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Real decisions
Employee accessibility is just one factor to mull when choosing space
by Matt Krumrie
WHEN IT COMES to buying or leasing Twin Cities office, retail, warehouse or industrial space, business owners, real estate brokers and attorneys have varying opinions about what the best options are.
But they are unanimous in one aspect of the process: Take your time, do your homework, and prepare before making a decision that can affect the short-term, long-term and overall future success of a growing company.
For Russ Hagen, founder and chairman of the board for Data Recognition Corp., a Maple Grove-based company that serves statewide educational assessment programs, buying office/warehouse space has worked best for his company that has grown to 500 full-time and 2,500 part-time employees.
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?I?d rather own something than lease it, but that?s my personal philosophy; not everyone agrees with that,? says Hagen.
Jesse Krebs, president and CEO of Minneapolis-based Championship Products, a company that provides custom screen printing and embroidery on apparel and promotional items, moved from a 2,500-square-foot space on East Hennepin Avenue in Minneapolis to a 9,182-square-foot combination office/warehouse location less than a mile away on Summer Street NE in March of 2006.
Krebs and his business partners lease the space for the 10-employee company.
?Our business was not in the position to buy a building or build our own,? says Krebs. ?We are still a small business, but growing, and we need to make some more progress before we take that next step of either buying or building our own place. Eventually that is the point we want to get to, we just aren?t there yet.?
Flexibility counts
Flexibility is the absolute top factor when making a decision whether to buy or lease, says Rob Kost, who manages the commercial leasing and property management activities for Sherman Associates in Minneapolis, and is a licensed real estate broker in Minnesota and Wisconsin who has worked in the industry since 1985.
?When you are making a decision to buy or lease, it?s hard to put an actual value on the importance of that decision,? says Kost. ?If you are going to buy or build you need to make sure that is the best decision for the present, and the best decision a couple of years, five years, even 10 years down the road.
?If you have a business that can expand or goes through a sudden growth, you don?t want to be delayed because of physical space issues. That can cost a company hundreds of thousands and even millions of dollars.?
When Hagen bought his first building he admits: ?I had no business doing it, but figured out a way to make it work.? He has now bought vacant land throughout the metro area and built buildings to meet the exact needs of his business and employees. In those early years, though, he was the one doing the remodeling, hanging wallpaper, cleaning and fixing the space up to cut down on costs.
The Maple Grove facility is on an18-acre campus that houses four divisions. The three-story, 115,000-square-foot facility incorporates special design features and structures that protect against loss of data in case of power outages or catastrophic events and includes controlled access to the facility and to individual work areas to ensure complete confidentiality of all customer data.
?I?ve never been a fan of renting,? says Hagen. ?I don?t even like leasing equipment. Basically leasing to me is the equivalent of buying a dead horse; someone else is making a buck.
?The tough part of buying obviously is it requires the cash up front. You also have to realize the return on investment will require a longer period of time. A lot of business people can?t do that, and that?s understandable.?
For Krebs, leasing allowed the company to use money in other ways, such as investing in new equipment for the print shop that has helped the business grow faster than investing that money into purchasing a building.
?With the addition of the new equipment we were able to purchase we are able to increase our production and decrease our turnaround time on our screen print items,? says Krebs. ?With the new space we were able to get more organized and not have to trip over boxes of product because they were in the middle of the floor because we didn?t have any room to put them.
?This all has allowed us to open our sales force up more to go after some larger projects and more customers. We are also able to stock a few more products due to the larger space, which helps us in time crunch situations,? Krebs says.
?With the additional space we are also now able to explore the option to bring our embroidery in house rather than outsource it. When that is complete we will be taking another step towards growing, which is always exciting.?
Broker recommended
While many business owners make decisions to buy or lease on their own, others highly recommend to consult with a broker and attorney before signing on the dotted line and sealing the deal.
One such advocate is John Francis, the PostNet area franchisee for Minnesota and Wisconsin. PostNet is a business center that offers digital, print/copy and pack/ship services. Francis has many locations and has been involved in owning and leasing space most of his career through businesses he or his family has owned.
?For most situations I use a broker who is focused on that type of real estate, a specialist because they can add value to the process,? says Francis. ?Many business owners think they can do their own leasing. I”ve found a good broker adds more value than cost to a deal.?
Kevin LaCasse, principal and co-founder of Greystone Real Estate Group, which employs 12 people at its Stillwater and Bayport offices and specializes in real estate brokerage, business development and investments in the east metro area, St. Croix River Valley and western Wisconsin, says every business, every industry and every business owner has so many different needs that failing to consult with an agent, broker or attorney is a mistake.
?This is an uncommon occurrence for the majority of business owners,? says LaCasse, referring to negotiating for real estate. ?A person may be great at running their business, but
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