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The Strategic Real Estate Blog

Creating Certainty In An Uncertain World

by . | on May 23, 2013 | No Comments

Whenever I talk with business owners and executives of growing and competitive businesses a common theme always seems to emerge.  A trait of great leadership is providing certainty, but how can one create certainty in such an uncertain world?

What happens if we win that big contract?

What if we lose one?

How will we recruit and deploy the talent we need to win in the game of business today and tomorrow?

These questions and more dominate the minds of most business executives.

We deal with these issues everyday as we help our clients navigate the confusing, complex and risky world of real estate management.  While most people don’t think about it this way, real estate is one of the biggest challenges facing executives in such an uncertain world.

“How can I make a five- or ten-year commitment, when I’m not even sure what we’re going to need next year,”

is a typical concern that we help our clients manage.

While there is always risk in what we do, over the years we’ve created some simple tips to help manage this paradigm and turn real estate management to your advantage.

Here are some of the most popular:

  • Always – and we mean always – map your real estate decisions to your business strategy and plan.  As the owl shared in Alice and Wonderland, “if you don’t know where you’re going, any road will get you there.”  And in the case of real estate that means higher costs, less control and greater risk.  When you’re clear on where you’re going, you can turn real estate negotiations to your advantage.
  • Don’t get lost in the transaction.  We get it.  There are lots of legal forms, financial checks and commitments.  But, don’t lose site of the forest because you’re obsessed with the trees.
  • Use an advisor.  This may sound self-serving, but that doesn’t reduce the importance.  Please note the key word here is advisor – not broker.  An advisor brings a high degree of business acumen, customer focus and the knowledge of your business, matched by a deep understanding of commercial real estate, applied towards managing the process to a successful conclusion.
  • It’s all about managing trade-offs.  When you’re clear on what’s important, you can utilize that knowledge to gain significant advantages.  Rent abatements, variable leases, terms tied to customer contracts and other items can be negotiated to give you the flexibility you need.
  • Remember, in the end it’s still just a negotiation.  There is no such thing as a contract that can’t be broken.  In the end, you can negotiate yourself into or out of just about anything.  In more than 20 years in the world of real estate we regularly see clients surprised by the number of choices they have in a situation, not by the lack of options.  (PS – that’s another reason to make sure you’ve got a good advisor just a call away)

Is Conventional Commercial Real Estate in for an Overhaul?

by . | on May 14, 2013 | No Comments

commercial-real-estate-trendsLet’s be honest: in today’s economy, there are a lot of employees who think the concept of going to a physical office is outdated, particularly in the IT sector.

With an increasingly-virtual world comes an increasingly virtual workplace, allowing many people to work from their mobile phones, iPads or homes with as little as a laptop and an internet connection. US Census data shows telecommuting to be up 35 percent between 1997 and 2010, with 13.4 million of the 143 million Americans in the labor force working at home at least one day a week.

But does this really mean that conventional commercial real estate is in need of a major conceptual overhaul?

Business Expenses: Driving Real Estate Decisions

Production today can be anywhere, and happens just about anywhere. I often find myself working from my iPad while waiting to pick up my children from activities they are involved in. Just this past weekend I was shopping to upgrade my iPhone which would allow me to dictate e-mails. How much time do I really spend at the office?

That’s why many companies these days are very hesitant about expansion when it comes to their office space. They don’t want to pay more money for physical space they’re not even sure they need.

But does technology really spell doom for commercial real estate—or is there simply a need for a different paradigm?

An Overlooked Side of Telecommuting- The Work-Life Balance

Because producers have a burning desire to compete and excel working from home can blur the lines causing longer work weeks and imbalance in work-personal time. Over time this can have a hugely detrimental impact on family members.

Some of the biggest myth-busting research on telecommuting was published in the Monthly Labor Review last June. “The Hard Truth About Telecommuting” found that telework often lengthened the workweek well beyond the traditional 40 hours, blurring work-life boundaries, said coauthors Professor Glass and Mary C. Noonan, an associate professor of sociology at The University of Iowa in Iowa City.

When people talk about telecommuting, says Glass, they mean substituting hours at home for hours at work. But that’s not really the case, she says:

“Most people don’t telecommute that way. People in certain professional or managerial occupations in particular are expected to be working from home when the office is closed, so it’s become a way to extend the workday, not really substituting one for the other.”

Another Thought Highly Publicized

Does telecommuting thwart collaboration and productivity? Well the chief executive at Yahoo seemed to think that telecommuting  could have something to do with business results when she banned employees working from home, citing  a memo to employess

“that togetherness at the office makes for more effective communication and collaboration.”

This lead to other companies such as Best Buy, Bank of America, and Google to re-evaluate and amend their work from home initiatives.

But does working long hours at the office really produce more results? Look at Japan whre its culture is to work long hours at the office but its econmy and productivity has been stagnant for years.

The Paradigm Shift

Do I think telecommuting and technology will have an effect on commercial real estate? Definitely YES!

Do I think telecommuting and technology will replace commercial work environments? Definitely NO!

As with everything in life there will be a need to find the right balance and this balancing act will be different for each business enterprise, depending on the goals and make up of each organization.

This will propel business owners to shift their paradigm about commercial real estate and increasingly shift their actions from a transactional approach to real estate to a more strategic approach to real estate.

Office 2.0: Businesses’ New Use of Space

by . | on Apr 23, 2013 | No Comments

Let’s face it: for many companies, the days of the traditional office setting are gone. Online communication is making it easier for employees to work from home or on the road, while mobile devices and enhanced IT are providing the infrastructure for business to be done anywhere.

In short, many of us no longer live in an “Office 1.0” world.

But that doesn’t mean the value of real estate in the world of Office 2.0 has plunged for good. Instead, businesses are finding new uses for space that rarely occurred in the past. If your own business is going to maximize its own real estate value, you should consider how businesses are utilizing their space with new and innovative strategies.

Real Estate as a Selling Point

In Office 1.0, there were generally two variables that attracted both clients and talent: the location and quality of your offices. These days, we see more and more companies finding new ways to make their real estate a key selling point for attracting new business.

Location still matters, but not always in the same ways it did in Office 1.0. Commuting time is still important, but so is the environment your real estate finds itself in. Your office location doesn’t just determine the time it takes to travel to and from work, but what kind of restaurants your employees can find for lunch breaks or whether or not they’ll be able to find a WiFi connection nearby. The world is more interactive than ever, and your location needs to reflect that.

Real Estate as Digital Infrastructure

Companies who work primarily online use their offices not just as a place to hold their desks and chairs, but as a “home base” from which they operate their entire infrastructure. As high-definition televisions display their latest work in the lobby, their offices are used as IT hubs that allow their employees more digital freedom than ever before through technology like VoIP and cloud data storage.

Even if your mobile employees only need to remain digitally tethered to your work space in order to contribute, the quality of technology in your offices can help shape your office’s efficiency. If you are a “2.0” company living in a “1.0” space, your business is not seeing the profits it could otherwise reach.

How to View Your Real Estate as a Business Asset in a Digital World

by . | on Apr 16, 2013 | No Comments

One thing we’ve noticed recently is that a lot of businesses seem stuck in a “holding pattern” when it comes to their real estate.

When their current commercial lease runs out, they go out on the market, kick the tires of a few other spaces, and end up coming back and renewing their original lease.

Why has real estate movement been so sluggish in recent years? You could cite a number of factors, including a stagnant national economy and the fact that more workers than ever seem to be working from home. However, we suspect there’s a more fundamental problem at cause: businesses are forgetting to view their real estate strategy as a potential asset to their business.

Even in the digital world of 2013, real estate can be a prime asset to help you grow your business. Here’s how to view your real estate as an asset to help build real value as a company.

Attracting Talent with Real Estate

If you want to attract top-tier talent for your company, your real estate needs to be working for you. Consider the Googleplex, the corporate headquarters at Google. Google is continually able to attract top IT talent from across the globe partially because of its employee-friendly, conveniently-located, state-of-the-art facilities.

Similarly, the people who work for you would much rather commute to a beautiful – and handy – location than to an industrial park far from the city. Your real estate should not be an impediment to working for you, but rather an attractor of talent.

Building a Digital Infrastructure

Even if your business’s work is primarily in information technology or in digital media, your real estate still serves as the infrastructure through which your company grows. From meeting with potential clients to offering your workers the equipment and IT they need to succeed, your real estate should be a “home base” through which your company operates.

Even companies that see a lot of employees work from home can always make their real estate more efficient. Your infrastructure shouldn’t just be a place where you work, but an integral part of your business strategy from beginning to end. That’s how your real estate can become a bigger asset even in the digital world.

Benefits to Owning Space

by . | on Apr 09, 2013 | No Comments

One of the questions we’re most often asked about commercial real estate is: “Should my company own or lease its space?” Unfortunately, there isn’t a simple and universal answer to this question.

Instead, your company’s decisions about commercial real estate should stem from your business growth strategies. The question isn’t “Should my company own or lease,” but rather, “which real estate strategy will help my company build the most possible value?”

But while each company’s situation is different, it’s still important to understand the benefits to owning a space compared to using a lease. Here are the benefits to owning space you may want to consider as you implement a comprehensive business strategy.

Running a Cost-Benefit Analysis

As mentioned earlier and again ingrained here is that  all commercial real estate decision you make as a business should be with your business’s growth in mind. This means that no matter which route you end up taking – leasing or owning – you should end up choosing the strategy that is most closely aligned with your goals as a company.

That’s why it’s important to remember both leasing and owning come with potential costs and benefits.

We frequently tell our clients to look at the total cost of ownership when they project the viability of owning their own space. This doesn’t only refer to taxes and regular expenses but other (often unforeseen) costs such as IT, build-out, maintenance and more importantly capital and opportunity costs as well as cash flow strategies.

The Benefits to Owning Your Commercial Space

Provided you are happy with the overall cost-benefit analysis of owning your own space, there are a lot of benefits of ownership to consider:

  • Control. When you own your own space, there are no lease terms to worry about or any relationships with landlords you have to manage. Your business is in control of its own real estate destiny. You also have greater control over your physical offices and are free to renovate and remodel as you please.
  • Stability of Cash Flows. Usually payments are fixed over a longer period of time, thus eliminating costly escalations of payments and more manageable cash flow expectations.
  • Equity Value. Paying expenses toward commercial real estate ownership rather than a lease helps your company to build long-term equity it otherwise wouldn’t realize under the terms of a lease.
  • Flexibility. Owning your own space gives you greater leeway for a number of real estate projects that align with your business’s goals, such as managing your build-outs or even leasing part of your space to another business.
  • Tax Advantages. You should speak with your accountant on tax matters but typically there are many tax advantages to owning real estate.

As with most decisions there are no one size fits all solution. The benefits of ownership are many – provided that ownership is the right strategy for your business. Be sure that your business goals align with real estate ownership and you can fully realize the value of commercial real estate ownership.

Benefits to Leasing Space

by . | on Apr 02, 2013 | No Comments

When’s the last time someone in your business looked at your lease?

Most businesses don’t evaluate their lease until the lease is almost up. To them, the lease agreement is simply a fixed expense on their accounting ledger. By treating probably one of the highest costs on the expense side of the ledger, the only strategy they can utilize to save money in the future is to negotiate when the lease is up or consider other real estate options, thus continuing to treat your lease as an expense instead of a strategy.

But there are many hidden benefits to leasing space that many companies don’t consider. When you manage the complexity of real estate from the standpoint of a business strategy, you begin to see just how flexible leases can be.

If you haven’t looked at your lease in a while, it may be time to do just that.

Specific Advantages for Lease Holders

If you have a lease, there are a number of advantages waiting to be utilized to their full potential:

  • Current Lease Options. How often do you look over your lease to find hidden benefits you haven’t explored? Many businesses forget about the options they initially signed on for
  • Additional  Expenses. Are the pass through being calculated correctly, or are you being charged for thing you shouldn’t be?
  • Tax advantages.  Have you taken advantage of all tax benefits that can be utilized?
  • Functionality and/or Branding.  Is the space configured and designed to maximize the productivity and presentation of your business?
  • Cash Flow.  Are there opportunities to enhance your cash flow hidden within your lease?

Of course there could be many other advantages you may be overlooking, but another is the advantage of evaluating your lease as a business strategy and how well your it contributing to enhancing your companies enterprise value. Finding the space and negotiating the lease are the easier transactions in real estate, but ensuring the lease is not just an expense requires experience and expertise not only in real estate but in business.

When is the last time you leveraged your lease to create value to  your business or enhance your wealth creation goals?

3 Reasons Your Real Estate Strategy Isn’t Taking Off

by . | on Feb 01, 2013 | No Comments

In life, there are few things as valuable as the right real estate strategy. With it, everything seems effortless. Without it, you’re just left picking up the pieces and wondering where things went wrong.

It’s the same in real estate. But while the quality of your strategy is of the utmost importance, remember that it’s easy to get caught up in strategic mistakes that doom your enterprise before you’ve even started. Let’s take a look at three potential reasons your own real estate strategy hasn’t been taking off.

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How to Formulate a Successful Real Estate Strategy – Today

by . | on Jan 15, 2013 | No Comments

Buy low. Sell high. Know your market. Location, location, location. Be ready to walk away from a negotiation at any time.

Lather, rinse, repeat.

It doesn’t take long to learn the principles of successful real estate strategy and management. Just follow the principles you read above. So why does it seem like so many people struggle with the concept of turning real estate into a consistent strategy – a modus operandi that actual yields results?

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What Your Approach to Real Estate Has Been Missing All This Time

by . | on Dec 20, 2012 | No Comments

Success in real estate can be messy. Sometimes it may seem like you’re just flying by the seat of your pants, hoping that your latest investment will turn out money – even though you have no idea if it actually will. Instead of estimating, you guess, and instead of guessing, you hope.

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The Real Estate Disconnect

by . | on Jul 03, 2012 | No Comments

There is a significant disconnect in commercial real estate and it’s impact on mid-sized businesses can be quite significant – costing you unnecessary costs, lost opportunities and decreased productivity.

When people ask us what we do, we tell them that we transform real estate decisions and management from an expense to be minimized into a strategic advantage that enables businesses to accelerate their results.  Bridging this disconnect is at the heart of what we do.

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