Selecting the Right Team
The goal for this article is to leave you with an appreciation of the inherent complexity in a typical office lease decision. We will explore why assembling the right multi-disciplinary Team throughout the lease transaction is crucial to avoid expensive mistakes and obtain the best outcome.
Each location in a company’s real estate portfolio, whether leased or owned, should have a designated person responsible for it (“Designee”). In larger companies, typically the Manager/Director/VP Real Estate would lead and assume the ownership of all leasing activities. Leasing decisions can only be made efficiently and optimally if based on quality information.
For most companies, office renewal or relocation planning begins with a review of short and long-term strategic plans. Some considerations include the following:
- Do we have renewal rights and if so, when are the notice dates?
- Should we renew or relocate?
- How much space do we need and do we need flexibility to expand or contract over time?
- Where do our employees live? Does our office location or aesthetic impact employee retention?
- Do we have a flexible work strategy and if so, is it working?
- Which departments do we require input from?
- Do we have a recent or pending acquisition that will be consolidated into the space?
- Are there unique data or security requirements for our space?
- What are the overall costs and merits for each option?
The balance of this article will identify key Internal and External Team Members and why their contributions are important to help guide the company to the optimal outcome. The Designee should consider including the following:
Internal Team Members:
- C-Suite Sponsor (CFO/CEO/COO/President) – Will provide direction regarding the company’s short and long-term goals, and will lead senior executive approval. Deals are likely to be approved more quickly when senior executives are included in the leasing process.
- Facility Managers are expected to contribute to the overall business strategy by continuously innovating and developing new procedures across interdisciplinary functions while maximizing cost savings. Facility Managers operate in two main areas: Space & Infrastructure (such as workplace design, maintenance, furniture, cleaning) and People & Organization (such as food services, HR, accounting, marketing). Facility Managers regularly communicate with all the various disciplines and as a result have a wealth of valuable knowledge of the factors that are important to each area in the company.
- Information Technology personnel will manage and coordinate the requirements for electricity demand, cabling, power points, computers, printers, servers, data room requirements, back up generators and systems. As each building has its own unique technology and electrical capabilities, coordination with the Facility Manager will provide the team with answers to key questions or issues regarding the company’s data and security requirements.
- Human Resource professionals are well versed in the importance of attracting and retaining employees. They provide valuable input on the commuting patterns of the employees which may prompt a change in the office location. Human Resources can also advise on workspace design and ergonomics of work stations and collaborative areas, as well as the need for segregated areas where sensitive or confidential information is present.
- Internal Legal Counsel will convey the rights and obligations contained in the existing lease. Their main function is to coordinate with the External Team Members regarding lease language for renewal and relocation.
External Team Members
- Real Estate Agents are a critical external Team Member, not only because they ultimately lead the negotiations, but also with the wealth of knowledge and experience they contribute. Experienced Agents will understand market conditions and which buildings can accommodate the company’s unique space and use requirements. They must coordinate their efforts with the company’s Internal and External Team Members to ensure the right space at the right price is achieved.
- Lease Audit and Advisory Consultants are the most influential member of the Team. The right Consultant will be independent and unconflicted by only working on behalf of tenants. A Lease Audit and Advisory Consultant should be retained to conduct a Lease Audit of the historical additional rents charged by the landlord. This exercise will identify historic and future savings on the additional rents and should meet the needs and objectives of the client. The Lease Audit should be completed prior to the renewal and/or relocation process in order to retain leverage during the possible renewal. This Consultant will work with the Agent and External Counsel to optimize the additional rent language and Lease Audit clauses in the renewed or new lease. The proper selection of a Lease Audit and Advisory Consultant will identify rent overcharges, strengthen lease language and ease the coordination and facilitation of the lease negotiation.
- Property Tax Consultants are known to conduct property tax appeals for companies who own their buildings. However, companies that lease a significant volume of space in a single building may have the right in their leases to appeal the property taxes in lieu of or in conjunction with the landlord. These consultants can also assist companies by reviewing their Personal Property Tax charges and appealing where appropriate. The Property Tax Consultant will ensure the renewed or new lease has the appropriate protections documented.
- An Architect or Space Planner will assist the company in determining size requirements and will assist the Team in assessing the various buildings and optimizing layout options. A well laid out workspace plan can avoid contracting for more space than required. The Architect or Space Planner will work closely with Human Resources, the Facility Manager, Furniture Supplier, and the Information Technology department to ensure the required workspace design is compatible with the leasing options being considered.
- Furniture Suppliers can assess what is currently in the company’s space to determine what is reusable in the lease options being considered. The Furniture Supplier will also be familiar with current trends, having seen what other companies have built into their space and can assist the Architect or Space Planner by advising what furniture options are available and which options may best suit the proposed office layout and designs.
- External Legal Counsel is necessary to supplement the typical general legal knowledge of the Internal Counsel. The External Legal Counsel will work closely with the Agent and Lease Audit and Advisory Consultant when negotiating lease language on behalf of tenants. Involvement in the beginning of the process is the key to understanding what is important to all the members of the internal and external team and making sure the appropriate language and protections are included in the lease.
We hope this article has provided some insight into the complexity of an office lease decision. The earlier that the Team Members outlined above are involved in the process, the more likely the company will achieve the best outcome. If you need help assembling the right Team, start by reaching out to CRE Advisory Services Inc., your trusted Lease Audit and Advisory Consultant.