Archive for the ‘General’ Category
We’re pleased to be working with Boxer Property. Boxer is a forward thinking commercial real estate property owner that offers office space solutions for all sizes of companies. They were early to recognize the role the web would play in commercial real estate and have built some impressive systems to support it. Welcome to Boxer and their 1800+ property listings.
Today we added a new feature on Rofo that helps you keep your listings at the top of search results and maximize exposure. All with the simple click of a button.
Rofo search results are organized by the date the listings were added or updated. The freshest listing content always appears first.
With the addition of the “renew” button (highlighted below) you can now click and have your listings appear on top. This occur at the building level so that all of your suites available in that building will be renewed.
There are no limits on how often you can renew. So come back often and keep your listings on top.
We’re highlighting this company because they’re innovative and responding to a need in the commercial real estate market.
Work Space Fremont is a commercial landlord in Fremont. What makes them innovative is their approach toward short term (monthly) leases and delivering an office space and warehouse solution that is needed in the market.
In the past we’ve discussed the idea of buildings with monthly leases that result in long term and long lasting tenant relationships.
Workspace Fremont is a great example of how it can work.
Okay, maybe a slight exaggeration. You won’t end up with any real physical ailments except a headache.
A friend of mine who runs an ad agency in San Francisco called me the other day and said he has a lease that needs renewing in 10 months. He leases 8,000 square feet in a nice neighborhood. His landlord wants to negotiate directly with him. “Let’s work this out and don’t insert a broker in this deal. It will just end up costing you more”, the landlord said.
So my friend asks why he can’t just look at commercial real estate listings online and compare asking rates? And why are so many listings priced as “negotiable”? What is everyone trying to hide?
The simple answer: nothing.
The rate depends on your credit, the length of the lease, the size of the deal, the popularity of the building, the lease that is getting negotiated in another suite, leasing commissions, improvements that you need. And the financial situation of the building/landlord. Let me elaborate on each.
Financial Credit – if you have good credit the landlord assumes less risk and is will to make some concessions. Less than good credit means you’re riskier and the landlord will feel less aggressive to reach for your tenancy.
Length of Lease – as a tenant, if you’re looking to make a long term commitment (defined as more than 3 years) you’re more attractive to landlords. It means less turnover for them and less vacancy. And that’s worth a discount in rate.
Deal Size – small tenants get less attention and perks. Everyone defines small differently. But for the sake of this post let’s define small as under 5,000 square feet.
Building Popularity – there are many things that make a building popular. Most often its the location, condition, and reputation of the landlord/manager. If you occupy a building that has little vacancy and the market is strong, your landlord is not losing sleep over your lease renewal. Sure a renewal is less expensive and easier than landing a new deal. But finding a new tenant is not the end of the world.
Lease Comps – asking rates are not lease comps. Leases that are getting negotiated right now are comps (not the comps from 6 months ago either). But you don’t have access to this info. The landlord probably does. The landlord knows his comps and there’s a good chance he knows of others. As leases are signed the rates change. Because most landlords will change pricing as other leases are completed.
Commissions/Improvements – these costs impact the rental rate. Pure and simple. This is why rates aren’t always published. Think of it like buying homeowners insurance. The price depends on several factors.
Financial situation of the building/landlord – The landlord who is desperate for a deal is not going to broadcast it. It’s better to show a negotiable rate than a discounted rate. And the landlord who’s not desperate for a deal doesn’t have much incentive to quote a rate. They want to evaluate the tenants in the market and hold out for the best. “Call us and we’ll let you know.”
So what should my friend do? Hire a broker. Spend the time finding the right one. There’s a good chance your landlord won’t pay your broker on a lease renewal. Especially if the landlord feels like you’re not going to move. And also if the broker wasn’t part of the first renewal conversation. So you may have to pay the broker yourself. But if it means cheaper rent over the course of a few years, it’s money well spent.
We want to buy songs not albums. Salesforce not software. Perpetual 1099 consultants over employees. Long term liquid investments.
We like the sound of flexibility because the world is unpredictable. But we’re also creatures of habit that like to minimize disruption and change.
Regus has been on to this for years. Office space without a long term lease commitment. It works. Because it’s the world we live in.
Sure, Regus caters to smaller space needs. The majority of their office suites are occupied by companies with 10 people or fewer in one location.
But guess what? Bigger users/companies want flexibility as well. And the landlord who dares to offer it is going to win. Here’s the reason why:
Large companies, even more so than small companies, do not want to move.
Offer a short term lease with renewal options and your building will always be filled with long term tenants.
We conducted a survey of commercial landlords with class A property and it was very interesting to see not only how much money was being spent annually but where it was being spent. This chart excludes brokerage commissions and tenant improvements which were tracked separately as transaction costs.
Even excluding commissions “Broker Marketing” is still where the majority of spending occurs. Examples include events like open houses, lunches, sporting events, and deal closing events.
The second largest category is “exposure/advertising”. This includes magazine advertising and sponsored business events.
“Other marketing” includes marketing and events for existing tenants.
“Promotional material” includes flyers, floor plans, and space plans.
Remember, this excludes commissions. Brokerage commissions is 2x the entire chart. And tenant improvements and build out is 16x.
Online listings marketing, CRE databases, and research was included in “Subscriptions & Associations”.
I run a website that lists office space. So I end up seeing a lot of office space. One thing I know about San Francisco is that finding quality space in an amazing location that is move-in ready and at discount to market rents is very hard to come by.
I came across this space today (actually it came to my inbox). If we didn’t have our own nice below market space I’d be hopping on this one.
Here’s the description I received:
We are marketing that 4,052 square foot space for sublease. This is a great space with north-facing views. Furniture can be included. Current layout is 18 low-height work stations, 5 private offices and a kitchen/break room. This is a stand-alone, non-shared space; our client’s other space is on separate floors.
The remaining lease term is through May 2014. The asking rent is $39 per square foot per year, fully serviced, or about $13,000 per month – well below the landlord’s $50+ asking rent.
Floor plan and pics:
A very common question with a simple answer: between $500 and $1000 per person.
I know it doesn’t sound very scientific but this is based on renting spaces for Rofo for the last 5 years, 5 years as an office leasing broker, and reviewing thousands of lease comps over the years. I know too much about office space rents.
As with any expense in life, some will pay a little more and some will pay a little less. Some rents will include everything and some rents won’t include a thing besides the space.
And I realize office rents in New York City are not the same as Pittsburgh. That said, all markets offer a choice to tenants in terms of quality and price.
The more important question to ask is what you do in your space? We’re all doing some kind of work. The type of work will influence your choices and rent.
Here are some basic questions to ask (you and your colleagues):
Do you meet with customers?
If yes, then you want to be in a presentable space with easy access.
Do you drive to work or take public transit? Or both?
Typically, spaces near public transit mean higher parking costs.
Do you work normal business hours or round the clock?
If you’re a night owl you may want to consider a more secure space. That often means building security which means a fully serviced building with slightly higher rents.
Are you a sales team or are you an engineering team? Or both?
This dictates whether you need your own space, if you can share space, and whether or not you can get along in a open space or need private offices. The more a space is built out the more the rent (usually).
Does your business have a history?
If you’ve leased space before there’s a good chance this means you have some future visibility. It also means you have a little financial credit. Credit will influence the kind of deal you can negotiate and how much money you must sink into a deposit. The deposit is also a function of how much, if any, a landlord has to spend to get you into a space. The more it costs the higher the deposit. One month of rent or less is great. Anyone who asks for 3 or more months is being unreasonable (unless they are spending a bunch on improvements and commissions to get you in).
How do you know what is right for you and your business?
At the end of the day, your rent shouldn’t exceed 10% of your overall business expenses (that includes payroll). If it does, you may want to think about finding cheaper space.
Share your thoughts with us.
Recently we’ve been getting a lot of questions related to integrating property listings on a corporate website. Rofo offers many built-in tools to help our customers publish their commercial real estate listings wherever and whenever you’d like. And a flexible, light weight, listings widget is one of those tools. Our widget offers a clean, simple design that integrates well with any site and, more importantly, it keeps your website visitors on your website.
Here’s a sample widget from a commercial property owner in San Francisco:
The size of the widget is easily customized and we offer a few versions depending on how you want to filter and display the data.
We can also provide you with the raw data if you’re interested in creating your own app. Our friends at World Business Chicago are doing some really innovative things with commercial property data, enterprise zone data, and other tax credit data.