Starboard TCN Worldwide Commercial Real Estate | March 4, 2010
The Lipsey Company, a third party training and consulting firm specializing in the commercial real estate industry, recently announced the results of their 2010 Top Brands Survey. Ranking the most recognizable brands from all sectors of the commercial real estate industry, TCN Worldwide moved up three more slots to rank as the 12th most recognizable brand in the industry.
Ranking not only brokerage firms but rather all firms that operate within the Commercial Real Estate Industry, last year TCN Worldwide moved up seven places to rank at number 15. Carrying that momentum forward this year – ranked among giants like CBRE, LoopNet and CoStar – TCN Worldwide moved up the ranks three to the 12th most recognizable brand throughout the CRE industry. This represents a considerable jump and is our highest ranking in the history of Lipsey's Top Brands Survey, which has been in existence since 2002.
We are pleased by our strong showing in this well respected survey and feel this ranking helps to illustrate the strength and the scope of our organization, notably ranking TCN Worldwide as one of the most recognizable brands within the CRE industry. The results reflect the ballots, informal focus groups, and opinions from a variety of sources made up of the 41,000 practitioners and industry leaders from REITs, Institutions, Mortgage Bankers, Commercial Brokers, Asset Managers, Property Managers and related professionals who were surveyed.
View the complete survey results online at www.lipseyco.com/component/content/article/38-frontpage/134-top-25-brand-survey .
Ranking not only brokerage firms but rather all firms that operate within the Commercial Real Estate Industry, last year TCN Worldwide moved up seven places to rank at number 15. Carrying that momentum forward this year – ranked among giants like CBRE, LoopNet and CoStar – TCN Worldwide moved up the ranks three to the 12th most recognizable brand throughout the CRE industry. This represents a considerable jump and is our highest ranking in the history of Lipsey's Top Brands Survey, which has been in existence since 2002.
We are pleased by our strong showing in this well respected survey and feel this ranking helps to illustrate the strength and the scope of our organization, notably ranking TCN Worldwide as one of the most recognizable brands within the CRE industry. The results reflect the ballots, informal focus groups, and opinions from a variety of sources made up of the 41,000 practitioners and industry leaders from REITs, Institutions, Mortgage Bankers, Commercial Brokers, Asset Managers, Property Managers and related professionals who were surveyed.
View the complete survey results online at www.lipseyco.com/component/content/article/38-frontpage/134-top-25-brand-survey .
Hans Hansson | February 23, 2010
For investors looking for deals through distressed properties you may be surprised at the competition. During the last collapse of the commercial real estate market in 1991 there were virtually no buyers. Vacancies were high, financing did not exist, and prospects for tenants were low. Today everything holds true except, there are many buyers with plenty of money all waiting to jump into the market.
Distressed property lectures, wieners, luncheons, dinners, retreats, classes, workshops abound-everyone is promoting distressed properties. New firms specializing in raising equity or raising capital to make loans are forming in large numbers. Yet, could this be all for nothing?
In order to have a distressed market, banks must take back commercial properties and be willing to discount notes to a value that meets the market wishes for a deal; or you must have owners that are willing to sell at a price that meets the economic realities of today's rental market and still allow a new investor to make money. Both of which have so far, been hard to find.
Banks today are paralyzed regarding the amount of commercial loans that are coming due or are in default. Unlike the residential market where loans are amortized and paid back over 30 years, commercial loans are typically due in 3, 5, and 7 years. The high water market deals done in 2006 and 2007 are now coming due. Banks at this point are sending mixed messages, some are foreclosing others are trying to work with the borrowers. The government is also sending mixed messages; first telling banks to reduce loan portfolio values to meet current market conditions, then telling banks they can leave their loan portfolios on the books at their original values.
Uncertainty typically creates opportunity. In this case uncertainty has created a gridlock where no one really knows what to do. The big difference is that there is a lot of cash waiting to jump into this market. In San Francisco, prices for office buildings have dropped and sold for under $200 a foot for a Class A product. This would appear to be a "steal" in terms of value, but rental rate prices are still soft and could go down further. At the prices of these current sales, $200 may be considered an expensive buy-both in the short term and in the long term.
Job growth will be the key; without it demand for commercial space will remain soft, potentially for years to come. When the market crashed in 1985, it was not until 1997 that values started to improve.
Some buyers believe that there will be another cycle of buyers that will overpay before property value will drop to its true worth. Then they will come into the market. Either way all of this distressed property discussion may turn out to be nothing more than a big hype.
Distressed property lectures, wieners, luncheons, dinners, retreats, classes, workshops abound-everyone is promoting distressed properties. New firms specializing in raising equity or raising capital to make loans are forming in large numbers. Yet, could this be all for nothing?
In order to have a distressed market, banks must take back commercial properties and be willing to discount notes to a value that meets the market wishes for a deal; or you must have owners that are willing to sell at a price that meets the economic realities of today's rental market and still allow a new investor to make money. Both of which have so far, been hard to find.
Banks today are paralyzed regarding the amount of commercial loans that are coming due or are in default. Unlike the residential market where loans are amortized and paid back over 30 years, commercial loans are typically due in 3, 5, and 7 years. The high water market deals done in 2006 and 2007 are now coming due. Banks at this point are sending mixed messages, some are foreclosing others are trying to work with the borrowers. The government is also sending mixed messages; first telling banks to reduce loan portfolio values to meet current market conditions, then telling banks they can leave their loan portfolios on the books at their original values.
Uncertainty typically creates opportunity. In this case uncertainty has created a gridlock where no one really knows what to do. The big difference is that there is a lot of cash waiting to jump into this market. In San Francisco, prices for office buildings have dropped and sold for under $200 a foot for a Class A product. This would appear to be a "steal" in terms of value, but rental rate prices are still soft and could go down further. At the prices of these current sales, $200 may be considered an expensive buy-both in the short term and in the long term.
Job growth will be the key; without it demand for commercial space will remain soft, potentially for years to come. When the market crashed in 1985, it was not until 1997 that values started to improve.
Some buyers believe that there will be another cycle of buyers that will overpay before property value will drop to its true worth. Then they will come into the market. Either way all of this distressed property discussion may turn out to be nothing more than a big hype.
Hans Hansson | February 8, 2010
When 2008 ended we all said thank goodness! We knew that 2009 would not be easy, but we never expected that it would be worse than 2008. Entering 2010 there are signs that things will be better, but is that based upon actual fact or just hope? To answer that question you have to look at past cycles to better understand what 2010 could become.
Through the 1980's there was a lot of money available for commercial real estate construction. In addition, the government provided tax incentives through accelerated depreciation to start a construction boom. This was done to take us out of a deep recession coming out of the late 1970's. The era of "build it and they will come" began. The San Francisco landscape, like most major US cities, changed forever as new major high-rises were constructed.
This booming market cycle ended as a result of several factors not unlike today. The initial tax incentives were suddenly taken away without any grandfathering provision, leaving new projects and recently built projects without the tax benefits used to build them in the first place. Without these tax benefits buildings immediately became liabilities rather than assets. When buildings started losing value, lenders retrenched pulling back new financing and withholding necessary tenant improvement and refinancing funds necessary to keep these buildings afloat. The result was a total collapse of the commercial market by 1990.
Savings and loan institutions, which were less regulated than banks, were the first to collapse-followed by the banks. Unemployment began to grow and the economy slipped into a major recession starting in 1991. Government intervention with the creation of the RTC program delayed recovery initially, until new financing opportunities began to emerge. It was not until 1998 that we saw real job growth and the beginning of the next economic growth cycle.
If 2008 was the beginning of the current commercial real estate bust and we look back at history-unless there is a dramatic shift in unemployment and valid financing opportunities presented to existing owners and future buyers-we are nowhere near a recovery period; let alone the next boom in 2010. Rather 2010 should look more like 1992 and 1993 where government finally creates programs that will eventually work, but will take several years to develop before results can be seen. Unfortunately, like the early 1990's the current administration believes in job growth through public works projects and expanding government employment. This direction takes additional time to develop and see results; moreover, it leads to increased federal deficits, putting more uncertainty in the marketplace. Also, typical of the 90's collapse, government feels the need to introduce more regulation to try to prevent future collapses through abuses during liquid market cycles. This too further delays recovery, as markets have to figure out how to do business under new regulations.
Will 2010 be better than 2009? only marginally in my opinion. The shock of the immense downturn that we are experiencing is over. Businesses have scaled back as far as they will go and the amount of businesses that actually will fail has probably stabilized. However, businesses will still struggle with limited cash and financing options and therefore, try to expand in any fashion that will have any real impact in 2010.
Through the 1980's there was a lot of money available for commercial real estate construction. In addition, the government provided tax incentives through accelerated depreciation to start a construction boom. This was done to take us out of a deep recession coming out of the late 1970's. The era of "build it and they will come" began. The San Francisco landscape, like most major US cities, changed forever as new major high-rises were constructed.
This booming market cycle ended as a result of several factors not unlike today. The initial tax incentives were suddenly taken away without any grandfathering provision, leaving new projects and recently built projects without the tax benefits used to build them in the first place. Without these tax benefits buildings immediately became liabilities rather than assets. When buildings started losing value, lenders retrenched pulling back new financing and withholding necessary tenant improvement and refinancing funds necessary to keep these buildings afloat. The result was a total collapse of the commercial market by 1990.
Savings and loan institutions, which were less regulated than banks, were the first to collapse-followed by the banks. Unemployment began to grow and the economy slipped into a major recession starting in 1991. Government intervention with the creation of the RTC program delayed recovery initially, until new financing opportunities began to emerge. It was not until 1998 that we saw real job growth and the beginning of the next economic growth cycle.
If 2008 was the beginning of the current commercial real estate bust and we look back at history-unless there is a dramatic shift in unemployment and valid financing opportunities presented to existing owners and future buyers-we are nowhere near a recovery period; let alone the next boom in 2010. Rather 2010 should look more like 1992 and 1993 where government finally creates programs that will eventually work, but will take several years to develop before results can be seen. Unfortunately, like the early 1990's the current administration believes in job growth through public works projects and expanding government employment. This direction takes additional time to develop and see results; moreover, it leads to increased federal deficits, putting more uncertainty in the marketplace. Also, typical of the 90's collapse, government feels the need to introduce more regulation to try to prevent future collapses through abuses during liquid market cycles. This too further delays recovery, as markets have to figure out how to do business under new regulations.
Will 2010 be better than 2009? only marginally in my opinion. The shock of the immense downturn that we are experiencing is over. Businesses have scaled back as far as they will go and the amount of businesses that actually will fail has probably stabilized. However, businesses will still struggle with limited cash and financing options and therefore, try to expand in any fashion that will have any real impact in 2010.
Hans Hansson | February 3, 2010
With office vacancy rates climbing and rental rates dropping this is a great time for tenants to take advantage of lowering their office costs and locking in those rates long term. However, it is an even greater opportunity to lock in future expansion needs now and without adding office rent costs to their bottom line.
In most major cities in the United States, the available office spaces today are in larger blocks ranging in sizes from ten thousand square feet and above. Larger institutional tenants previously occupied most of these spaces. While a recovery appears to be underway, institutional office users tend to come in late in a recovery and leave early when times get tough. Independent firms represent the largest users of smaller spaces under six thousand square feet on average. These firms tend to grow first in hard times, particularly as new firms are established from personnel that have decided to start their own businesses rather than find work at other firms in this difficult jobs market.
Today, it is absolutely cheaper to rent space in offices over ten thousand square feet rather than five thousand square feet. In fact, with the great sublease opportunities today many firms could pay the same rent for ten thousand square feet as they could at five thousand.
Take for instance, my market in San Francisco. There are some attractive subleases today in the twelve thousand square foot range that are offering spaces as low as $12.00 per square foot for Class A office space for a two to four year sublease. If you needed six thousand square feet of Class A office space you would be paying at lease $26.00 to $30.00 per square foot for similar quality space.
By looking at larger sublease opportunities you can often grab furnished spaces ready to go. That would allow you to meet your current office needs and have room to grow without taking the financial risk of paying more rent for that space. There is a drawback though. If you have too much extra space your firm could appear to be "swimming" in it. This could be resolved by offering to sublease space to other firms which could allow you to defer additional rent costs. Or you can take out some of the existing workstation areas and give your current employees more room to work. Either way, the cost savings could be so high that it is worth it.
In most major cities in the United States, the available office spaces today are in larger blocks ranging in sizes from ten thousand square feet and above. Larger institutional tenants previously occupied most of these spaces. While a recovery appears to be underway, institutional office users tend to come in late in a recovery and leave early when times get tough. Independent firms represent the largest users of smaller spaces under six thousand square feet on average. These firms tend to grow first in hard times, particularly as new firms are established from personnel that have decided to start their own businesses rather than find work at other firms in this difficult jobs market.
Today, it is absolutely cheaper to rent space in offices over ten thousand square feet rather than five thousand square feet. In fact, with the great sublease opportunities today many firms could pay the same rent for ten thousand square feet as they could at five thousand.
Take for instance, my market in San Francisco. There are some attractive subleases today in the twelve thousand square foot range that are offering spaces as low as $12.00 per square foot for Class A office space for a two to four year sublease. If you needed six thousand square feet of Class A office space you would be paying at lease $26.00 to $30.00 per square foot for similar quality space.
By looking at larger sublease opportunities you can often grab furnished spaces ready to go. That would allow you to meet your current office needs and have room to grow without taking the financial risk of paying more rent for that space. There is a drawback though. If you have too much extra space your firm could appear to be "swimming" in it. This could be resolved by offering to sublease space to other firms which could allow you to defer additional rent costs. Or you can take out some of the existing workstation areas and give your current employees more room to work. Either way, the cost savings could be so high that it is worth it.
Hans Hansson | January 25, 2010
2009 is my 25th year as a commercial real estate broker and it certainly was one of my toughest years. The worst year in my career closings was 1990. The worst year in my working life was 1976 and it was actually my most rewarding year of knowledge that I learned from surviving it.
Cycles in business happen. We all know it but we never prepare for it and never take the necessary steps to succeed in one, rather we enter a positive cycle or a negative one. Most of us don't see a cycle coming or there are those that see a cycle change coming, but we rarely allow ourselves to actually make the necessary changes to our business to deal with them.
If you started 2009 as a commercial real estate broker and ended 2009 as one, Congratulations, you have "potentially" survived a real bummer of a year. I say potentially because 2010 is not expected to be a whole lot better. Business activity is improving but actual deal flow is still down for virtually all businesses. The jobs report continues to be a real concern and without true job growth the economy will not expand greatly any time soon.
A experienced broker friend of mine recently reflected that the difference between (1991) the last major full economic downturn and this severe recession (2009) is that back in 1991 he was young and could live on pretzels and beer, now with a family and large financial obligations he has entered 2010 with much more concern and conviction to succeed. He also indicated that it would the veterans that will ultimately survive while the younger inexperienced salespeople will leave the business. Once business comes back, the veterans will be full of business opportunities and businesses will start hiring younger salespeople to take the load of smaller deals while the veterans work on larger deals.
I disagree in some cases with that thought. Veterans that are used to success in most cases do understand what it takes to succeed but how many of them are ready to go back into the trenches - because that is what its going to take. Sales are going to be tied to smaller deals. Is a veteran prepared to do a 1,500 square foot deal and properly service that client?
The inexperienced younger agent may in fact be the survivor in this market. I started at the beginning of a down market in 1984 and did not know what a great market was. I just worked my business and succeeded. My early years in a down market would be considered solid years, even in a good market. So market conditions does not necessarily always equates to results.
As we enter 2010 creating a business plan for yourself and staying with your plan is more critical than ever. Do this before the year begins and really spend time developing that plan. It could be the difference between you ending in this business or not when 2010 comes to a close.
Cycles in business happen. We all know it but we never prepare for it and never take the necessary steps to succeed in one, rather we enter a positive cycle or a negative one. Most of us don't see a cycle coming or there are those that see a cycle change coming, but we rarely allow ourselves to actually make the necessary changes to our business to deal with them.
If you started 2009 as a commercial real estate broker and ended 2009 as one, Congratulations, you have "potentially" survived a real bummer of a year. I say potentially because 2010 is not expected to be a whole lot better. Business activity is improving but actual deal flow is still down for virtually all businesses. The jobs report continues to be a real concern and without true job growth the economy will not expand greatly any time soon.
A experienced broker friend of mine recently reflected that the difference between (1991) the last major full economic downturn and this severe recession (2009) is that back in 1991 he was young and could live on pretzels and beer, now with a family and large financial obligations he has entered 2010 with much more concern and conviction to succeed. He also indicated that it would the veterans that will ultimately survive while the younger inexperienced salespeople will leave the business. Once business comes back, the veterans will be full of business opportunities and businesses will start hiring younger salespeople to take the load of smaller deals while the veterans work on larger deals.
I disagree in some cases with that thought. Veterans that are used to success in most cases do understand what it takes to succeed but how many of them are ready to go back into the trenches - because that is what its going to take. Sales are going to be tied to smaller deals. Is a veteran prepared to do a 1,500 square foot deal and properly service that client?
The inexperienced younger agent may in fact be the survivor in this market. I started at the beginning of a down market in 1984 and did not know what a great market was. I just worked my business and succeeded. My early years in a down market would be considered solid years, even in a good market. So market conditions does not necessarily always equates to results.
As we enter 2010 creating a business plan for yourself and staying with your plan is more critical than ever. Do this before the year begins and really spend time developing that plan. It could be the difference between you ending in this business or not when 2010 comes to a close.
Hans Hansson | December 15, 2009
This has been an extremely difficult year for California state and local governments; deep cutbacks are affecting services in every department throughout the state. With the state in a budget crisis, work furlough days have been mandated for all employees. Choosing to implement a strategy that would maintain a workforce while avoiding mass layoffs, every state department was forced to participate in furlough days with the exception of vital services. One problem with this approach is that all the state licensing departments are affected by these furlough days. Shortened office hours and under staffing makes it more difficult for business to obtain the licenses required to conduct business as well as directly affecting the state's ability to collect fees from private businesses, slowing new revenue to the state.
Take the ABC Licensing Department that deals with the transfer of alcohol licenses for bars and restaurants for example. This department is a major revenue source for the state and it carries decision-making powers on who can obtain or transfer licenses. For the business owner, these staffing cuts can greatly affect the ability of a new restaurant or bar to open their doors in a timely manner. Our restaurant division at Starboard TCN has experienced this problem with many of our clients that are trying to buy or sell their operations.
Today the ABC Department is closed every Friday and work half day on Mondays. To obtain or transfer a liquor license now days, a potential buyer or seller could be waiting four to six months for the paperwork. This delay means businesses are harmed throughout the food chain of that deal. If the restaurant or bar does not open, it's not just the operator that experiences losses. The contractors working on the build-outs, the new employees that will be hired, the brokers and title companies involved in finalizing the transaction, all lose work. Additionally the State experiences the loss of fees for the licensing and taxes in their already dry coffers.
Any licensing agency that directly affects commerce should to be viewed as a "vital service" and removed from state furloughs. This is bad for the state, bad for business and more importantly does nothing to reduce state spending, it only creates more losses.
Take the ABC Licensing Department that deals with the transfer of alcohol licenses for bars and restaurants for example. This department is a major revenue source for the state and it carries decision-making powers on who can obtain or transfer licenses. For the business owner, these staffing cuts can greatly affect the ability of a new restaurant or bar to open their doors in a timely manner. Our restaurant division at Starboard TCN has experienced this problem with many of our clients that are trying to buy or sell their operations.
Today the ABC Department is closed every Friday and work half day on Mondays. To obtain or transfer a liquor license now days, a potential buyer or seller could be waiting four to six months for the paperwork. This delay means businesses are harmed throughout the food chain of that deal. If the restaurant or bar does not open, it's not just the operator that experiences losses. The contractors working on the build-outs, the new employees that will be hired, the brokers and title companies involved in finalizing the transaction, all lose work. Additionally the State experiences the loss of fees for the licensing and taxes in their already dry coffers.
Any licensing agency that directly affects commerce should to be viewed as a "vital service" and removed from state furloughs. This is bad for the state, bad for business and more importantly does nothing to reduce state spending, it only creates more losses.
Starboard TCN Worldwide Commercial Real Estate | November 24, 2009
For years mid-Market Street in San Francisco, CA, between 5th and 8th Streets, has been ignored by investors, retailers, developers and real estate brokers. Now, agents Louis Cornejo and Colleen Meharry of Starboard TCN Worldwide Commercial Real Estate are changing this trend. Both brokers have refocused their efforts to bring in tenants and effect change in this underdeveloped area. "I am inspired by the challenge of bringing retailers into neglected areas of the city in order to make these San Francisco neighborhoods viable again," Cornejo stated.
Cornejo and Meharry recently assisted bringing Show Dogs Restaurant to 1020 Market Street and are nearing finalization on a 12,000 square foot restaurant lease at the Warfield Building between the Foreign Cinema restaurant team and building owner David Addington. Addington has been spearheading efforts to improve this area for years.
Prior to the construction of the underground BART/Muni Metro system in the 1970s, this area included major retailers such as JC Penny's, Regal Shoes, Weinstein's Department Store, as well as numerous theatres such as the Saint Francis, and United Artists theatres. The construction of BART and Muni underground essentially caused foot traffic to come to a halt, driving stores from a once thriving retail corridor and leading to years of decay and neglect.
Today through efforts by Starboard TCN agents Louis and Colleen there has been a renewed interest by retailers, office tenants, artists, and restaurants to the area.
Cornejo and Meharry recently assisted bringing Show Dogs Restaurant to 1020 Market Street and are nearing finalization on a 12,000 square foot restaurant lease at the Warfield Building between the Foreign Cinema restaurant team and building owner David Addington. Addington has been spearheading efforts to improve this area for years.
Prior to the construction of the underground BART/Muni Metro system in the 1970s, this area included major retailers such as JC Penny's, Regal Shoes, Weinstein's Department Store, as well as numerous theatres such as the Saint Francis, and United Artists theatres. The construction of BART and Muni underground essentially caused foot traffic to come to a halt, driving stores from a once thriving retail corridor and leading to years of decay and neglect.
Today through efforts by Starboard TCN agents Louis and Colleen there has been a renewed interest by retailers, office tenants, artists, and restaurants to the area.
Hans Hansson | November 12, 2009
Over the last few months we have been seeing a number of new startups looking for office space. This is a very good sign that the economy is turning around. Most of these startups fall under two categories. You have Tech startups that continue to attract venture capital money with their new ideas and startups put together by people that have now lost their jobs and have decided to start their own business rather than to continue looking for a job in a depleted job environment.
Both of these startup groups suffer the same problems in getting their business off the ground. First, they know what product or service they want to introduce but they have limited experience in setting up an actual business. This includes finding and securing office space. Second, they have little time to devote to anything but working on their core business, looking for office space is secondary to getting their business funded and getting clients to support the business. Below are some dos and don'ts that these start ups should watch for to insure that they are success in securing their offices.
Don't - send a person to look for office space that is not a decision maker. There is nothing that wastes more time than this. Over and over again I have worked with non decision makers that eventually bring a short list of buildings to the owner of the business only to find that none on the short list is a consideration because the core important needs of an office search was not properly understood by what we call the "scout".
Do - check online to educate yourself on buildings and pricing. Also educate yourself ahead of time on the process it takes. At www.starboardnet.com, we have an extensive news and research section that carries numerous articles on how best to secure your offices and current market conditions.
Don't - try to do this search without a professional broker representing you. Commercial real estate brokers are a free service to the tenant and are paid for by the building you ultimately choose. Check online and find a broker and get them involved in the process at the beginning of your search. They will provide you will a proper list of buildings that will fit your exact needs and price points and can handle your entire transactions. Plus they have resources to moving companies, furniture vendors and more to get your complete office off the ground.
Do - give yourself a realistic time frame to find office space. Typically the process to secure office space takes one month to find and successfully negotiate a lease. If you take a sublease space, add one additional month to get landlord's approval. If any sort of tenant improvements is required you may have to add three to four months. If this time frame does not work for you, consider an 'executive suite' as an alternative to get your business up and running now while you take the necessary time to secure a permanent office for the future.
Do - figure out how many square feet you actually need for the firm ahead of time, not how much I can afford and we will add more space later. Moving an office is expensive and prices for office space are very attractive right now. Take enough square footage to accommodate your realistic growth plans for the next year or two. Typically figure 200 square feet per person. That includes where the person sits plus their circulation needs.
Don't - expect to find a lot of choices for month-to-month or less than two-year lease terms. Typically leases run 3-5 years. You may not be able to see that far ahead in your business plan but your only fear should be if your business does not make it. If you feel your business will grow beyond your current office space, look to secure your initial office space in a larger building that could accommodate your growth needs in the future. Most building owners would be glad to tear up your existing lease for a larger space lease in the future.
For more information on the process feel free to contact us at Starboard TCN Worldwide at 415-765-6900.
Both of these startup groups suffer the same problems in getting their business off the ground. First, they know what product or service they want to introduce but they have limited experience in setting up an actual business. This includes finding and securing office space. Second, they have little time to devote to anything but working on their core business, looking for office space is secondary to getting their business funded and getting clients to support the business. Below are some dos and don'ts that these start ups should watch for to insure that they are success in securing their offices.
Don't - send a person to look for office space that is not a decision maker. There is nothing that wastes more time than this. Over and over again I have worked with non decision makers that eventually bring a short list of buildings to the owner of the business only to find that none on the short list is a consideration because the core important needs of an office search was not properly understood by what we call the "scout".
Do - check online to educate yourself on buildings and pricing. Also educate yourself ahead of time on the process it takes. At www.starboardnet.com, we have an extensive news and research section that carries numerous articles on how best to secure your offices and current market conditions.
Don't - try to do this search without a professional broker representing you. Commercial real estate brokers are a free service to the tenant and are paid for by the building you ultimately choose. Check online and find a broker and get them involved in the process at the beginning of your search. They will provide you will a proper list of buildings that will fit your exact needs and price points and can handle your entire transactions. Plus they have resources to moving companies, furniture vendors and more to get your complete office off the ground.
Do - give yourself a realistic time frame to find office space. Typically the process to secure office space takes one month to find and successfully negotiate a lease. If you take a sublease space, add one additional month to get landlord's approval. If any sort of tenant improvements is required you may have to add three to four months. If this time frame does not work for you, consider an 'executive suite' as an alternative to get your business up and running now while you take the necessary time to secure a permanent office for the future.
Do - figure out how many square feet you actually need for the firm ahead of time, not how much I can afford and we will add more space later. Moving an office is expensive and prices for office space are very attractive right now. Take enough square footage to accommodate your realistic growth plans for the next year or two. Typically figure 200 square feet per person. That includes where the person sits plus their circulation needs.
Don't - expect to find a lot of choices for month-to-month or less than two-year lease terms. Typically leases run 3-5 years. You may not be able to see that far ahead in your business plan but your only fear should be if your business does not make it. If you feel your business will grow beyond your current office space, look to secure your initial office space in a larger building that could accommodate your growth needs in the future. Most building owners would be glad to tear up your existing lease for a larger space lease in the future.
For more information on the process feel free to contact us at Starboard TCN Worldwide at 415-765-6900.
Hans Hansson | October 28, 2009
I recently had a deal stall as a result of an option. Instead of a "true" fair market value option, the landlord wanted a fair market value or the rent, based upon the last year's rent whichever was highest. In a soft market tenants are nervous to accept a minimum rent base for fear that rents would actually be lower at the conclusion of the initial lease term. Landlords fearing the same thing do not want to offer an option that would allow for a rental rate to drop.
Normally, when I have been faced with this issue and the landlord is firm on having this language I have been able to convince the tenant that they are still in the driver's seat with control of their space. If a tenant has a minimum rent that is higher than the fair market value at the time the option is to be exercised, they simply do not exercise the option and should negotiate with the landlord to obtain a fair market value.
Unfortunately, in this case my client was not willing to move forward with this minimum rent. At issue was what the motivation of the landlord was to not allow this minimum to be taken out? If rents were below the minimum you would think the landlord would be more than anxious to negotiate a fair market rent to avoid potentially losing the tenant.
But, I learned that the landlord had a very different reason for not allowing the removal of this minimum. This landlord has remained quite successful in a down market. He is still buying in this market and expanding his business. His reasoning for wanting to keep the minimum rate in the option is that, if rents did collapse below the minimum then would be the time to address the future highest and best use for the property. His statement, "You build in a soft market to get ready for the next positive market."
In real estate no matter what market you are in development takes time. You can easily enter a hot market - decide to build for that market - completely miss the market and then introduce your new inventory in a bad market. The old rule is simple but most of us do not have guts to follow it; "Buy low, sell high."
Today is a buy low market. Building owners should be directed to do those lobby renovations, revisit the highest and best use of their buildings. Salespeople need to do the same thing; work on building your business by revisiting from the ground up what is working for you and not. Revisit how you operate each day. What systems do you have in place, is it time for an update? What kind of marketing are you doing to get the phone to ring? Look at this market as an opportunity to shred bad habits and work on new habits that will be in place when your market takes that next positive turn.
This recession is now entering its 23rd month. This is one of our longest recessions and signs are starting to show that the economy is improving. Your time is short, start thinking about building not retrenching.
Normally, when I have been faced with this issue and the landlord is firm on having this language I have been able to convince the tenant that they are still in the driver's seat with control of their space. If a tenant has a minimum rent that is higher than the fair market value at the time the option is to be exercised, they simply do not exercise the option and should negotiate with the landlord to obtain a fair market value.
Unfortunately, in this case my client was not willing to move forward with this minimum rent. At issue was what the motivation of the landlord was to not allow this minimum to be taken out? If rents were below the minimum you would think the landlord would be more than anxious to negotiate a fair market rent to avoid potentially losing the tenant.
But, I learned that the landlord had a very different reason for not allowing the removal of this minimum. This landlord has remained quite successful in a down market. He is still buying in this market and expanding his business. His reasoning for wanting to keep the minimum rate in the option is that, if rents did collapse below the minimum then would be the time to address the future highest and best use for the property. His statement, "You build in a soft market to get ready for the next positive market."
In real estate no matter what market you are in development takes time. You can easily enter a hot market - decide to build for that market - completely miss the market and then introduce your new inventory in a bad market. The old rule is simple but most of us do not have guts to follow it; "Buy low, sell high."
Today is a buy low market. Building owners should be directed to do those lobby renovations, revisit the highest and best use of their buildings. Salespeople need to do the same thing; work on building your business by revisiting from the ground up what is working for you and not. Revisit how you operate each day. What systems do you have in place, is it time for an update? What kind of marketing are you doing to get the phone to ring? Look at this market as an opportunity to shred bad habits and work on new habits that will be in place when your market takes that next positive turn.
This recession is now entering its 23rd month. This is one of our longest recessions and signs are starting to show that the economy is improving. Your time is short, start thinking about building not retrenching.
Starboard TCN Worldwide Commercial Real Estate | October 13, 2009
A common theme I am hearing from sales organizations is "where is everybody?" Sales offices involving outside sales are seeing their offices go quiet during the day. With the advancements in remote access software as well as the emails on cell phones, more salespeople are staying mobile instead of coming into the offices. A number of sales offices use their offices today for weekly meetings and training but often times during the day they are simply empty.
Back in the late 80s the idea of "hoteling" was introduced. Firms did not offer private offices or workstations for individual employees, but shared spaces where people could simply plug in the laptops and work on at any desk that was available. The concept failed for a variety of reasons. First the loss of synergy and connection to the company was a major problem. Second, the loss of a personal space that belongs to each employee was another.
Today things are different. First there is a broader acceptance of mobile business. Next with the expansion of new communication tools such as IM services, Twitter, Facebook, Skype and text messaging people have more ways to stay connected.
Back in 2001 Microsoft and the Korean government agreed to create a brand new city called the Digital City in Korea. This city would be created from scratch studying new ways on how to do business with the introduction of new technology. Instead of traditional offices, the offices in Digital City would look more like a hamburger stand. Booths instead of desks are provided where employees can collaborate while "wirelessly" hooked up. Offices are colorfully decorated with flat screen televisions throughout offering updated news and entertainment. The idea of an office is to offer a place to work as well as a place to collaborate with fellow employees in a relaxed setting. In a way it offers what a convention usually provides, a chance for employees to get to know each other better while allowing firms the ability to educate
As the sales office's leases start coming up, expect the sales offices to get smaller. Sales offices have to meet today's marketplace and the next generation of salespeople that are far more accustomed to be on their own and mobile. Yet firms have to still create an environment that will bond their employees to them. Otherwise firms will have a difficult time holding employees long term and facing a constant revolving employee base.
Back in the late 80s the idea of "hoteling" was introduced. Firms did not offer private offices or workstations for individual employees, but shared spaces where people could simply plug in the laptops and work on at any desk that was available. The concept failed for a variety of reasons. First the loss of synergy and connection to the company was a major problem. Second, the loss of a personal space that belongs to each employee was another.
Today things are different. First there is a broader acceptance of mobile business. Next with the expansion of new communication tools such as IM services, Twitter, Facebook, Skype and text messaging people have more ways to stay connected.
Back in 2001 Microsoft and the Korean government agreed to create a brand new city called the Digital City in Korea. This city would be created from scratch studying new ways on how to do business with the introduction of new technology. Instead of traditional offices, the offices in Digital City would look more like a hamburger stand. Booths instead of desks are provided where employees can collaborate while "wirelessly" hooked up. Offices are colorfully decorated with flat screen televisions throughout offering updated news and entertainment. The idea of an office is to offer a place to work as well as a place to collaborate with fellow employees in a relaxed setting. In a way it offers what a convention usually provides, a chance for employees to get to know each other better while allowing firms the ability to educate
As the sales office's leases start coming up, expect the sales offices to get smaller. Sales offices have to meet today's marketplace and the next generation of salespeople that are far more accustomed to be on their own and mobile. Yet firms have to still create an environment that will bond their employees to them. Otherwise firms will have a difficult time holding employees long term and facing a constant revolving employee base.
