When Should I Move From My Home Office to a Commercial Space?

When Should I Move From My Home Office to a Commercial Space?

 

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

This blog post is geared towards small businesses that are unsure as to whether they are ready to move from their home office space into a commercial space. 

Our company offers office spaces as small as 600 square feet and warehouse spaces as small as 1,500 square feet.

Because of this, we often talk with prospects who currently work out of their homes.  More often than not, these prospects have a difficult time deciding whether they are actually ready to move into a commercial office space or warehouse space.

This clouds their judgment and prevents prospects from asking the right questions (like "What Should for When I Tour an Office Space for Rent").

This post should help businesses make a firm decision as to whether they are ready to pull the trigger and move into a commercial office space or warehouse space.

As a landlord of office and warehouse space, we obviously have every incentive to persuade you to get out of your home office ASAP.

However, we tell all of our tenants that if a deal is not right for them in the long term, it is not right for us in the short term.

We’d rather pass on a prospect who will move right back to their home office after the initial lease term because we might have leased that same space to a long term tenant.

So, with that in mind, you will need to consider the following:

Type of Business

First of all, we cannot stress enough that your decision will depend greatly on the type of business you are running.

Take a look at your target market and customer.  If you have a product that is designed for retail that cannot be accomplished solely online, you should get out of your home office, like right now (as in stop reading this post and search for available retail space).

If you are a consultant who always travels to the client and will never have a need for a large staff, you can probably stay in your home office indefinitely.

Once your business is starting to grow and you are taking on employees, you are getting into that gray area in which case…keep reading.

Space Constraints

Home Offices

Home offices tend to be cramped.

You’ve taken a space that wasn’t designed to be a commercial office, and you’ve converted that space to make it such.

This works for a startup and is a great way to explore whether your business plan will work and to test your local market.

But you will eventually want more space because a cramped workspace can (and will) hinder your productivity.  Once you talk more about your limited space and less about your business, it’s time to move out.

Home Warehouses

Home warehouses are typically sheds/garages.

You are storing household items alongside your commercial inventory.

As you grow, you will run out of space.

You might be able to use mini-storage unit(s) as an alternative to a commercial warehouse space.  In time though, you will want everything under one roof, including office and storage.  Once you get there, it’s time to move into a commercial space.

Distractions

It takes dedication to work out of a home office.

You have all the comforts of home (literally) combined with a home office.

You have countless distractions, some that cannot be avoided (like if your doorbell rings) and some that can be avoided (like wanting to see highlights of last night's game on ESPN).

Either way, some people are just not wired to work out of a home office.

Be honest with yourself.  If you can’t handle the distractions, convert your home office back to the bedroom or sitting room that it was and move into a commercial space.

Perception

Having an address at a commercial location legitimizes your business.

If you think people aren’t Googling your office’s address to see where you are located, you’re fooling yourself.

A commercial office or warehouse also tells your customers that your business has stability.

Plus, there’s nothing worse than making a phone call to a client or prospective client and your baby starts yelling in the background or your dog starts barking uncontrollably (has happened several times when a prospect calls our office).

And a commercial space will tell your clients that you are here to stay because you have spent the time and resources to open a commercial location.  And speaking of spending resources…

Finances

Okay, so we know this is the largest factor.  But it’s definitely not the only factor.

If you work out of your home office, you might be able to expense some items (like phone and internet) that could end up saving you some money that you’d be paying for anyways in your house.

You’re also saving on the rental fees that you’ll have to pay a landlord.  You might even save on some items that you never dreamed of paying (pro-rata share of landscaping services).

However, your move into a commercial office or warehouse might make your business even more profitable (cha-ching!).

If you stock inventory, you will have more merchandise to sell (and receive bulk discounts when you purchase), and if you sell products or services, you will have greater visibility to the public. 

Even if you don’t think it’s time to move into a commercial office, you should still check prices in your local market on an annual basis (at a minimum).  Prices fluctuate from year to year and you might find a landlord who is looking to lease a space at whatever price is necessary (particularly in a down market).

Summary

There are several benefits (too many to include in this post) to working out of a commercial office or warehouse.

However, your business must be ready.  Your business has to grow at its natural pace.

Moving into a commercial space is not going to magically increase your revenues, and you don’t want to bankrupt your business by leasing a commercial space too quickly.

Whether this means having revenues above X dollars, a customer base of at least X people or a geographic reach of X miles is for you to determine.

We hope this list provides you with some factors other than the bottom dollar to consider.

Please feel free to leave comments.  We promise to read them all.  You can also email us with any questions/comments at leasing@seawaybusinesspark.com.  As a reminder, we provide office space for rent and warehouse space for rent in Gulfport, Mississippi.  Please keep us in mind if you are looking for a space in our area.  If you want more information about our available office space or warehouse space, visit our website at www.seawaybusinesspark.com or give us a call at (228) 575-7731.

NO Deal Until the Contract is Signed

Image courtesy of Jeroen van Oostrom at FreeDigitalPhotos.net

You have probably heard this old adage before.

You do not have a deal until the contract is signed.

And let us confirm this, once again for you.

Save this blog post and read it periodically.  Print it out and frame it.  Keep it fresh in your memory.

Take a look at the picture we used at the top of this post.  Do you notice how the hand is hovering just above the signature line?  Do you know what that means?

NO DEAL!

Our company was reminded of this very scenario several years ago with a company that has a global presence.  Let’s call this company XYZ, Inc.

XYZ, Inc. had leased with our company for nearly 2 decades.  They had gone through 2 expansions, one of which was a custom build-out.

About 9 months before their lease was set to expire, we heard from their in-house real estate manager.  They went through some internal analyses and determined that their location within our business park was perfect.

We were told XYZ, Inc. was either going to move into a larger space with a substantial remodel or they were going to let us construct a custom-designed standalone building for them.

Back and forth we went with XYZ, Inc. over the specific size of each option, the floor plans within each, the length of the lease term, etc.

The 9 months until lease expiration came and went very quickly.  Still, no deal was in place.

We had a very good relationship with the local manager and regional manager.  Both managers and the real estate manager assured us that they were only looking at our property.  So we extended the lease month-to-month to allow XYZ, Inc. some additional time to make their decision.

After all, we were told, XYZ, Inc. was so busy at the corporate level, a decision could not be made whether to go with one of our two options.  How could they possibly pursue another property with a new landlord?

A few more months passed and we were very close to a deal.

Then, the phone stopped ringing and our phone calls were no longer being answered.

The local manager was clueless.  He was being left in the dark too.  Probably just the “corporate dance,” he assumed.

At last, the real estate manager took one of our phone calls.

He engaged in a lot of small talk, which was a little out of the ordinary.  (At this point, we knew something was going on…)

As you can probably tell from our not so subtle foreshadowing, they had found another building that had recently become vacant.  And it was right down the street from our property.

We called the local manager, and he was shocked.  Nobody had told him.

The regional manager told us that this new building hit every box of their wish list.  He had previously looked us right in the eye and assured us that they would be staying at our property.  He shook our hands and told us he was excited to begin a new, long term lease.  He liked the idea of remaining with the same landlord because he knew there would be no surprises.

What was his response when we asked him about these promises?

It’s just a business decision.

This regional manager had every intention of leasing from our company.  They were excited about a build-to-suit and got far along in the discussions.

Then, XYZ, Inc. put a stop to all new construction and started cutting expenses.  That meant the regional manager’s hands were tied.

Our company pulled out every trick we could to try to keep XYZ, Inc. at our property.  All of our efforts, however, were to no avail.

XYZ, Inc. moved right down the street, and we pass by them several times a day.

Remember how we said to read this blog post periodically or print it out and frame it?

Our reminder of this lesson is driving by XYZ, Inc. every single day.

Although our story did not have a happy ending, it did come with a great lesson: You have NO deal until the contract is signed.

Please feel free to leave questions and/or comments.  We read all of them.  You can also email our company at leasing@seawaybusinesspark.com.  We provide office space for rent and office/warehouse space for rent in Gulfport, Mississippi.  If you need commercial real estate space in our area, please give us a call at (228) 575-7731 or visit our website at www.seawaybusinesspark.com.

What’s the Price to Lease Commercial Real Estate?

What’s the Price to Lease Commercial Real Estate?

What’s the most common question our company is asked?

Every single prospect call we get – we are always asked the same question.

What’s the price to lease a space?

In this blog post, we will explain why this question is a little more complex than it sounds and why we don’t publish our rental rates.

(Side note: A big thank you to Amy Porterfield for this blog idea – it came direct from her podcast on How to Create Content to Attract Your Target Market.)

Following is a typical prospect phone call that we receive:

• Prospect: I’m looking for around 4,000 square feet of office space.  Could you give me some pricing information?

• Landlord: Sure, do you have an idea of the layout?

• Prospect: Large open space for cubicles, reception, 3 restrooms, break room, conference room and a few private offices.  What is the price?

• Landlord: Great, and what lease term are you seeking?

• Prospect: That likely depends on the price – what is the price?

• Landlord: What exactly is your timing:

• Prospect: Next 6-12 months, maybe sooner if you will just GIVE ME THE PRICE!!!

Why do we ask all these questions before giving a quote to rent a space?

Glad you asked.

Assume that we have 3 vacant spaces for the above scenario, with our prospect needing 4,000 square feet:

• Space 1: 3,600 square feet, similar layout to what is desired, available in 9 months

• Space 2: 4,200 square feet, completely different layout, available now

• Space 3: 5,000 square feet, similar layout to what is desired, been vacant for 12 months

If we had given pricing information solely from the space requirement, we might have quoted on Space 2, which is the wrong layout.   That phone call might have ended quickly.  But if we had known the prospect was looking at a long term lease, we might be able to remodel the space.

Space 3 is 25% larger than what is being requested, but we would be motivated to lease it at a discount given the fact that it has been vacant for so long.

If we had given pricing information solely on our current availability, we would have only quoted on Space 2 or Space 3, not realizing that the prospect could wait until Space 1 becomes available.

With this specific scenario, all 3 spaces could potentially work.  However, there are several factors to consider, including budget/timing constraints, layout, proximity to competitors, current lease expiration (both for tenant and landlord), etc.

Also, the above example is a simplified version of what might actually occur.  Allow us to further complicate this hypothetical:

• There is currently a tenant in Space 1, and they are unsure of whether they will be renewing the lease.  They have an option to renew for 3 years that can be exercised with 3 months’ notice, and their lease expires in 9 months.  We cannot sign a lease for this space until another 6 months passes, and the space might be unavailable if the option to renew is exercised.

• Another prospect is looking at Space 3 and will be deciding within the next month whether to pursue this space.  This specific prospect needs at least 4,500 square feet and can only lease Space 3.  This prospect is also interested in signing a 7-10 year lease, so it is worth holding out another month to see what happens.

• This leaves Space 2 as the only currently available option for our prospect in need of 4,000 square feet.  For a long term lease, we will remodel the space and have time to negotiate the lease and perform the renovations, since the tenant is looking 6-12 months in advance.

We hope this example was not too complicated.  Trust us, what happens in practice is often much more complex.

And the above example only dealt with office space.  We also lease warehouse space, which often varies even more from space to space than office.  Say we have two 5,000 square foot warehouse spaces available.  One has 500 square feet of office, and the other has 2,500 square feet of office.  Do you think these two spaces will have the same rental rate?  Of course not!

Now do you see why we cannot just publish a price without asking some qualifying questions?

Commercial real estate is not a commodity, like the gas you put in your car.  If you are choosing between filling your car up with gas from an Exxon or Shell station, you will likely not notice any difference in how your car runs.

In contrast, no 2 commercial real estate spaces are alike – even if they are in the same building!  In addition to different finishes and layouts, there are external factors, as described above, that can sway tenant and landlord leasing decisions.

Plus, a rental rate for a new business interested in a 1 year lease will differ from the rental rate for a national company signing a 10 year lease with substantial modifications.

We hope this post illustrates why many landlords (including our company) choose to not publish any leasing rates until some qualifying questions are asked.

Please feel free to leave questions and/or comments.  We read all of them.  You can also email us at leasing@seawaybusinesspark.com.  We provide office space for rent and office/warehouse space for rent in Gulfport, Mississippi.  If you need commercial real estate space in our area, please give us a call at (228) 575-7731 or visit our website at www.seawaybusinesspark.com.

CRE and Carli Lloyd

CRE and Carli Lloyd

The Women’s World Cup final got us to thinking: What does commercial real estate have in common with the Carli Lloyd (Women’s World Cup MVP)?

An article was posted on Forbes with the headline “13 Minutes Equals Millions in New Endorsement Potential for Women’s World Cup MVP Carli Lloyd.”

For those of you who are unfamiliar with Carli Lloyd’s achievement, here is a quick recap: Within the first 16 minutes of the Women’s World Cup final this past weekend, Carli Lloyd scored 3 goals.  She scored all 3 goals within 13 minutes of one another.

Clearly, Carli Lloyd has a chance to cash in big.  Product endorsements will likely flow her way in the coming days/weeks.  And good for her – this was quite the triumph and on the biggest possible stage.

Now that you’re up to speed on Carli Lloyd, you may recall that we posted a market update for South Mississippi last week (link found here).  The gist of the update was that 2015 has been very promising for commercial real estate in South Mississippi, and we are hopeful/optimistic that this will continue into 2016.  (Apparently, last week’s post could have been summarized in one sentence.)

So, we ask again: What does CRE have in common with Carli Lloyd?

With the commercial real estate market on an incline, you have to make sure to seize the opportunity to capitalize.  Market booms don’t last indefinitely.  Eventually, the market will taper off (and thereafter, likely fall into a slump again).  When will this happen?  Nobody knows for sure.

Just like Carli Lloyd will have a better chance at landing huge endorsements in the coming weeks, everyone involved in commercial real estate will have a chance to land some monster deals in the coming months.  You must use the CRE boom to your advantage, because it will not last forever.

And in a good market, you should not sit back and figure you can reap the benefits by putting forth less effort.  You might be thinking to yourself, "Well, the phone is ringing off the hook.  So I can do very little work and still have increased success."

Trust us…the phone will eventually stop ringing. 

Make the most of the good times in commercial real estate.  Take advantage of the moment.  Carpe diem.  Seize the day.

Congratulations to Carli Lloyd and the entire U.S. Women’s World Cup team!

Please feel free to leave comments.  We promise to read them all.  You can also email us with any questions/comments at leasing@seawaybusinesspark.com.  As a reminder, we provide office space for rent and office/warehouse space for rent in Gulfport, Mississippi.  For more information, visit our website at www.seawaybusinesspark.com or call us at (228) 575-7731.

South Mississippi Commercial Real Estate Market Update

South Mississippi Commercial Real Estate Market Update

Image courtesy of renjith krishnan at FreeDigitalPhotos.net

As you may or may not know from previous posts, our company serves as a landlord in Gulfport, Mississippi.  We have a couple of properties that we manage that contain several office buildings and office/warehouse buildings. 

From time to time we will post market updates of what we see in our area in South Mississippi.

Like commercial real estate brokers, our best gauge as to how the local economy is doing is by the types of phone calls we are getting (and whether phone calls turn into transactions).

However, unlike local brokers, we only operate on one side of the equation.  We do not offer any of our properties for sale so we only see the leasing side of the local market.

Of course, we discuss our market with local brokers and get a good feel from just being aware of what is going on.  After all, when there are construction cranes everywhere vs. a bunch of for sale signs in front of properties, it is easy to tell what kind of market we are in.

The broad (national) market had a very good year in 2014.  By contrast, 2014 was a bit of a slow year for our company and local economy.  We heard rumblings of expansion from some of our larger tenants (the types of tenants who have a national presence).  We even completed an expansion with one tenant.  Overall though, businesses were still struggling and several businesses were closing (not just in our business parks – throughout the local economy).

As we read reports of the national market doing so well, we wondered, "Was the commercial real estate boom going to miss South Mississippi?"

To shed some light on this question, let us relay what our local banker told us when meeting with our company a few years ago.  The bank this representative works for is a large, regional bank that has locations that span from Texas to Florida.  He told us that in their experience, the South Mississippi market lags behind the rest of the country (no real surprise there). 

Further, once the bank starts noticing activity on the Florida Panhandle, it slowly makes its way west, first hitting Alabama and ultimately, increased (or decreased) activity hits Mississippi.

Since we heard this, we have seen this concept in action.  

Last year, the articles we read around the country talked about commercial real estate’s resurgence and how times were really picking up.  Would our banker’s advice hold true for 2015?

Halfway through 2015...so far, so good!

In 2014, we were getting calls from people not quite ready to pull the trigger.  Since the beginning of 2015, we have had new businesses looking to open locations in our area, some in our business parks.  We have had existing tenants either talk or go through expansions already.  There have also been phone calls discussing expansion for new clients.

The signs are all here for an improving local economy.  Our business park is not unique in having lots of new business.  Strip centers are filling up again.  For sale signs are being removed from the fronts of buildings.  New signs are going up.  Things are exciting once again in the commercial real estate market on the Mississippi Gulf Coast.

We can only hope that if our market lags behind the broad national market, and 2015 has been a better year than 2014 nationally, 2016 will be even better for those of us in South Mississippi!

Please feel free to leave comments.  We promise to read them all.  You can also email us with any questions/comments at leasing@seawaybusinesspark.com.  As a reminder, we provide office space for rent and office/warehouse space for rent in Gulfport, Mississippi.  For more information, visit our website at www.seawaybusinesspark.com or call us at (228) 575-7731.

The Most IMPORTANT Part of Being a Landlord is...

The Most Important Part of Being a Landlord Is…

 

Image courtesy of Ambro at FreeDigitalPhotos.net

As landlords, we are always searching for our next tenant.

After all, we must seek new deals in order to expand our business and to fill our vacant spaces.

We look for good buys on raw land and buildings.  We market our existing office spaces and warehouse spaces.  And we solicit to prospects that we think would be a good fit for our business parks.

However, the most important part of our jobs as landlords is really quite simple.

It even sounds a little too simple.  Without this single action, we would not be able to stay in business.

That one thing is: KEEP YOUR CUSTOMERS HAPPY!

Sounds easy, right?

There have been numerous studies that find that signing up a new customer is 5x-10x more expensive than keeping an existing customer.  Some studies find that it costs even more.

In our business, we strive to keep tenant turnover as low as possible.  We lose cash flow for every month an office space or warehouse space is vacant.

Plus, vacant spaces in commercial real estate cost money (utilities, taxes, insurance, overhead, etc.).  Not to mention, you have additional expenses in marketing vacant spaces.  Wouldn’t it be better to just keep your current customers happy so that there is no need for a vacant space?

Of course, sometimes, vacancies are inevitable.

Businesses expand, downsize and occasionally close.  If you can’t accommodate a tenant’s needs at lease expiration, a vacancy will happen.

But we have had countless prospects come to our business parks because, quite simply, they are unhappy with their current landlord.

So, the main question is: How do you keep your customers happy?

To illustrate some of the things we do, allow us to tell you a story of a transaction that took place.

Recently, we completed an expansion with one of our existing tenants.

The regional manager in charge of the real estate transaction was repeatedly thanking us for being so helpful throughout the entire process and kept complimenting us on how smooth of a transition we made their expansion (which included quite a bit of construction in a different building).

What did we do that was so exemplary?

We constantly followed up to give status updates.  Whenever a question came up in construction, we promptly asked our customer for guidance so as not to delay their move-in.  We asked if they were happy with the progress and the work being done.

We answered any questions our customer had as quickly as we could.  We offered to have our janitorial service clean up after the construction crews were out of the office and warehouse.

In other words, there was no single thing that we did that made someone say “Wow!”

We treated our customer the right way and tried to go the extra mile.

Did the lease say we had to have a janitorial service clean up after the construction?  No.  But that was a minimal expense and our customer will definitely remember it.

In fact, the regional manager asked us if we had any property in our neighboring state, as they have a store relocation coming up in that area.

Not only did we secure repeat business from one of our existing tenants, but we might have secured a future deal.

And all of that came from keeping our customer happy.

This expansion story is just one example of how we strive to keep our tenants happy.

We also make a point to address maintenance issues promptly.  After all, summers in Gulfport, Mississippi get quite hot, and nobody wants to sit in their office when the A/C is not working.

Meet with your customers and ask them for suggestions.

Be proactive.

Make sure everything is okay with your tenant’s space needs.

Thank your customers for their business (maybe even a holiday card or gift basket).

Conclusion:

Keeping your customers happy is an ongoing process. 

Don’t think that you can send a gift basket when a new tenant first moves in and forget about them until the lease renewal.

Being a good landlord means focusing on your existing clientele throughout the lease term and not just looking for the next deal after you sign a lease.

Use common sense.

Welcome feedback.

Be proactive.

Put yourself in your customer’s shoes.

Keep your customers happy!  J

Please feel free to leave comments.  We promise to read them all.  You can also email us with any questions/comments at leasing@seawaybusinesspark.com.  As a reminder, we provide office space for rent and office/warehouse space for rent in Gulfport, Mississippi.  For more information, visit our website at www.seawaybusinesspark.com or call us at (228) 575-7731.

How To Avoid SURPRISES At Your New Commercial Real Estate Space

Image courtesy of David Castillo Dominici at FreeDigitalPhotos.net.

Picture this:

You just went through the entire relocation process for you new commercial real estate space and did everything you were supposed to do.

Start the process one year in advance of your lease expiration?  Check.

Do your market research?  Check.

Tour several different spaces within your target market?  Check.

Submit offers on a couple of your top choices?  Check.

Once you got the best possible deal for pricing and lease term, you negotiated your lease agreement.  At last, you just moved into your new space.

Fast forward one month. 

It just rained every single day for one straight week.  You operate a retail business in a strip center, and the parking lot is flooded.  People do not want to use half the parking lot because it is under a couple inches of water.  Frustrated by this inconvenience, several of your customers never enter your store.

You may not have any rights under your lease agreement either.  While parking in 2 inches of water is certainly an inconvenience that might drive customers away (no pun intended), it does not prohibit someone from parking and entering your store. 

Sounds like a bad situation, right?

What can be even more frustrating is that you could have avoided this by performing some unconventional due diligence.  And no, we are not suggesting that you analyze engineering plans or site elevations to determine whether the parking lot is going to flood.

All you needed to do to avoid flooding fiasco would have been to drive by your new commercial real estate space several times! 

Drive to the space and surrounding area in the morning during rush hour.  Go there during people’s lunch breaks.  Check it out during the evening when everyone is on the way home.  And make sure you go during inclement weather.

All tenants should drive by their future space – not just those involved in retail.

Flooding can be just as big of a deal for office and industrial tenants as well.  Employees, just like customers, do not want to walk through giant puddles to get into their space.  Shoes/clothes get ruined, it makes the floor slippery which is a slip hazard and liability, trucks may be prevented from making deliveries/pickups, etc.

And flooding is just one example of a problem that could arise if you only visit your commercial real estate once or twice before signing a lease.  Other problems include traffic congestion, noise levels, smog (in certain areas), neighboring tenants taking up lots of parking at certain times of the day, the list literally goes on and on.

Also, mix it up on the actual days that you visit.  Make sure you do not always go on a Wednesday, for example.  Here’s why:

We heard a story of a tenant in a downtown retail shopping area in a small town.  During the warm weather months (and this was in Florida so pretty much every month except December, January and February), there was a farmer’s market from 3:00-5:00.

People were not allowed to park on the street because it was sectioned off for people walking around the farmer’s market.  Customers would have to park in a garage several blocks away in order to visit the store.

Guess what?

Fridays afternoons were never busy.

And Friday was an important day for this tenant and losing out on this business was devastating.

Unfortunately, there was nothing they could do about it.

Again, this situation could have been avoided had the tenant driven around the potential space several times before signing a lease (especially on a Friday if that was a key day for their business).

A quick ride to your future space will paint a picture of what you can expect at any time of the day and from any situation. 

What do you have to lose? 

Worst case – you just confirmed that you selected a great space with no surprise issues. 

Best case – you discovered a “hidden issue” with your new space.  You can now either use this as leverage in your negotiations or find a new location.

Conclusion

There are several items of due diligence you should perform before signing a lease agreement for your new office space or warehouse space.  Most of the time, you can perform the due diligence from the comfort of your own desk.  You can make phone calls, read reports, negotiate a lease, etc.  However, some items require you to get in your car and drive by your space.

You might be asking yourself, how likely is it that my location will flood?  And if it does flood, what is the big deal if it is only once a year? 

Trust us, that one day that it floods will be the worst possible day it could have been. 

It will always fall on a day that you had your annual sale, meeting with a big client, when you were in a huge hurry, etc.

We sincerely hope you are enjoying our blog posts.  We welcome any and all questions and comments.  If you are looking for commercial real estate space in southern Mississippi, please give us a call at (228) 575-7731, email us at leasing@seawaybusinesspark.com or visit our website at www.seawaybusinesspark.com.