The latest Wingate Hughes Architect Session You Want to Move to a New Office? Here’s How! featured commercial real estate expert Bruce Pascal, Executive Managing Director, Cushman & Wakefield, and John Sadlik, a leader in the real estate and construction industries and Principal of J2H Partners. Their knowledge in the DC real estate and construction scenes can’t be matched and their insights are exactly what every prospective tenant needs to hear before moving.
Thank you, Bruce and John, for sharing your learnings!
Choosing Your Commercial Real Estate Broker
Expert — They must be an expert and knowledgeable in the type of commercial real estate you need, your industry, and the neighborhoods you are interested in. Also, make sure your broker understands the quirks and has a relationship with the buildings and properties you like.
Family — Your personalities must mesh. Your broker should feel like a part of your family and understand who your company is from A to Z.
Time — Make sure your broker has the time. “Don’t forget the mantra,” Bruce shared, that “sometimes the best people to get things done are busy people. Don’t confuse busy with not having the time.”
What to Do Before Taking the Leap and Looking for New Office Space
Host a democratic information gathering session or survey to gather accurate information and form the best prescription for your next office. A suggestion box works too! “Retention and recruiting. You want employees to say they work at the greatest office in DC,” said Bruce.
Think about everyone in the office, not just the CEO.
Write down your driving forces for moving. Overcrowded? Outdated? “Schedule, budget, and exclusivity. Consider those too. You need to dig down and find out what you need,” said John.
If you have an ideal building and architect, will the building work with your architect?
Have you considered renegotiating with your current landlord?
What to Realize Before Searching for a New Office Space
Find ways to save time and money. “One of my first clients wanted a big renovation for their amenity and lobby space, even though they were 100% occupied. I convinced them it was a waste of money and time if they were full,” shared John. “I went back to my partners and said, I lost our first job. But it was the right answer for the client, we built trust, and ended up working with them later.”
Know your hot points and most important negotiation points. Are they time, money, aesthetics?
The right architect and contractor are key. If they’ve worked in your chosen building before, that’s a bonus!
Consider future growth. Can you grow with your new space? Can you sublet now until your growth spikes? If you are growing, consider looking at a building that has multiple vacancies so you can expand effortlessly.
“The space needs of a tenant 10 years ago are opposite of what a tenant needs today,” said Bruce. “It’s more difficult now to renovate and stay than to pick up and move.”
Narrow Down Your Neighborhood Selection
Location is less important now than it was 20 years ago because DC has so many more options.
Perform a zip code analysis to identify where employees live in proximity to the neighborhood. Most companies honestly don’t know where their employees live. They assume.
Know what types of transportation staff use to get to work. Do they bike, walk, drive, metro, or bus? Do they need parking?
Invest in building a relationship with your broker and consultants. This encourages honesty. Don’t be afraid to be upfront and share what you need in your office space and building. Now is the time. If you wait, it may be too late to get what you want.
When you build a relationship, your broker will put you first and help you be secure in your next space. They’ll have your back in your office search and in negotiations.
Create leverage, especially if you want to stay in the same building. “Landlords bank on that their tenants don’t want to go through the process of moving. The more a tenant looks like they are moving or leaving the building, the more leverage you have,” shared Bruce. “You want your landlord to hear that you are looking to move.” Tour and look at multiple office spaces and buildings, not just one, so you have options and appear to have options. One out of three tenants ends up moving after they tour spaces. “Leverage is the actual fear that an owner will lose the tenant,” said Bruce. “The average time it takes to release a floor in Washington, DC when a tenant leaves is two years. Two years before the next tenant moves in.”
When the market is weak, owners want you more and will do more to secure you as a tenant. “Our estimated vacancy rate now is 14-15%. The A and trophy market are predicted to hit 18-20% by 2021,” noted Bruce. This potential record vacancy for DC’s best product is getting the tenant great lease options. “A tenant today signing a 15-year lease is getting a year’s worth of free rent.”
Know what you want. Lower rent? Free rent? All these things and more are negotiable.
Get a tailored deal. Items include gym, bike room, and overtime AC hours.
Avoid being over aggressive or too confident. Sometimes an owner will pick a tenant on a feeling over financial standing.
Class A Versus Class B Buildings
Class A buildings are well located, have good access, and are professionally managed. As a result of this, they attract the highest quality tenants and command the highest rents.
“Every building built, the day it was built, was a trophy, class A building,” Bruce emphasized. “Class B buildings are aging trophies and have good bones.”
Class B buildings tend to be a little older but have good quality management and tenants. Know how you can add value to the building.
Decide if you truly need 10-foot ceilings and floor-to-ceiling windows.
Buildings of the future are great and are built with the most efficient standards. However, they will also become an aging trophy.
Predicted Construction Industry Changes
The construction industry will take on more of the information technology needs with projects. This includes funding and implementing project IT elements and dedicating 60% of staff to IT.
Subcontractors like to work with specific general contractors and can be hard to find short notice. However, collaborative approaches are becoming more attractive and lead to broader creative freedom within projects. Allowing time for this in the process leads to more opportunity to choose the subcontractors and distributors of your choosing.
Find a broker who will spend a day at your current office. “I take the glasses of the tenant and put them on my head,” said Bruce. “That is the best education.” This is how you hear things that the CEO might not share. The more a broker knows, the better.
Trust isn’t given. It’s earned. Your broker and architect must have the time to invest in listening. This shows they care about you, not just budgets and schedules. By listening, they will know what your company aspires to and what hasn’t worked in the past.
Find someone like a J2H to give you peace of mind. Companies like J2H represent you, provide project management, and expert consulting. They ensure the building delivers on their promises and help define your lease at the point where the landlord ends and the tenant starts. “We work together as a team with the broker, leasing team, building, and contractors,” says John, “Communication is key. We do this so we can look after our tenant and their needs.”
Get the whole office involved. Find out what everyone thinks is important. What is important to the founder may not be relevant to someone else or even a whole department. You may realize the whole office wants to plug in laptops and crockpots in the pantry. You might be surprised at what you discover!
Factor in time spent in the office. If an office only serves as a home base and most meetings are spent outside of the office, conference rooms aren’t that important. Do you have events constantly? Then you need ample open pantry and events space.
Scoop sheets, you need to get on them so owners know you are looking to move. They build leverage and lead to concessions.