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The Workplace

Keep A Scorecard When Searching For Properties

One of the messages I always convey to new clients when embarking on a search for a new location for their business is that it is a process; that is, the search itself serves to bring into focus what is important to them and that it is OK to shift their priorities along the way.  Nothing brings must-haves and deal killers to the surface better than actually touring several properties and their respective neighborhoods. 

Sometimes several of the tenant’s stated priorities are in flux and I find it helpful to keep track of the properties we have viewed with a scorecard that rates key criteria on a scale (I like 1-5; 1-100 or even 1-10 risks everyone getting lost in the weeds.)  Here is a list of criteria I rated for a client recently:

  • Budget – budget often evolves from the tenant’s original rent target.  When it comes to the economics of a given space, employee satisfaction and productivity trump rent.
  • Parking – abundance and security were key parking considerations for this client
  • Proximity to neighborhood amenities – the client wanted to be in a walkable neighborhood where their employees felt safe and where there was an array of food and personal services available.
  • Proximity to client’s manufacturing facility – as our touring progressed, neighborhood amenities moved ahead of being close to the industrial submarket where they manufacture their products and this slid down the priority list.
  • Proximity to other business in the same industry and industry-supporting services – this matters when you are in the fashion or media industry but not so much if you are an accounting firm.
  • Building and premises image and functionality – they valued a creative office environment and lots of natural light.

When I introduced the client to the scorecard I made it clear that it was not intended as a tool to choose a property based on the overall highest score; rather, it was a way to consciously take stock of their shifting priorities and steer clear of confusion that can derail what is always a complex decision. 

In the end, the tenant got the location they wanted and just as importantly, knows how they got there.

 

Getting Creative With Creative Office

One of the hallmarks of “creative office” space is the deconstruction of the walls that divide everybody and the collaboration and fresh ideas that spring from large, open spaces. Many of the images we see are of the most dramatic spaces created for large tech juggernauts. While these pictures are eye-popping, they also tend to scare off small and mid-sized business in more traditional industries. But fear not – creative concepts can be applied in smaller offices with great functional and aesthetic effect.

I am working with a regional accounting firm eager to change the feel of their space. This desire is motivated by the most profound reason: they know that they are competing with other firms to attract the best and brightest millennial accounting talent and want to present an environment that is cool and alluring. Want to know the secret to achieving this goal in a traditional office building setting? One word: furnishings.

Most people think of bow truss overhead structures, exposed air conditioning ducting, and concrete floors when creative office is mentioned but furniture systems are at the root of the functionality of creative space. Work surfaces are replacing work stations. Task seating is critical to wellness and productivity over the long term. Soft seating with style contributes mood enhancing color and, well…style.

For the accounting firm remodeling their existing offices, we started with a fresh space plan that carved out the open space. Then I set up a meeting with one of the largest dealers of modern office furnishings who could not only present a vast array of new concepts and materials, but could help them with the design and “spirit” of the space.

“Creative” not only describes the finished space but the inspiring process of getting there. Get a good broker on your team who can lead the way…and have fun!

A New Location Involves So Much More Than Real Estate

It is time to find a new location for your business.  You know this is going to be a time consuming pain in the neck, so you call your trusted tenant rep broker – your advocate for all things real estate – and give the command to get started. 

No doubt, a move is arduous and complicated, but it’s not just about real estate.  Every professional advisor that your business depends on gets involved in a change this big; indeed, your corporate attorney, your CFO, your outside accountant, your insurance agent, and your HR department all have a role to play.  And the outside business growth consultants that you recently engaged to help steer your business to a successful future?  Yeah, them too.

Your real estate broker is the scout that runs out in front of the expedition, reporting back on market trends and available space for lease or purchase.   But it is also the broker’s role to know how each professional on the tenant’s team will be processing that information.  In particular, the broker would be wise to open a line of communication with the growth consultant to insure their efforts are coordinated to achieve a common goal.    I often encounter tenants who do not fully appreciate the teamwork involved.  As the consultant that initiates the relocation process, I am in a position to call to their attention the need to draw their other business experts into the fold.

The real estate broker may run ahead of the pack at first, but a lone wolf could jeopardize your goals. 

The Varied Reasons For Picking A Business Location

The rise of new business sectors is pulling us back to the old cliché concerning the three fundamental rules of real estate: location, location, location. 

When you look at the most expensive office submarkets in Los Angeles you might wonder why firms would choose to locate there when there are so many lower cost alternatives.  Very rarely is more than a few cents per square foot of the rent premium related to the physical attributes of the building and its amenities.  Similarly, only a few cents differentiate the prominent location on a major street with a building located on a secondary artery (on L.A.’s Westside, think Wilshire Blvd. vs. Olympic Blvd.)  It is business synergy and the people behind it that creates a “have-to-be-there” location .  For once, the developers can’t even take credit!

The classic example in Southern California is Silicon Beach, the submarket originally comprised of Santa Monica and Venice.  Due to demand pressures, its borders have since expanded.  Within those boundaries is a culture of adventurous, entrepreneurial creativity that has become a vital jolt of energy to every one of the businesses there.  Thus, you have firms willing to pay nearly double what they would have to pay in, say Westwood, barely 4 miles away. 

I toured a social media app client through Santa Monica recently to look at buildings to lease.  Parking is impossibly scarce, mid-afternoon traffic is mind-numbing (and blood pressure-raising).  But in one building, we crossed paths with another young tech worker.  When she introduced herself to my client and they realized they were big fans of each other’s tech offerings, the connection was palpable.    And the value?  Arguably, priceless.

Sometimes there is a submarket where your business just has to be.  When that is the case, you still need a good real estate broker advocating for you and negotiating aggressively on many fronts.  But the rental rate may not be one of them.  

"Creative Office" Moving From the Fringe to the Middle

Once and for all, let’s put the worn out term “Creative Office” behind us.  Used to describe the workplace of technology startups and flip flop-wearing millenials, the term was abused and perverted by the real estate profession, I’m sorry to say.  First and worst of all, they tried to define creative office by a type of building (old, obsolete industrial buildings) and where it was likely to be found.  The archetypal locations in the Los Angeles region have been Santa Monica, Venice, El Segundo, Culver City, Hollywood, and the Arts District in downtown L.A.  But the misguided definitions of building construction and zip code missed the point.  The emerging new concepts about the communal office are about the people and the work – and it can take place anywhere that a community can thrive.  

The “Creative Office” cliché is being crushed in downtown Los Angeles.  In the midst of a breathtaking renaissance, young entrepreneurs and professionals are flocking to the city’s long forgotten core to live, work and play…and eat…and drink (craft beer, anyone?)  And in everyone’s view is Bunker Hill, home to the city’s largest concentration of skyscrapers.  Where better to challenge the notion that the new office space paradigm is exclusive to low-slung, worn down buildings?

If the primary creative office precept is collaboration, then it can flourish in a dense, vertical downtown community brimming with cultural institutions and richly programmed public spaces.   It is starting to happen.  Brookfield Office Properties’ experimental  DesignHive of six bleeding-edge spec suites in two of their Bunker Hill Towers is a must-see.  I would be happy to give you a tour.

Another perception that is being trashed is that “Creative Office” is just for technology companies.   I have accounting and insurance clients that are shifting to more open plan, team work layouts.  No longer relegated to the “creative” pigeon hole, a new paradigm of productive office space is here.  All aboard

When "Triple Net" Isn't Really Triple Net - Kellogs Swale Tale in Detroit


Can the landlord force their tenant to cure all latent defects at a property under a NNN lease?  The answer is yes…if you let them!  Tenants take this on the chin day in and day out without a good, experienced broker in their corner who can come out swinging!

Properties can have latent defects even if they are brand new.  The benefit of brand new is that there are construction warranties in place.  Did the broker make sure those warranties were addressed in the lease to protect their tenant against construction defects?  If not, the tenant just got the shaft!  If the warranties have long since expired, did the broker get wording into the lease that latent defects would be the landlord’s responsibility?  Admittedly, those assurances are hard to get, but you gotta ask!   Putting protections into the lease regarding premature and extensive repairs to a property that is being tendered in “good operating condition” is the stuff of another blog post, but I wanted to share an interesting story that involved my client, The Kellogg Company. 

Kellogg was 3 years into a five year lease at a free-standing, single tenant facility in the greater Detroit, Michigan market.  This was a classic triple-net situation: the tenant was the only one using the property.   I got an email from Battle Creek: the Detroit distribution center manager was complaining that a broken concrete drainage swale running down the middle of their truck court was breaking up and causing damage to their trucks.  After reviewing their lease and finding what I expected – pure triple-net without any carve outs – I took a few minutes to reset the client’s expectations; after all, it was their truck traffic that caused the damage.   But before I came to any final conclusion, I asked them to take several photos and send them to me.

What the photos revealed was that the concrete swale was poured with the rebar very close to the surface which arguably caused the concrete to “spall” or fracture.  The rain and freezing temperatures took care of the rest.  I presented the problem to the landlord thusly: the faulty construction of the swale was the root of the problem.  And the tenant was considering their options with respect to renewing this lease.  Can you guess what the outcome was?  Problem solved…and at no cost to the tenant!

The moral of the story here is that the tenant or their broker must give these situations a closer look before incurring the cost of repair.  And if you think you need the leverage afforded by a Fortune 100 tenant, that’s not necessarily the case.  So long as the tenant has held up their end of the lease and paid their rent on time, they are golden. 

Nothing is absolute when it comes to the landlord-tenant relationship.

Corporate Image: Inside vs. Outside - Does Your Broker Get It, or Even Care?

Did you sign a lease for a beautiful new building only to watch employee morale disintegrate after you moved?

Your corporate image and culture is projected in many ways, including your branding and marketing materials, but perhaps in no way more dramatically than in your place of business.  Tenants, be they retail, office, or industrial in nature, choose buildings based on their outside appearance  or “curb appeal”.  While there is no discounting the way a building looks from the street, experienced and knowledgeable real estate brokers know that what you see isn’t always what you get.  Poor brokers and naïve tenants overlook the fact that there are two distinct audiences for corporate culture:  the outside world (their clients and the public at large) and, no less important, their employees. 

On the outside is the architecture, the building skin of granite or glass, the expansive lobby and the corporate identity (not necessarily theirs) on the top of the building.  But what is important to your valuable employees?  Think ease of parking, the speed of the elevators, the smell of the bathrooms, the design of the suite, and the amenities in the neighborhood.  What do you think it does to productivity to have your employees chronically complaining that they are too hot or too cold in their work area, or worse, going home feeling sick because they are hypersensitive to these temperature extremes?  Or when they take longer lunch breaks because the food amenities located in or nearby the building are lousy?  Or when there are no places nearby to network and socialize after work?

How else does a building impact your business operations?  Is that impressive grand lobby in your three story suburban building inflating your rentable square footage and costing you more relative to other alternative buildings?  Are you setting yourself up for surprise billings from the landlord because they are doing a poor job managing building operating expenses?  It might surprise you to learn that these are all things a good real estate broker can identify before you sign your lease.

Think about it: those companies rated as “the best places to work” in your local business journal never cite the exterior appearance of the building.  It’s all about happy employees.  And happy employees make for happy clients.