Friday, April 27, 2012

Steps in Locating a Commercial Building

I provide location advice to owners and to occupants of industrial buildings in Southern California. Throughout my career, I have enjoyed assisting many businesses in evaluating their real estate options and am proud to share with you the process that I use in locating the "right alternative" for my clients.

Before we jump to the process, I would like to dispel a commonly held misconception..."the more the merrier". Some occupants believe that if they engage multiple service providers to accomplish the same task, a greater result will occur. I frequently hear "the more brokers that I have searching, the more alternatives I will see." Actually, the opposite is true because there is no alliance formed, no commitment is created on either side, and there is no accountability for the results.

For a commissioned sales person who is paid only on closed transactions, a minimum amount of time will be expended without a commitment and only the "natural" solutions will be presented. If the requirement takes a different turn or doesn't fit into the "natural category", the "right alternative" will not be presented. As an occupant, your time is valuable. If you will see more alternatives, spend your time more efficiently, and pay the broker nothing (the fee is paid by the owner)...doesn't it make sense to work exclusively with one broker?

We have employed a systematic strategy in locating commercial buildings for tenants and buyers of all shapes and sizes.

We are engaged by the client through a one page exclusive engagement agreement which authorizes us to search but does not authorize us to bind the client to a lease or purchase. The client is not obligated to move or to pay us for our services. We seek compensation from the owner of the property and/or operate as a sub agent under a listing agreement with another broker if the property is listed. Our experience indicates that this strategy produces the "best" economic deal for the client and provides an efficient means of searching the market because we are your advocate.

We define the requirement, notify the market, qualify the submittals, tour the alternatives, request proposals, negotiate the economic points, work with counsel to negotiate and execute the lease agreement, oversee the tenant improvement construction and celebrate the move-in.

We have successfully employed this strategy recently with Western Air Limbach, KLS Doors, Drake Controls, Raymond Handling Solutions, Orkin, Direct List Technology, Advantage Adhesives, and many others. The steps we employ are detailed below.

Defining the Requirement


We team with Raymond Handling Solutions to help our client clearly define the requirement. Raymond’s services are free of charge and can be invaluable in evaluating warehouse, manufacturing, racking, operational flow, etc. An initial determination of the size of the location is deduced. Our starting point is that the relocation will require approximately "x" square feet of building square footage and approximately "x" amount of office square footage. If a significant change in the operation is considered…larger to smaller of smaller to larger, we believe it is imperative to insure that we are searching for the correct square footage and that the square footage considered will adequately house the operation. After the requirement is clearly defined, we prepare an outline of the requirement which provides the market notification discussed in the following section.
Notifying the Market


The requirement letter is converted into a “constant contact” email document and the email document is e-blasted to approximately 1500 Southern California brokers via our AIR mail database. We e-blast the requirement once a week for the first four weeks and then once a week for four weeks two months later. In this way we capture any new availabilities that surface after our search has begun. We couple the market notification with a deep search of all of the available multiple listing services; AIR, ILS, CoStar, Loopnet, Rofo, Smith Guide.

Qualifying the Submittals


The submittals are received and reviewed. The submittals are received from cooperating brokers who have a suitable alternative listed or are aware of an alternative that will soon be available. An example of this is the facility presently occupied today by the company. If the company relocates as anticipated, the building on that the company occupies will be available for lease or for sale. Brokers are aware of the these “unlisted” opportunities and will make us aware of such unlisted alternatives. Additionally, submittals are reviewed from the multiple listing services…both currently available and alternatives that become available during the search process. We will track ALL new properties that hit the market via the AIR and ILS Hot Sheet and through the Loopnet filters that we design. Probably the most important aspect of qualifying the submittals is to get a complete understanding of the ownership and the ownership’s motivation and financial capabilities. If a significant Tenant Improvements allowance is needed, we need to insure the ownership’s ability to provide the dollars necessary to construct the Tenant Improvements AND to support the underlying debt for the term of the lease. We will suggest that the ownership provide us with a Non Disturbance, Subordination and Attornment Agreement which will insure that the tenant's leasehold interests will be protected in the event of an ownership default on the underlying debt. We will preview all potential tour alternatives prior to the client touring.

Touring the Alternatives:


Once the submittals have been received and qualified, we will assemble a tour package with a summary, brochures on each property, floor plans of each property, and a locator map. All of the alternatives to be toured will have been previewed by the team and a tour route established which maximizes the tenant's time. The tour package will contain COMPLETE information on each alternative so that accurate consideration of each alternative can be made. We will involve our construction partner at this phase of the process. Prior to narrowing the alternatives, we make a determination as to the viability and expense of modifying and/or adding to the office layout. This includes a “test fit”, space plan and cost estimate.

Requesting Proposals:


Once all of the alternatives have been toured and a few of the best choices have been “test fit”, space planned and cost estimated, we present Requests for Proposals to four to six alternatives.

Negotiating Economic Points:


The team prepares a comprehensive analysis of all proposals received. One to two of the best alternatives are selected, chosen and negotiations commence to refine the economic points. A non-binding Letter of Intent is executed and forms the basis of the lease negotiations.

Lease Review and Execution:


The team works with local or corporate counsel to negotiate a lease in conformity with the Letter of Intent. The negotiated lease is executed by all parties.
Construct Tenant Improvement:


The team works closely with the contractor, owner, and the tenant to insure that the work is progressing satisfactorily.

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