Wednesday, June 1, 2011

10 Leasing Insights - Tip #9

Posted by: Michael Nevis, CCIM
Industrial Specialist

Mike has specialized in industrial properties since 2004. His leasing assignments included over 4MM square feet of institutional bulk and flex industrial projects. In addition, he participated in over 700,000 square feet of Build to Suit projects on behalf of Landlords and Tenants. Mike’s clients have included: USAA Real Estate Company, Bentall Kennedy, McMorgan and Company, Scannell Properties, Latitude Management, Washington Capital Management, REEF, ING Clarion, Trex Company, and Archbrook Laguna.

~10 Leasing Insights ~

Broker tips to better deals

Tip #9
How Much Space Do You Need?

One of the first questions a real estate broker asks any prospective tenant is, “How many square feet are you looking for?” There are many different ways to approach this question:
• Competitive Analysis – How much space does your competition occupy?
• Budgetary Analysis – Decide how much you can afford and shop for the best space in that price range.
• Demand Analysis – Identify the primary factor driving your requirement for physical space – machines, boxes, employees – and calculate how much space you need.
• Strategic Analysis – How much space will your fully realized business model require?
Try approaching this question from a variety of perspectives to arrive at the best answer you can forecast. Keep in mind that no forecast is ever perfect. Things change. A 3 – 5 year commitment will be based on the best information you have at the time.
BROKER INSIGHT: When a developer plans a project, they target users in a given size range and design the building accordingly. In a normal market, the cost of the project determines the rental rate the owner will accept. A 10,000 SF space in a 30,000 SF Flex Center will likely cost more than a 10,000 SF space in an 80,000 SF Mid-Range Building and much more than 10,000 SF in a 200,000 SF Distribution Building. The foot print in each scenario is the same, but the actual spaces will function much differently. If you involve your broker in the conversation early, he or she should bring insights gained from seeing lots of different types of spaces.

Next Tip.... Why Creating Competition between Landlords Helps You Get a Better Deal

Last Tip... Trade Fixtures vs. Tenant Improvements

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