Jay Sachetti joined Jeff O’Brien, partner at Husch Blackwell and Dyanne Ross-Hanson, president of Exit Planning Strategies talked about the market for mergers and acquisitions, exit planning opportunities for companies that don’t end up for sale and how companies can maximize their eventual sale price during an early October panel at the first Upsize on Tap event at Summit Brewing Co. in St. Paul.
When the state Legislature passed a law requiring employers to provide paid leave and safe time for employees, Justin Bieganek started hearing differing details from friends, colleagues and peers.
business builder real estate
by Philip Kluesner
MOST EVERYONE enjoys talking about real estate. Whether it’s a discussion with the next- door neighbor about the value of a house, the price of land up north or the free rent a CEO received on a lease, we all have an opinion about real estate.
I’ve never heard a CEO boast about the “bad” deal they were able to negotiate. The fact is when purchasing a building or leasing space, economics is only one part of the equation. Far too often management teams look only at rent as the driving force to locate to a particular building, only to realize that in the long run the building’s location or ownership structure can have an impact on the tenant’s cost.
Is the discussion at your company turning to real estate these days? No longer can a company simply add space. As occupancy costs continue to increase, coupled with the need to provide a more competitive working environment for employees, a sound real estate strategy is required. Below are four requirements for a sound real estate strategy that balance economic priorities with that of a company’s long-term growth plan.
Start early
You will need 12 to 24 months prior to an anticipated move, depending on the size of your company, to formulate a strong and effective plan.
This time is spent soliciting feedback from employees, identifying space needs, understanding the relationship between growth and employee count, discussing image and understanding the long-term implications of a move.
As you formulate your plan, take into account the type and feel of building you envision for your company. Rebranding a company’s image may have an impact on the type of building you require. It’s also essential to engage your real estate provider often about market conditions. Market conditions can change significantly in any one submarket after a sale of a building, a downsizing of a company, a swing in the economy.
For example, the industrial vacancy rate in the southeast metro can have a swing of 5 percent to 7 percent depending on two or three bulk buildings being vacant or occupied.
Hire good help
Engage a real estate provider. Your real estate provider should understand the market, save you time and provide leverage. Market knowledge is more than deal knowledge and requires a broader perspective.
For example, motives differ from each landlord. Some landlords are willing to add to an improvement allowance rather than decrease rent. Others might desire a shorter-term deal. Consider the value of your time. A good real estate provider will take the time to compare alternatives and bring the market to you while showing you only those properties that fit your requirement.
Maintain leverage. Be sure you and your provider have two or three good space alternatives so that you can drive a good deal.
Ask how your provider is being compensated and whether or not they have any conflict of interest with other property owners. Is he or she simply to find you space or do you want them involved with reviewing the lease? Do you expect them to be at space planning meetings or to coordinate tenant improvement? These are all questions a good provider can and should answer.
Tie needs to growth
Whether you purchase, lease or build, your future space requirements need to be identified and parallel the growth of your company.
You should look at a five-, seven- and 10-year real estate plan. If you’re forecasting revenue growth of 20 percent per year does this mean your space needs require 20 percent growth? What about employee count – will this increase as revenue increases?
You would be wise to engage an architect or space planner to help you program your future needs by department and personnel. This process requires time and becomes the foundation for future growth, so plan carefully.
Can you identify two or three buildings that feel “right” and would serve as a good home for your company? Can a Class B building work with a Class A buildout? A preliminary tour of these building with your key personnel will help to keep you on track.
Competing for employees is critical in today’s environment and where you locate will have an impact on keeping and soliciting strong candidates. Plotting where your employees live is a good tool to use when identifying locations.
Time to budget
Once you’ve identified your needs it’s time to budget. A preliminary analysis of the market should provide a good indication of what you can expect to pay to purchase a building or rent space.
The market you were in five years ago has changed. Real Estate Investment Trusts now own the majority of buildings in our metro area and their motives differ from those of private owners. A preliminary analysis of interest rates and financing options will allow you to rough out costs.
Within this budget calculate the dollar value associated with the time your management team will devote to the project. We all know what our time is worth. Include it as part of your budget.
Now let the fun begin! You’ve started early, identified your needs, engaged a real estate provider and budgeted for the move. The foundation has been set for you to tour buildings.
The time it takes to tour buildings, obtain RFP’s, or requests for proposal, and negotiate a deal can be significant so make sure you have a workable schedule and stick to it. Revise your real estate plan each year, and add specific action plans that go along with your growth strategies.
This way, you’re not just adding space. You’re creating a strong platform for continued growth.
contact Philip Kluesner is with Gannett Peak Partners Inc., a commercial real estate consulting firm in Edina: 952.929.5000; pk*******@*****************rs.com; www.gannettpeakpartners.com
