To Buy or Not to Buy, revisited

Back in October, I took some time to write about the pros and cons of buying your office space.  Just this week, I had the opportunity to reflect on my own opinions, after a friend referred a new client who is actively seeking a small office space to own.  As I mentioned in the post, there are definitely valid reasons for buying versus leasing and my client has several.  Interestingly, the one that I hadn’t considered in the past is the fact that they are an international firm.

Being based in another country, the American dollar and dollar-denominated assets, including real estate, still look pretty cheap by comparison.  Overseas firms that meet other office condo acquisition guidelines would do well to consider relocating to an office condo and parking some of their capital in American real estate.  Whether analysts are bullish or bearish on real estate prices, the strength of the American dollar can be an attractive hedge for the international business or investor.

Accelerating through (Office) Space… and Time

Before the extended feast that is Thanksgiving comes upon us, I wanted to share my thoughts on one more article from CoreNet’s magazine The Leader.  Dennis J. Donovan, a site selection expert, wrote an article entitled Location Velocity: Good Today, But What About Tomorrow?  Using a term that he coined – “location velocity” – Donovan introduces the reader to the key indicators and questions to answer in preparing the short list of potential sites for your firm’s relocation.  Through a couple of graphical charts and an extensive collection of bulleted lists, Donovan lays out the process to complete the two steps of location screening (generation of the short list) and location evaluation (grading of the short-listed sites).  However, where the article goes beyond traditional site selection strategy is a thorough analysis of trends that may reduce the advantages of an otherwise desirable site.
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Are You Being Served… More Expenses Than You Deserve?

On Monday morning, my colleague Bill in our Audit and Recovery practice presented to all of us on the expense and fee clauses that he frequently sees when he is brought in to audit a client’s lease.  Since he is compensated on a contingency basis, he is very good at finding discrepancies between what the lease obligates and what the landlord actually charges.  However, the gems that he shared with us had less to do with comparing rent bills to leases and more to do with how to reduce the likelihood of these improper charges ever being an issue for our clients.
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A CRM product that actually helps manage your business relationships… priceless

I am a big fan of the concept of “Better living through efficiency.”  As a result, I love technology products that make my life easier.  It’s an added bonus when they don’t cost a penny and can actually serve to make me more effective at helping my clients. Take Microsoft Business Contact Manager for Outlook 2003 (BCM, for short), as an example. Continue reading

When the Worst Happens in your Business – Managing the Real Estate for a Closure

Karen Klein, of BusinessWeek, recently responded to a letter in her Smart Answers column asking for advice on how to close a division of a business.  Knowing that real estate holdings (owned or leased) often must be disposed as part of a closure, I scanned the column for the advice that Klein provided to her faithful reader.  I was not disappointed, nor was I impressed.  Since I appreciate that Klein is not a real estate professional, I applaud her for including a short paragraph in the Tie Up Loose Ends section; however, the advice that she and her forensic accountant interviewee provide stops a bit short.  What follows is my elaboration of their advice.
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The Property Taxman Cometh

I was doing a bit of research to improve my understanding of the financials involved with tenant representation and came upon this older article on CFO.com about corporate property taxes, entitled Poor Move.  Here are the key points from the article:

  • As of the date of the article (02/01/04), property taxes were the single largest non-federal tax obligation for companies, weighing in at 38.3 percent.  Given the significant increase in $/sf prices paid for commercial buildings in the last 18 months, I suspect that this still holds true today, since property taxes are assessed based on FMV.
  • Corporations should seek reductions in property taxes at the time they are considering a relocation.
  • You’ll be paying property tax whether you own your building or rent your commercial space.
  • If you are a major tenant in a building, ensure that your lease obligates the landlord to “go to bat” to reduce property taxes should they change substantially.  If your lease doesn’t have that, bear this wisdom in mind when your lease is up for renegotiation or you relocate.

My hope is that CFO Magazine revisits this article in the 2007/2008 time frame.  My theory is that the only change will be higher rates today.

A tale of two clients: how needs dictate performance

Two of my clients are looking for the same thing, but in very different ways.  First, let’s review what they have in common:

  • Seeking office space in the central business district (CBD) of their respective city
  • Know how much space they need
  • Need access to rapid transit and dining options for their employees
  • Desire a short-term (~2 year) lease

As you can see from the above facts, they have quite a bit in common.  However, there is one major difference that influences how we go about advising each client, which I will explain shortly.  Prior to that, it is worth noting how the experience of touring spaces has been profoundly different.
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