Friday, April 6, 2018

A SHORT Term Commercial Real Estate Need - Now What?

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One of your largest customers has requested you stock some of their products. Problem is, the customer cannot commit to you for a long duration.

Or, your wife has given an ultimatum - the business you run from the guest bedroom must be relocated to a permanent location - one without Mickey Mouse murals. But, you don't know how big the business will grow and your are reluctant to lock-in a term lease for a location.

Or, you have made the decision to discontinue your warehouse operation and run it through another channel.

Or, you notch a huge manufacturing contract which will require you to free up building space to employ another machine - but the contract expires the end of the year.

All of the above situations translate into a short term need for space. You, the business owner must take that short term need for space and marry the need with an available building. I've written ad nauseam about the shortage of space - we are now at historic vacancy lows with estimates in the 1% vacancy range. So when you trot out your short term requirement - less than one year - you are met with a reluctance to consider the proposal by owners. In this robust environment - with lease rates near the top - owners are interested in securing long term tenants - three years plus. So, what's a mother to do?

Please consider these options:

A third party logistics provider. Also known as a 3PL, these operators specialize in short term logistics and warehouse needs. Generally, their services are billed by the pallet and include handling in and out, storage, inventory, bonding, and can be cancelled or changed when your logistics needs change. 3PLs have become increasingly popular with the advent of e-commerce. So, if that customer demands you stock some of his products locally or your find yourself in need of additional space in your building - consider outsourcing to a 3PL.

An executive suite. Executive suites are a popular way to move a home based business from a bedroom to a boardroom. Akin to many small fish swimming together to appear larger, executive suite operators lease large blocks of space in high rise or mid rise office buildings and then sublease smaller portions on a short term basis. An arriving client sees a full floor of space - even though you only occupy one room. Included in your rent typically is a charge for reception, conference, kitchen, and in some cases phone and internet. Leases can be crafted as short or long term and generally you can expand or contract as needed.

A co-working space. Similar to an executive suite but vastly different, co-working space became popular in densely populated areas where independent workers could arrive, plug-in, and work along side other professionals without the need to commit long term. Generally, a monthly fee is assessed which allows you access to any of the co-working spaces available in the network. We-work has taken this concept globally. For a flat rate each month, you can reserve conference rooms or offices anywhere We-work has a location. We recently met a client from New York in a We-work space in downtown Los Angeles. A bit more professional than meeting in a coffee shop or a hotel suite, a co-working space can solve a short term need in a seamless manner.

Short term need? Don't despair. You have alternatives.

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