Question:

Business owners and corporate clients are always asking me, “Larry, how can I get the best deal?”

The answer may surprise you!

Answer:

When answering a loaded question like this one, I have learned that the first thing to do is set the parameters.  Naturally, what may be the best deal for one client is certainly not the best deal for every client.  Every business has its own set of unique issues that sets it apart from every other business, but there are some common threads that may help to get to the bottom of this seemingly insurmountable question.

To begin, I like to start by asking the business owner or manager some preliminary questions to help define their business objectives.  It is the business drivers that determine a company’s real estate needs (and not the other way around as most real estate advisors would lead you to believe).

I start first seek to understand the big issues.  I do this by breaking them down to small slices that we can all get our hands around.

I ask defining questions about:

• Industry trends
• Business goals
• Personnel needsThese questions must be answered in to terms of a timeline of today, one year, 3 years, and 5 years or longer where appropriate.Let’s take an industry that we know, or think we know. Here in New Jersey one of our biggest industries today is Pharmaceuticals. Major employers like Aventis and Merck have thousands of employees. Just ten years ago, Merck was moving into a million plus square foot headquarters building that it constructed for its growing needs in Whitehouse NJ. At the same time, Aventis was acquiring millions of square feet in Bridgewater, New Jersey. The industry was growing rapidly with new products hitting the market daily, and it looked like the growth trend would just go on forever. Jump ahead ten years, and we see the industry is on its heels.   After major law suits and regulatory changes, the future of the industry has changed dramatically. New products will no longer be coming on the market at anywhere near the former pace, and the approval time it takes for new drugs to get on the market is longer and longer, which leads to less and less time for a drug patent to run. The result is that we see Merck announced that it will be leaving its vaunted headquarters and Aventis has been divesting itself of its Bridgewater space at a rate that is truly staggering.Now most industries do not experience a boom/bust model in such a short timetable as this one, but the key here is to understand the industry trends before making long term decisions.What does your industry look like today? Is it going up, down or sideways? Slow and steady growth is the ideal business model, but macroeconomic factors may cause your industry to suffer rapid changes that are extremely volatile and just plain unpredictable. Short Term versus Long TermEveryone knows that we are in a tenant market. All we hear about in the News is the growing vacancy in office and industrial space. Business is slow! Profits are at record highs while the unemployment numbers show continued weakness. With Obamacare coming next year, there is a disincentive to higher new fulltime employees, especially if your company is near the magic 50 employee threshold. In our last newsletter, we spoke about the Landlord’s dilemma, that with all the vacant space in the Garden State, there is hard floor that the Landlord cannot go below and still make a profit. So, getting back to our question, Larry, how can I get the best deal? We find the answer depends upon what is the best deal for you! If your Industry, like so many other industries, is in a state of flux, short term thinking is a must. You must be prepared to change direction on a dime, and so you must make short term space decisions, which, even though they may prove more expensive in the short term, may prove indeed to be the best choice for you!If you are fortunate to have a stable business where you can safely predict your space needs for the next few years, you may be able to enjoy the advantages of locking in today’s historically low rental rates.Today’s real estate representative is not just a real estate broker who can find you space.   He is a knowledgeable and trusted business advisor that should be hired by you to solely represent your fiduciary interests. He is one who understands that smart real estate decision making advice is made by knowing the business drivers that affect your space needs.   No one can represent two masters. Choose your real estate advisor wisely and insist that he represents only your interests by saying it in writing.Regards,
• Larry
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