- 32 years experience in commercial real estate transactions and development
- Founder and Principal of The Mehigan Company, Inc., providing transaction management, project management, operating expense and project audits, database design, toolkit development and incentives recovery services
- Clients range from small/mid-size companies (DASSE Design, Prange Law Group, PMC-Sierra) to Fortune 500 corporations (Cisco Systems, Apple, J.P. Morgan Chase, AT&T, The Clorox Company, McDonalds)
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Corporate Real Estate - Transaction Management
- Corporate decision makers have not signed off on space requirements.
Far too often, top management is brought into the process too late, at which point scrambling to undo unnecessary damage becomes a costly, time-consuming endeavor. Top management needs to be on board from the get-go before any stage of the transaction process begins. This ensures that decisions will be based on real needs, precise space criteria and in accordance with company best practices.
Creating a standard transaction approval form that includes space benchmarks and tracking metrics can help facilitate corporate’s role. If the top tier is not an active and exemplary player at the outset, it’s far too easy to disregard the standards and processes that are so essential to a transaction’s success.
- Current leasing terms and conditions are often disregarded in the decision to acquire more space.
There exists a long held belief that freeing oneself from a current lease, or subleasing current space while moving into a new space, is going to be easy. However, there is nothing easy about this kind of equation and it’s important to exhaust all terminating or relocating alternatives within a landlord’s portfolio before considering the option to sublet.
Timing is everything and it should be examined and precisely calculated before anything else. Coordinating a company’s acquisition of new space with the termination of its current lease agreement can mean the difference between saving hundreds of thousands of dollars or incurring multiple rents for space that the company does not fully occupy.
- Sizing criteria for new space or site selection is inconsistent and/or incomplete.
Exactly how big is your company?
- What is your current headcount?
- What are your 3-5-7 year growth projections?
- What about desired location, access to public transportation, and size and layout of usable space?
- What values does your company brand embody?
- What corporate image should be exemplified in the physical space you occupy?
You’d be surprised at how these simple questions can generate a range of inconsistent facts and diverging opinions.
Decision makers need to agree on these critical details before the transaction process begins so as to ensure that external vendors look for the right space based on the right criteria. If they don’t, the risk is more wasted dollars on more wasted time.
- The planning and moving process is poorly organized.
Time is precious. And time is patience. While a CRE transaction is an exciting prospect that most companies are eager to complete, it cannot and does not happen overnight.
The belief that it takes only a few weeks to find and move into a new facility is simply a myth. In fact, 2-3 weeks is the bare minimum for what it takes to plan the process, obtain approvals, select a site and negotiate a space. Companies must then be prepared to add another 8-12 weeks for the lease documents to be finalized, for local building and planning permits to be issued and for renovations or improvements to be completed.
The time a company devotes to planning a move is inversely proportional to what it will cost them to do so. The more time spent on planning, the less they will pay in rent and new installation costs. Sound decisions can only be made if companies are methodical. So don’t be afraid to take the time to shop around to get the space you want at the best possible price.
- Corporate standards and processes are not defined or implemented.
The importance of creating consistent CRE Transaction Management standards and processes cannot be stressed enough.
Imagine the mayhem of inconsistencies and superfluous costs that would arise if decision makers from different departments each operated on their own set of parameters and needs? Surprisingly, this happens quite often, or at least more than it should.
If a strong, effective Transaction Management process is in place, not only will the work be streamlined but critical metrics like cost per square foot/employee will be consistent throughout the company. By the same token, implementing standards like ensuring that the site enables employees easy access to public transportation will create sustainable practices across company divisions.
- Decisions are made without use of sophisticated qualitative and quantitative analysis tools
Relying on instincts, intuition and personal opinions or feelings may be an effective way to approach certain situations. But CRE Transaction Management is not one of them. Selecting a site or sites and negotiating for space is an elaborate, highly precise and complicated process. Those involved should rely on using nothing short of the best qualitative and quantitative analysis tools to help them make the most informed decisions and obtain optimum results.
Companies should have these tools at their disposal internally or request them from their external provider at no extra cost.
- Companies neglect to form a cohesive team of both internal and external players, compromising success.
Most startups and younger companies think the transaction process is simple and that existing resources can do it all. However, the days of a one-person approach to problem solving and decision-making are over.
Today, particularly in an area as far reaching as Transaction Management, teambuilding and teamwork is one of the tickets to success. Teams are the strongest and most effective when they include experienced members from all stakeholder groups - company directors, employees, IT, external vendors, contractors, architects.
And before teams are formed several major decisions need to be addressed:
- Do we go with a large or small brokerage?
- Do we hire a relocation specialist or an architect?
- Do we outsource or insource project management?
These answers will help to finely tune the team based on the expertise required and help pave the way to successful transactions.
- Transactional Management decisions are often placed in the hands of individuals who do not represent the broader interests of current or future space occupants.
CRE Transaction Management has no room or need for individual agendas. Rather, it is the collective whole that matters. So those put in charge must be able to see the bigger picture and weigh and appreciate the benefits for all space users.
Regardless of a company’s size, the transaction management leadership team, whether it is composed of an individual or a group of individuals, must be driven by a sense of commitment and equanimity towards all occupants and be able to balance at that critical point the needs of many with the aim to create a cohesive whole. These individuals must also be able to bring different people together in a way that aligns with corporate values and standards.
- Companies tend to overlook the need to have multiple alternatives in order to gain leverage during the negotiating process.
Although you may think the contrary, there is never only one perfect place to relocate or build new space. In fact, thinking this will undoubtedly limit your ability to leverage during negotiations. With more options on the table and more viable, suitable locations to choose from, companies can get the best mileage in setting their tenant terms and conditions.
Remember that the best deal is reached by pitting two or three alternatives against one other in a spirit of fair and perhaps even fierce competition.