Jul 25, 2012

Farming the Competitive Bid to Lower CRE Costs Part 1

By Don Catalano

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Farming_CRE_Bid

When the time comes in your lease term when you need to make a decision on submitting a notice of renewal, or identifying potential relocation destinations, there are several key points you must keep in mind.  In this three-part series, we will discuss the essential steps in optimizing your dollars spent per square foot.  But first, let’s take a look at the opening stages of the process – the commercial real estate comp search.


Define

Define what you have in your current space as well as what your ideal building and arrangements would be.  In setting your real estate benchmark, you are allowing yourself to make the prudent decision based on what is realistic and where improvements can be realized.  Once this first step has been taken, you will then be able to properly define the parameters of your search.

Market Scan

When you start your initial commercial real estate comp (comparable site) search, you want to keep an open mind.  Think about where it may be beneficial to consolidate or expand, perhaps rearrange unit layouts to improve the flow of day-to-day operations.  Now depending on your search requirements, it is not uncommon for an initial search to yield as many as 30 to 40 commercial real estate comps, and usually much more than that when searching for less than 10k to 15k square feet of contiguous space.  (Note: after you have compiled your comps list you will want to keep your search open for new and undiscovered listings.)

Filter

When you have an excess of alternative locations, it is recommended that you weed out the obviously weaker options to avoid wasting time.  And after cutting down your list to about 20 or so buildings, it is time to fill in all of the information gaps that are virtually guaranteed to exist in any web search.  That means calling brokers, property owners/managers, and perhaps local zoning or eco-development offices.  Remember one of the keys to saving a million dollars on your next tenant lease is to develop extreme market intelligence.  You want to know as much as you can about ownership history, building/area amenities, tenant improvement opportunities, etc.  Once all of the holes have been filled, that list of 20 or so will sort itself out, and reveal the best candidates that are really worth exploring.  Have your decision makers and advisors (i.e. broker, property/branch manager, etc) tour your top candidates – about 8 to 10 is a good number to shoot for in this stage.


Check out Part 2 & Part 3


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Topics: Competitive Bid, Commercial Real Estate Comp

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Don Catalano

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