In my last newsletter, I wrote about how our office space market is shrinking, as many buildings are losing tenants and are faced with lower rental income that inhibits their ability to do new leases due to a lack of capital for fit outs and other transaction expenses.
I have always been a tenant representative that starts early with my clients-about 2 years prior to lease expiration. Why so early? It takes a long time to do a deal. To inspect and sift through the alternatives. To negotiate the economics with the short list buildings. To select the winning building. To negotiate the lease. To create and revise designs for the space. To create construction documents, wait for a building permit and construct the space.
You can always pause the process if you are running ahead of schedule, but it is almost never possible to speed it up if you are running late. This puts a lot of pressure on everyone when a lease expiration is looming, and you need to vacate your space or face significant economic penalties.
As I am always focused on what they will need in the future (the new lease is for the space they will need in the future) and I really need them to have done their corporate planning for the next 5, 7 or 10 years before we can intelligently shop for space and design it for the functions and layout that they will need in the new lease term. That takes time, lots of it. And I have to wait until that is done so I know what my client wants and needs for its future.
And, while this process is happening, things change. I have seen situations recently where a building my client is interested in has delayed giving us a proposal for months, only to finally admit that the building is in default, or for sale, and that they cannot and/or will not invest the dollars necessary to do a new lease. And some new opportunities may come up that need to be researched and inspected. So, the puzzle pieces keep moving while the selection and negotiation process is going on.
And most important is that my client is not earning their living by looking at real estate. They are supporting themselves with their law practice, their not for profit goals, their production of widgets or whatever they produce, etc. They can devote time to the real estate search, but it is always a challenge to move the process along and the clock keeps ticking. Real estate is typically the second largest expense for an organization, after personnel. It is critical to get it right.
Otherwise, I am wasting my time and theirs shopping for the wrong building in the wrong location with the wrong size space available, only to have to begin the process again when the client realizes that their planning needs to change, or other business related issues arise.
Put the above together and you see why I start so early. I need to, in order to do a professional, proper job for my client and to counsel them intelligently. This is still a people business, with economic negotiations, lease negotiations, design and construction to be done. It takes time, and attention and experience.