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Thursday, June 25, 2015

CRE Occupants, Are You Making Any of These 10 Mistakes?

CRE Occupants, Are You Making Any of These 10 Mistakes? Those occupants who are buying or leasing commercial real estate, face an array of issues and considerations to examine before inhabiting a new property.

Consider these 10 deadly errors before you complete your decision-making:

1.)    Buying when you should lease.
 Among the many considerations you should examine are the time in the market cycle; the amenities of the building; if you expect to outgrow your location within three to five years; and if you are a publicly traded company. Consider leasing if your business is outstripping its building capacity almost daily; if you want to build the business and sell it; and if you are sinking every bit of operating capital into business growth.

2.)    Leasing when you should own.
 You should own if you have been in business for over five years; your space needs are diminished; the interest rates are historically low; you have enough idle cash for a down payment; and the cost to own versus the cost to lease is comparable.

3.)    Leasing more space than you need.
 If that growth spurt you expected never occurred, you wind up with more space than you need. That means your profit dollars are consumed in that space.

4.)    Committing to a short-term lease in a downward market.
 If your business is suffering and you are questioning whether or not it will survive, you may think you cannot commit to a lease term that’s in excess of a few years, even though the deal is the remarkable. Think again. A solution could be a short-term lease with a fixed rate option to renew. In an up market, owners will most likely not agree to such an arrangement, but in a down market they may negotiate to secure your tenancy. You can also consider negotiating an out clause.

5.)    Committing to a long-term lease in an up market.
 If the market is up, why commit to a long-term lease? You will pay substantially over market lease rate for the space.

6.)    Waiting too long to consider your alternatives.
 Change is inevitable and you can miss out on great opportunities if you procrastinate. If you want to move and there is some complexity to the operation, plan on expediting your decision to make it happen in your favor.

7.)    Thinking you will not “broker up” at renewal time.
 You owe it to yourself and your company to have representation during your lease renewal. A broker is well informed on market conditions, current lease rates and terms and the most recent comparable lease transactions.

8.)    Not weighing all of your options.
 Carefully examine whether or not you stay in your existing location, move, or change the operation to outsource a function.

9.)    Believing one broker is as good as the next.
 If you have three service providers offering the same service, what suffers is the service you receive. Because you have not loyally chosen a representative, the representative has no loyalty to you, so you will see only the most likely alternatives for your requirements.

10.) Not competitively bidding your financing.
 You owe it to yourself and your company to get several opinions before you allow your bank to do your loan. Unlike commercial real estate service providers, lenders sell money at a price … the interest rate. Financing can vary greatly and you want to ensure it’s in your favor.

As an entrepreneurial leader in commercial real estate, Block Real Estate Services, LLC (BRES) has been investing in commercial real estate for years, providing customized solutions to maximize financial outcomes for every client we serve.

Find more information on what BRES can do for your investment when you click here.


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