Chicago’s Top Commercial Real Estate Broker, William Himmelstein, shares insights on what to expect when looking for office space in 2021 and offers tips on navigating the commercial real estate landscape.
While many businesses continue to extend their work-from-home policies as the pandemic wears on, many owners report plans to return to the office. Some business owners are looking to downsize their in-person workforce only to include partners and upper management, whereas others are looking to relocate their entire workforce, hopeful of finding new space at a reduced price point given the recent market fluctuations. Regardless of why, many business owners are interested to know what exactly is involved in searching for new space. Herein we review the most important steps involved in an office relocation, along with a few additional tips and tricks we think will help.
Timeline
Aim for a minimum of nine months before you’re ready to lease or purchase a space. Keep in mind that at least six months’ worth of time is essential to account for site selection, business term negotiations, attorney review, architectural design, permitting, and any interior construction or design work to fit your specific office needs.
The Search
A tenant representative will start with a survey of the market to deliver relevant property options that fit your specifications in terms of budget, location, type, size, and space quality.
In addition to the standard software that all commercial real estate (CRE) firms use, many firms have also established a network of resources to efficiently uncover both newly on- and off-market listings that will increase the quality of your search.
Assuming a budget of a certain amount per month, desired office size, building class and neighborhood proximity to transportation are all variables that can be adjusted to stay within your means.
After you’ve selected a list of properties of interest, a tenant representative will organize tours of all potential buildings, helping to guide you through considering all the logistical factors involved with each space.
One great way to get the most out of your dollar is to consider reducing the number of private offices in exchange for a larger bullpen area to reduce the square foot per capita. However, if individual offices work better for your type of business, and you are not looking to compromise on size, then shifting from a Class A to a Class B building can still maintain relative quality building finishes with amenities while substantially reducing rental rates.
Business Term Negotiations
Once you’ve narrowed the list down, the next step is to submit Request for Proposals (RFPs) that seek to achieve all of your goals, both financially and in terms of space quality and layout.
Even if you’ve chosen one property for your top choice, seeking proposals from multiple properties will provide you with market comparables to facilitate more negotiating leverage.
In addition to appropriate rental rates, a tenant representative broker will understand terms and advocate for you to achieve fair market concession packages such as rent abatement; tenant improvement allowances; escalations; securitizations; rights to expand or renew; and termination rights. Working with a tenant representative who possesses an in-depth knowledge of fair market values will be indispensable to this process and overall cost savings.
Upon receiving proposals, a broker will run analyses to outlay the financial impact of the Landlord’s response and will submit counters to advance the negotiations toward your goals until acceptable business terms are agreed upon.
If there is a need for a build-out, this will also be the time that a tenant representative will coordinate the efforts of an architect to design the space to your specifications. A space planner might be provided from the building, particularly if they will turnkey the work, or an independent architect may be involved.
One thing to keep in mind during the negotiation process is to organize your paperwork. Prior to signing a Letter of Intent with a particular property, the landlord is most likely going to require you to show them financial statements and/or the last two years of your tax returns to be assured that you will be able to pay your rent in a timely and stable manner.
Attorney Review
Once both sides have agreed on the key business terms, a tenant representative will coordinate the attorney review process. They will work alongside your attorney to ensure the legal language reflects the negotiated terms.
If your business does not have an attorney you use that specializes in real estate, Tenant Advisory Group is available as a referral source to qualified and affordable real estate attorneys.
Navigating Construction
Upon lease signing, your tenant representative should continue to assist with coordinating walk-throughs of the space for meetings with the architect and contractor bidding. It is helpful if they are there to track progress against the project completion dates and to make sure everything and everyone is moving forward efficiently.
Tenant Advisory Group is also available to make introductions to quality furniture vendors, movers, phone & data brokers, IT vendors, insurance brokers, and other ancillary professionals to help facilitate the process.
Moving Checklist
- Receive quotes from several movers and line up a company well in advance
- Line up the phone and data broker to set up the phone and data lines so they are ready by the time you move
- Contact your IT support and let them know about the move at least six months in advance, but no later than 90 days
- Recycle or donate unwanted electronics and furniture
- Consider meeting with a furniture vendor to decide on reusing existing furniture, purchasing new or purchasing refurbished furniture
- Gather any necessary paperwork for potential tax write-offs
- Obtain a copy of the building rules and regulations
- Identify the best point of contact from the building for all moving-related, space buildout and daily space operations questions
- Understand the acceptable moving procedures in terms of hours, parking, unloading and elevator access
- Establish a packing schedule to determine what can be packed in advance or last minute to reduce disruption to productivity
- Setup mail forwarding from your old address
- Order stationery, business cards and envelopes with the new address printed on them
- Change your mailing address on your practice registration with the city, website, social media, Google, credit cards, bank accounts and other professional organizations
- Notify your network of clients and vendors that your business has a new space and address to proactively avoid any interruptions in productivity
Why Use a Tenant Representative
The tenant does not pay any commission for the brokerage services they receive. The services are paid by the landlord. Even if the tenant negotiates direct, the landlord still pays a commission to its in-house brokers. Shouldn’t you have an experienced advocate on your side, too?
An attorney can negotiate legal terms, but typically does not have sufficient micro-knowledge of the changing local real estate market conditions to ensure you receive favorable business terms.
Tenant Advisory Group has established a network of trustworthy, qualified and affordable real estate-adjacent professionals to incorporate into the transaction, in order to fully service all of our client’s needs.
Bill Himmelstein, CCIM, CNE, is the Founder, CEO, and Managing Broker of Tenant Advisory Group, LLC. Bill started Tenant Advisory Group in July 2008 after gaining experience at several major commercial real estate firms in Chicago. To date, his has completed over $1B in commercial transactions, with his typical clients including professional service firms, technology-based businesses, manufacturers, and private practice physicians. Bill has been a guest professor at UIC, DePaul, and Columbia College, he’s hosted a digital real estate show through Advisor TV and was a founding member of both the Coleman Circle for Entrepreneurs and the Chicago Leadership Alliance. Bill prides himself on acting with a high level of integrity, accountability, responsiveness, and determination in achieving the best possible deal terms for all of his clients. In 2017, Bill was named one of The Most Influential Commercial Real Estate Brokers in Chicago by Crain’s. His expert advice and market knowledge has also been featured in over a dozen news articles, podcasts, and radio interviews.
