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Your Next Move

A Handbook for Your Company's Lease Renegotiation or Relocation

Your Lease Expiration Presents Opportunities

Nobody looks forward to the end of an office lease. A lease renegotiation or a move is a grueling task. But a lease expiration also opens up new opportunities. A new lease can give you the extra room you need or relieve you of the burden of underutilized space. It can enhance your company’s image, make the process of doing business more efficient, make your offices more accessible or, if that’s an objective, reduce your occupancy costs.

With such opportunities available, the first order of business is to map out a path of critical tasks and decision-making points for your company’s move or renegotiation. This handbook is designed to get you started by offering a step-by-step guide to a successful real estate solution.

Action Steps for Planning

1. Form an internal real estate committee. You will want a balanced team with different perspectives and specialties. A member of senior management provides the needed overview and can be the spokesperson, the CFO handles budget issues and the head of administration contributes the operational input.

2. Review your existing lease. Identify expiration date, options and important notice dates.

3. Select an outside real estate advisor and other specialists. As an integral part of your team, you will want an experienced firm of real estate professionals, which can bring you an in-depth knowledge of the market and availabilities as well as expertise in the nuances of location, ownership and the myriad details of lease terms and relocation and occupancy costs. Your real estate representative will help you find the other professionals – architects, engineers, contractors, telecommunications experts, move consultants – to assist you through the move process.

4. Establish your current and future space needs. Where is your company heading over the course of your next lease? Do you have special needs for equipment, staff or security? Are you expecting to grow or downsize, overall and in targeted areas? Will new trends in space planning and use, or in technology, impact your needs? Because your new lease will probably extend for longer than your business plan, you will want to allow for change and flexibility.

5. Set objectives against which to evaluate options. You and your real estate advisor must define your goals. Some will be fairly exact: a target budget, special mechanical or service requirements, security. Others will be more subjective but no less important: corporate image, location, accessibility, building services and amenities. This is also when you should work out a timeline for all the tasks to be performed.

6. Identify your options. Armed with this priority-ordered list of objectives, your real estate advisor will help you develop strategic alternatives and will search its databases of available space for choices that meet your needs. You will then do a preliminary screening, including your present location, to isolate the most desirable options.

Careful Analysis Selects the Finalist

1. Tour a range of properties. After ranking the alternatives, you should arrange with your advisor to tour the most desirable and meet with their representatives for presentations. You will then be in a position to evaluate their physical, operational, locational and preliminary economic attributes against your objectives. This is the time to make an assessment of your present location in the light of your criteria and to put it into the competition on the same basis as the others.

2. Prepare and distribute the RFP. When you have arrived at a list of properties for serious consideration, your advisor will help you to prepare a customized request for proposal (RFP) to be sent to the owners of the buildings in question. The RFP has two purposes: first, to help establish terms consistent with your business plan and ensure that the owner will address them; and second, to enable you to make an “apples to apples” comparison among the proposals.

3. Analyze the proposals. Your advisor will analyze the RFPs, evaluating and ranking the buildings. Among the considerations are lease term, rental rate, expansion and renewal options, subleasing privileges, construction and rent allowances, escalation bases and clauses, and operating costs. Also to be compared are rentable vs. usable area, floor sizes, column spacing, ceiling height, elevatoring, mechanical systems and adaptability to your needs. Accessibility, ownership, management services, security and parking also figure in the mix.

4. Create space utilization plans. You will need to work with your architect to create an overall plan to help determine the most efficient use of the space at each prospective location. The “fit plan” will identify any unsuitable buildings and compare how well each space can be configured to your needs. It will also give you a basis for rough estimates of construction costs.

5. Reach a decision. The analysis will narrow the field to a short list for return visits and more detailed examination. You will now be ready to begin the negotiating process. Here, information and experience are power, so your advisor’s market knowledge and strong negotiating skills will save you headaches and dollars. When you have identified the finalist, you will be ready to sign a letter of intent with the owner of the building you have determined is best suited to your requirements.

A Smooth Execution Wraps Up the Process

1. Finalize the lease agreement. Your real estate advisor will play a key role, with your real estate attorney, in representing your present and future interests during the negotiation and drawing up of the lease, in its many facets. Lease provisions involve an enormous range of matters, large and small, which will affect your company’s operating costs, comfort and well-being for the years to follow. You must determine your preferences and strategic priorities as the basis for negotiating a sound and mutually satisfactory agreement with the building owner. Your advisor and your attorney should act jointly as your negotiating agent, serving as a buffer between you and your future landlord and thus setting the stage for a good working relationship during the term of the lease.

2. Build out the space. With the lease negotiated, the focus shifts to details of space planning and construction and all of the related pricing issues. Furniture and technology issues must be resolved and the counsel of specialists in space utilization, telecommunications, computer networking and relocation management may be useful. Careful coordination now among your real estate committee, real estate advisor, architect, contractor, mover and other consultants and vendors is critical to your success, logistically, operationally and economically.

3. Make the move. The physical move is divided into two phases. In the early move, furniture and technology are installed. During the final move, normally scheduled to take place over a weekend, the staff settles in to prepare for the first business day in the new location. After the move is completed, your real estate advisor will work with you to ensure that the landlord is fulfilling all the terms of the lease. Over time, your advisor will continue to help you monitor your real estate situation as your company’s physical needs evolve.

Selecting Your Real Estate Advisor

Chances are that your company doesn’t face a relocation decision often and that nobody on your staff has the knowledge or experience to help you deal with the problems. What you need, then, is a real estate advisor who:

knows the market
will help you define your requirements
will find the space that best meets them
will negotiate the best possible terms
will help you manage a difficult and complex process so it disrupts your regular business operations and economy as little as possible