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Rent is NOT the Only Factor to Consider in Your Site Selection

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Real estate is usually the second or third largest expense item for companies.  Logically, then, many businesses focus on economics in a site selection process.  On occasion, however, a business will focus exclusively on the rent at the expense of other important variables.  There are other quantitative factors which also impact a business’ real estate costs, as well as qualitative factors worth serious consideration.

As I discuss in my article on financial analysis, a commercial office lease is a complex financial structure, and there are many factors to consider in determining its true costs to the tenant.  In addition to the base rent, tenants should consider the following variables in their site selection:

  • Rent abatement and rent escalation
  • Operating expense pass-throughs
  • Tenant improvement expenses and allowances
  • Options (renewal, expansion, contraction, cancellation)
  • Add on factor (rentable vs. usable square feet)
  • Relocation costs

There are also important qualitative factors to consider in a site selection.  In addition to the base rent, tenants should consider the following variables in their site selection:

>Location

  • Location of existing and future employee base
  • Synergy with area’s business environment (particularly important for medical office)
  • Proximity to customers
  • Ease of access
  • Area amenities

>Brand

  • What statement does the property and office make about your company?
  • Who will visit your office?  What conclusion do you want them to reach?
  • Will the facility’s image enhance or detract from your ability to hire quality employees?

>Employees

  • Do the majority of your employees live in a particular location?
  • Will your company lose employees as a result of relocation?
  • Which locations provide a sufficient employment base?

Businesses should retain a tenant representation commercial real estate broker to help with their site selection.  A tenant representation broker will calculate the true costs of each alternative (the true cost DOES NOT equal rent) and will ensure that important qualitative factors are also considered.  For more information about site selection strategy, please contact Troy Golden at (630) 805-2463 or [email protected].

tbl_2014

Photo Credit: “Business Success Signpost” by Stuart Miles FreeDigitalPhotos.net

Source: Oak Brook Office Report Blog

Apr 16, 2014Troy Golden
4 years ago Best PracticesChecklist for CRE Leasing, Checklist for Office Leasing, Leasing Decisions, Office Leasing Strategies190
Troy Golden

Troy Golden is President at Golden Group Real Estate. He received his undergraduate degree from Yale University in 2005. After graduation, Troy worked on political campaigns, managing a state house race in North Carolina. In 2008, he returned to school to earn his MBA in Real Estate from the Wisconsin School of Business. Today, he specializes in office space in the western suburbs. For more information, contact Troy at (630) 805-2463 or [email protected]

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Comments: 1
  1. Customer Service
    4 years ago

    Very good points Troy and each point could actually be its own blog as so many people need to hear even more in-depth reasons as to why these categories are vital to consider in the success of a business!

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