it is a critical time for buyers to uncover costly surprises. A little homework goes a long way toward getting the best deal. If a resolution can’t be made, the buyer has the choice to walk away.

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

How to breathe new life into abandoned retail spaces

The growth of e-commerce in the past decade has put big box retailers in a tough spot.

Those who have been able to transform their business models to meet evolving consumer demands have stayed afloat. The ones who can’t change have either gone out of business or significantly downsized their retail space.

In either case, the large physical structures that gave big box retailers their name are quickly becoming the white elephants of the real estate world, says Eliot Kijewski, Senior Vice President at Cushman & Wakefield/CRESCO Real Estate.

“The big question is what do owners and communities do with these buildings?” Kijewski says. “How do they reposition and market these structures not as a stale mall or a vacant building, but as a valuable piece of property? There is a lot of cooperation that needs to take place between community, developer, owner and seller in order to find solutions.”

Smart Business spoke with Kijewski about what communities can do to breathe new life into these abandoned big box retail spaces.

What percentage of retail sales now occur online?
E-commerce sales during the first quarter of 2017 accounted for 8.5 percent of total retail sales, according to the U.S. Department of Commerce. That is up from 3.6 percent in the fourth quarter of 2008. E-commerce sales totaled $33 billion at the end of 2008 compared to $105.7 billion during the first quarter of 2017, per the same report.

Are indoor shopping malls likely to become extinct?
There are examples of indoor shopping malls that continue to do well. Great Lakes Mall in Mentor is losing Sears, but the mall itself is not anywhere near being on its last legs. The company that owns it recently announced a new entertainment center that will open up in the mall.

It’s in a middle-class to upper middle-class community, the economy is decent and people are going to the mall and spending money. Beachwood Mall is probably in good shape.

But other indoor malls in the area have lost most, if not all of their key tenants. Randall Park Mall is currently being demolished, Midway Mall in Elyria was recently sold at auction and Parmatown Mall has been converted to an outdoor shopping facility. If the indoor shopping mall as we know it is going to stay, it depends on the demographics and the anchor stores that are there. Unfortunately, in too many cases, those anchor stores are closing.

What can be done to salvage big box retail spaces that are no longer being used?
Communities need to look at these spaces and think about what their people would like to see. Ohio Technical College has taken space at the old Randall Park Mall formerly occupied by J.C. Penney and converted it into a college. It has big square footage and is wide enough to create a faux store that includes classrooms.

This is a concept used by motorcycle and watercraft dealers whereby students learn how to use the computers and tools utilized to fix dealer-specific equipment.

At Richmond Mall, a deal is in the works to bring a packaging company to the former Sears location.
Other potential uses for these buildings include call centers, indoor entertainment facilities, assisted living communities, libraries or light assembly uses.

How difficult would it be to open for business in these spaces?
In most cases, these buildings have decent highway access since they were built to serve a retail clientele. There is an abundance of rooftops, public transportation and parking. You’re not starting from scratch. The sites also have electricity, water and restrooms.

If the buildings haven’t been used for some time, there are likely repairs that need to be made, particularly with the rooftops, but the repairs are manageable.

Zoning is also a consideration. Developers looking to revitalize a former big box space need to consult with that community’s zoning board to determine if there’s a fit, or a likelihood that zoning could be changed to accommodate the new use.

The reality is that empty buildings are doing nothing for a community or its economy. If they can be purchased for another use, and be revived or repositioned, it can be a win for everyone.

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

Due diligence can really pay off for companies entering a new market

Companies looking to expand into a new market typically have conducted an initial thorough round of internal research and due diligence into what a particular market has to offer, says George J. Pofok, CCIM, SIOR, senior vice president at Cushman & Wakefield/CRESCO Real Estate. The next step is finding the right location within the market to open up for business.

“The ability to identify the right location often comes down to timing, which can be unpredictable,” Pofok says. “Each business must work within the existing opportunities. If the timing doesn’t work out, the company may not get the top destination on its wish list.”

While bad timing can preclude a company from landing its destination of choice, there are steps that can be taken to identify a location that still fits with the existing growth strategy.

Smart Business spoke with Pofok about best practices when looking to expand a business into a new market.

What considerations are key when studying a new market?
When a company is examining the potential entry into a new market, the likelihood is that it already has an existing customer base within that market. The next step is to perform an analytical survey to determine where customers are located and where the competition is set up.

Company leaders can lay these points out on a map and study where their business model would be the best fit. More often than not, businesses like to be in close proximity to their competition or to other companies that are in a similar type of industry.

The home improvement sector is a good example. In Bedford Heights, the intersection of Miles and Richmond has been identified as Contractors’ Row. It includes window, siding and roofing suppliers, bathroom and kitchen stores and tile companies, among others.

It’s a one-stop shop for consumers, whether they are homeowners or businesses, to get materials for home improvement work. If a designer has a customer in the car to talk about a project, he or she can travel from one store to the next to put together an overall fit plan.

This type of setup is particularly attractive to a national company that is looking to open up in a new market. These types of businesses aren’t as interested in taking risks and would rather come into an established market where their name brand will enable them to rise above the crowd and generate plenty of traffic.

How important are demographics when in the market assessment?
Market household income and demographics can play a role, as well as geography in certain cities. In Cleveland, there are eastsiders and westsiders, and there seems to be an imaginary line between the two that people don’t like to cross.

This will often lead companies to open up two operations, one on the eastside and the other on the westside. Others will try to locate in and around the intersection of Interstates 480 and 77 to get the best of both worlds. When businesses are prospecting for a new location, this type of knowledge about a market can be important factor in their ultimate decision.

Do long distances make this process more difficult, despite the available tools and resources?
Identifying the right market to enter into should be the main component driving the decision. The real estate is the easy part. Still, there are considerations that need to be made. Companies coming to a new region are often more cautious since they don’t know where sales will end up.

They may lease a smaller space and then all of a sudden, business is booming and they need to expand and/or relocate. Reliable forecasting can provide a better sense of a company’s performance and instill confidence to pursue a larger location, if the projections indicate success is likely.

Timing, once again, is also important. Right now, the market is extremely tight and the number of quality options is limited. Landlords are now looking to ink deals between five to 10 years. Taking the time to work with a professional real estate expert that has knowledge of the market and its attributes can pay big dividends and give companies a better chance to succeed in their new location.

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

Commercial real estate values are on the rise in Cleveland

Downtown Cleveland’s commercial real estate market has come alive in the last five years with renovation and new construction projects taking place across the city, says Joseph V. Barna, SIOR, Principal at Cushman & Wakefield/CRESCO Real Estate.

“The economy has turned,” Barna says. “The buzz of what’s going on in Northeast Ohio, specifically in Cleveland, has caught the attention of real estate investors from all over the country. People want to be here.”

Commercial real estate value is up across the board, both on the sales and leasing side, and in both the office and industrial sectors. In addition, land values have begun to rise as investors as well as users are more willing to put shovels in the ground and begin new rather than take on a property that has significant flaws. As the vacancy rate for the industrial market has dropped from more than 10 percent in 2008 and 2009 to 4.6 percent today, many of the more desirable buildings have come off the market.

“What you have are older multi-story structures and buildings that have been expanded several times and lack open contiguous space,” Barna says. “They simply are not functional.”

Smart Business spoke with Barna about the best strategy to follow in a growing real estate market.

What are some important tips for entering the real estate market?

It’s important to understand that you make money in real estate when you buy, not when you sell. Make an informed decision and don’t overpay. If you’re buying an older piece of real estate, understand the structure of the building and the mechanical components. How long will it be before the property becomes obsolete? What limitations does the space have that could hamper your growth plans as well as exit strategy? If you’re not experienced in real estate, these are things you may not think to consider. It’s critical to have a knowledgeable team that can walk you through the steps. Have a good real estate consultant, financial adviser, attorney, environmental specialist and a contractor all of whom understand commercial real estate. Surround yourself with a team of consultants that can lead you to a smart decision. So many people who have found success in business think they can easily transition into real estate. You need to look beyond the sales price, however, and think about total operating expenses. Additionally, if your plan is to have tenants, consider the cost of adapting the space to a tenant’s unique requirements.

How important is planning when entering a new market?

The planning process is critical both from the developer and user side. When you come into a market, you need to understand the trends and the characteristics of that specific location. There are certain sectors of Greater Cleveland and Northeast Ohio that are much more desirable for redevelopment or new development. When it comes to speculative construction, you need to be in the right place. Development firms utilize “feet on the ground” local experts to ensure their decisions are based on real-time market knowledge and guidance.

If you’re a user, there are limited choices in the market and your planning needs to be ahead of the curve. Assemble that team and make sure you are truly exposed to all the alternatives. On the leasing side, lease terms are longer today. People know that inventory is tight and they want to lock up functional space long-term, especially if it includes expansion and contraction rights.

Conversely, if you own a building, it may be a good time to sell because values are higher than they have ever been, demand is high and the supply is low. It’s also a good time to liquidate because there are a lot of buyers with cash looking to come into this market. The more qualified buyers you have interested in acquiring your property, the greater the likelihood of bidding up the price.

How do you deal with economic uncertainty?

The world of real estate, like most things, is always in a state of constant change. Change also brings opportunity and you just need to stay ahead of the trends and understand where is the opportunity. Technology has provided potential investors and users with so many sources of information, it can be overwhelming. Don’t make a rash decision. Rather, be willing to take a step back and think before you act.

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

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