The (executive) Suite Life: Appreciating the importance of transit when selecting an office space

As I type this, I’m sitting in an office at Avenue Business Center, which occupies the entire third floor at 500 N. Michigan Ave.  I mention the address because it is not only a feature but also a benefit of the space.  Size of the office space, location in the city, proximity to clients or other businesses, quality of the space – these are all factors that get a lot of attention during a site selection process.  One factor that frequently is overlooked when doing a space search is transit access.  The location of the office where I am working demonstrates the value of convenience.  I can walk half of a block from my home to pick up my choice of bus line that will run express down Lake Shore Drive and drop me off right in front of my building – total commute time: 20-25 minutes.  In stark contrast is my roommate’s commute – living downtown, but working in the north suburbs, he takes a bus west to a train north to a shuttle that drops him at his office complex – total commute time: 60-75 minutes on a good day, plus 3 changes of transit type, which can add additional latency.  My roommate is a very special exception to the rule; most of my peers in the late generation X/early generation Y (already in the work force) are not willing to accept the commutes that our parents have historically.  We want immediate action and quality of life and office location can have a substantial impact on our employment decisions.

Now, that isn’t to say that no employers are taking transit into consideration when evaluating their space.  The US Government “gets it”.  Working on the GSA projects for the US Census Bureau, I was impressed that proximity to bus line was a question included on the market survey forms, to ensure that the employees at the Census Bureau would have access to transit to and from work.  If you are in the market to evaluate your location and ways to improve your top line (i.e. the revenue from hiring the best, brightest and most productive), take into consideration where they live and how far they’re willing to travel.  You may find that a small time investment up-front will yield substantial returns down the road.

Since I saved so much time on my commute, I was able to sleep in 15 more minutes and still have almost half an hour on each side of my work day to be more productive.

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A Tale of Six Cities – CFO.com’s Alix Stuart analyzes corporate real estate stats in six major US cities

Alix Stuart’s A Tale of Six Cities is a well-written article about considerations a CFO must make related to real estate and peripheral costs impacted by real estate, like cost of living.  In the article, Alix identifies six major cities – 2 on the East Coast, 2 on the West Coast and 2 in the Central US – pairs of which account for three major points on the tenant/landlord power spectrum.  Below is a chart that identifies the six cities, linked to their respective reviews, and where they fall in the spectrum.  NOTE: This is not to say that Chicago and Austin are necessarily “value cities”, nor that New York and San Francisco are cut-throat, but rather that these classifications are relative to each other.

Power of Tenant/Landlord City #1 City #2
Stronger Landlord New York City, NY San Francisco, CA
Moderate Las Vegas, NV Charlotte, NC
Stronger Tenant Chicago, IL Austin, TX

For any corporation occupying space in one of these markets, Alix’s analysis of each market, paired with real-world examples and statistics, provides some insight into where the market is trending and whether it will continue to remain a financial opportunity… or hazard.  One thing that I did find absent from the report, however, is whether the average rent per square foot is net or gross.  I would imagine gross, but as we all know, it’s a bad idea to assume.

As a little added bonus, the final page of the article comprises five tips for dealing with rent-hungry landlords.  I particularly admire Jeff Klausner’s wily strategy of negotiating an option to buy their single-tenant office building and then flipping the property for a $2 million profit – now that’s unlocking hidden value.

The Under-Utilized Tenant Representative

NOTE: This post applies more to small and mid-sized businesses than for large enterprises with in-house real estate and facilities employees.

Since I transitioned into commercial real estate, I have served as a tenant representative for thirteen clients across eighteen active or completed transactions.  About one-third of these deals have come from existing corporate clients, while the others have come through referrals and various prospecting methods I employ.  Whether this number of projects sounds like a lot or a little, there’s one thing they all have in common – if given the opportunity, I could have provided so much more to these clients.

Except for a few particular brokerage firms that focus exclusively on tenant representation, like UGL Equis and Studley, most commercial brokerage houses have built up their tenant representation work out of their existing property management and leasing practices.  An Entrepreneur.com article from a few years back identifies roughly when the shift to begin focusing on tenant needs took place, stating that the process still does not suitably address the needs of the tenant – “most brokers… continue to focus on the specific goal of the property owner–the signing of the lease or purchase agreement.”  Using the term “out-tasking”, the article continues by stating that the right approach is to look at the business strategically and determine what processes, or tasks, can be delegated to an outside firm.

Unfortunately, smaller firms do not typically have the resources or know-how to determine which processes can be outsourced, or even what processes they may have to deal with in the future.  As a result, I feel that many firms, including those of several existing clients, still look on a commercial real estate broker as a space finder, neglecting to appreciate the vast resources we may have at our disposal to help them with more of their facility and real estate needs.  For instance, when was the last time you asked your tenant rep to perform a lease audit to ensure that you weren’t being overcharged for operating expenses (see Are you being served… more expenses than you deserve?)?  Or called on your tenant rep to help you evaluate your space plan to see if you might be able to improve space use and decrease your rentable area (see Calculating your office space needs)?  What about asking your broker to peruse your lease to see where key terms might impact future financial planning, relocation or expansion possibilities (see There’s gold in that contract)?

You may be wondering why I italicized “transactions” and “deals” in the first paragraph.  My goal was to emphasize that these client experiences were based on the old perception of broker as space finder.  At the end of the day, tenant representatives can do a lot more than help their clients simply find space.  We can help you identify your site requirements, ensure that you find the right space on your timeframe, assist you with navigating the build-out and furnishing process and more.  In the past several years, the industry has evolved significantly to better meet client needs.  Now, all you have to do is ask.

How investing outside your organization can pay dividends

About a month back, I expressed my thoughts on Dennis Donovan’s theory of location velocity, in which he expresses the need to analyze current conditions and future trends in order to select the best site for a headquarters or major operations facility.  Curiously, almost in a rebuttal to Donovan’s theories, Elizabeth King Forstneger, Director of Grubb & Ellis Consulting, wrote an article about a corporate stewardship to protect the value of your long-term investment – Getting It Right: Achieving Long-Term Value from Your Real Estate Investment.

I am very intrigued with this approach.  Rather than looking from a traditional real estate and facilities (RE&F) perspective of “how can we manage expenses” or “how can we derive more value from our facilities”, the prescribed approach is to look at how giving to the community can pay tremendous dividends.  Forstneger identifies three key areas in which a RE&F department, or a business as a whole, can invest in their new area:
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