Articles About Commercial Real Estate

 Office space in the Bay Area/Sacramento and all around Northern California is a major overhead expense for any growing business, which makes the concept of shared office space appealing from a financial standpoint.  There are many different forms of shared office space and each has its benefits and drawbacks. 

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We have a few articles on the site that are helpful in describing a small businesses insurance needs as it relates to real estate but I just ran into an interesting article that I thought I should pass on. As a small business, you are going to need workers compensation insurance and potentially health insurance. To open up a fixed location for your business, the landlord will require that you maintain genereal liability insurance.

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As the credit markets get tougher, we are hearing more and more about commercial landlords starting to default on their loans. As always with Rofo, we want to help explain what your landlord losing your building to the bank can mean to you as a small business. Below are some things to consider:

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Need an Office? Here are 5 things to consider:

1.    Term of the Lease: This first office lease will probably be one of the bigger commitments and liabilities of your business. Make sure the lease term is flexible and is within your budget based on current cash flow not future projections. Most small businesses start with a one-to-two-year lease, although in this economy, month-to-month lease may be more readily available.

2.    Location, Location, Location: The location of your first office is a balance of price and quality of life. Focus on a location  convenient for employees (or future employees) and one that is priced right. Commute times can have a drastic effect on your employees' quality of life and should be taken into consideration. Consider your safety. Have there been break-ins in the neighborhood recently? Would an employee feel comfortable working in the building alone, or walking to their car or public transportation after dark? All of these issues should be considered when considering your first office.

3.    Amenities: What restaurants, coffee shops and other businesses are available nearby that will make your employees' lives more comfortable? 

4.    Expansion or Reduction of Space: If things go well, you will be thinking about business expansion and you don’t want your space or your lease to hold you back. It's important to have a conversation with the owner about how much expansion space is available and an option to break your lease if it’s not available. If business is not going well, it is important to have an option to sublease your space or to buy out of the lease obligation.

5.    Parking/Public Transit: Transportation and parking are two of the most pressing issues for many communities. The proximity to public transportation and affordable and convenient parking are extremely important.  The more transportation options the better.


For more information on leasing office space see the Advice section on www.rofo.com

 

Searching for a location for your retail store? Keep these 9 things in mind:
 

1.    Location, Location, Location: Walk in traffic is the best way for a new retailer to be discovered. Spend time in the neighborhood, learn the flow of traffic, the demographic, etc.

2.    Type of space: What side of the street is the space on? Do you get afternoon sunlight? Is the space deep and dark? Is there a lot of wasted square footage in the space? Notice as much as you can on the first tour and make sure to come back several times at different times of day.

3.    Neighbors/competitors: What businesses are located in the area?  Will their customers see value in your merchandise or service? Ask other merchants about the pros and cons of the area.

4.    Crime:  Being in a neighborhood that is gentrifying or potentially has some crime issues is fine for a restaurant or office, but potentially disastrous for a retail outlet. Your most valuable asset is your inventory and although insurance will help make up for losses, it is a major distraction from your business. Do a little research and see how many police reports have been filed within a mile of your potential location.

5.    Parking: How far away is the nearest parking lot? Do your customers need parking or will most of them be walking to your location? Check what the meter situation is and how often people are getting ticketed. The ability to have your customers park close by and affordably is extremely important. Make sure to do a walk around the neighborhood to look for parking options for your new customers.

6.    Signage: How big of a sign do you need to attract attention? What are the regulations of the landlord or the city as it relates to signage? Make sure to check out the neighbors and ask them how they got through the system if the regulations limit what you are hoping to do.

7.    Foot traffic: How busy is the street during the daytime? How busy is the street during evening hours? What types of people seem to be walking around? Is their a bus stop or school nearby that will have people congregating in front of your store blocking people from entering. Take note of who walks by and what percentage of people seem to be window shopping because the more people looking the higher likelihood you’ll find a new customer.

8.    Lease Negotiations: Check out http://www.rofo.com/articles/negotiating-101.html for some negotiating tips. In general, try to move away from personal guarantees and ask for the landlord to build as much of the improvements as you can justify. Make sure the get enough free rent to cover the period while you build any necessary improvements.

9.    Brokers: Most of the brokers you will be interacting with will be representatives of the owner of the building. If you want to hire someone to hunt for you or negotiate on your behalf, do some online research about brokers in your area who specialize in retail or contact support@rofo.com. We're happy to make a referral to a qualified broker in your area.

For more information on leasing retail space see the Advice section on www.rofo.com
 

Searching for a Restaurant Location? Here's some advice: 

1.    Location, Location, Location: A boring old adage, perhaps, but when you're talking restaurants, nothing is more important. In fact, a poor location is the #1 reason restaurants fail. Walk-in traffic is crucial for eateries, so locating your new venture off the beaten track might save you a few bucks in rent, but could hurt when it comes to attracting diners.

2.    Restaurant Improvements: Some say that searching for a restaurant with the necessary kitchen equipment and is worse than searching for a needle in a haystack. Look for restaurants that are currently for sale. Otherwise, begin building in the kitchen improvements into your construction budget. Have a contractor in mind so you can get quick estimates.

3.    Permitting: As you tour potential locations, make sure to ask about permitting and current zoning. Venting and stove equipment may be prohibited in certain buildings. Discuss potential restrictions with the owners, brokers, and city employees as soon as possible.

4.    Neighborhood: As you walk the neighborhood, take note of competitors and the level of foot traffic. If your past space was occupied by a restaurant, find out why it moved. Ask neighboring restaurant owners for advice and referrals to potential suppliers.

5.    Building Expenses: Most retail buildings add in NNN expenses. These include property taxes, insurance, and common area maintenance. Ask the owner for the last few years of building expenses at each potential location. Keep a spreadsheet of all relevant building- related expenses so you can get a true comparison since buildings can have drastically different expenses.

6.    Lease Negotiation: Many commercial building owners will attempt to get a percentage of your revenue or even a percentage of the sales price when you sell the business. Have a qualified attorney help you review the lease language and customary terms. A lease is a legally binding document, so know what you're signing!

7.    Free Rent:  Building out your restaurant can take six months or more. You don’t want to be paying rent for this entire period. It is reasonable and customary for some if not all of this construction process to be rent free.

8.    Common Improvement Problems: Bathrooms, venting, and American with Disabilities Act (ADA) are the most common issues with restaurant spaces. Restaurants often need to address one or more of these issues. Monitor the costs closely.

9.    Personal Guarantees:  If this is your first restaurant, many building owners will ask you to personally guarantee the entire lease value. This is a risky proposition but can't always be avoided. Try to phase the lease guarantee out over the course of the lease. For example, you guarantee the first year or 18 months of the lease but nothing beyond that period.

10.    Brokers: Hiring a local real estate expert to help with the search and negotiation process is advisable. Make sure to ask them about their experience working with restaurant clients and in knowing the specific neighborhoods you're interested in.

For more information on leasing restaurant space see the Advice section on www.rofo.com
 

 Office space in Northern California is a major overhead expense for any growing business, which makes the concept of shared office space appealing from a financial standpoint. Executive suites, also known as business centers or serviced office space, offer fully-equipped and furnished offices within a shared infrastructure. Choosing the right office space in Northern California is crucial to the success of your business, so it’s important to be educated about the pros and cons of shared space before making a decision.

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Date: November 5, 2008

Hi. Terry Trevino here. I've many many years of experience in the property business and am hoping to share that expertise with the local community. My consulting work has been varied and thorough. Either through an ownership interest or as a property manager or as a leasing director or as a development manager or the developer, I've have done it all. Feel free to drop me a note to chat about the market, get advice and allow me to help.

My opinion on the San Francisco commercial real estate market....  My view is most asset classes are in tight supply here in the City. There is, however,  an abundance of large floor-plate A to B+ type commercial office space. And you are sure to find several owners relunctant to negotiate. From their point of view, those loan payments are pretty big, with the big prices that these assets were changing hands at. But small niche type spaces in better than average locations are hard to come by and be prepared to and expect to negotiate, lease rate, length of term, tenant improvements and pass through expenses.

This is exactly when you need a local expert to cover your $$$!

I currently represent a varied inventory of lease space and would be happy to see if there is a fit for your group/team.

Cheers,

Terry T