The Onshoring Phenomenon
October 26th, 2011
By Rob Wheeler, Vice President
Earlier this month, I was a panelist at the Metro Denver Site Selection Conference. The topic of our panel was onshoring, or bringing jobs that were once shifted overseas back to the United States. Each panelist had dealt with this topic sometime in the past 18 months from an industrial and service perspective.
Manufacturers have always chased cheap labor and low costs wherever it appears. For decades U.S. based firms have looked overseas for low-cost regional sourcing, locating manufacturing and production in countries with strong labor forces, low wage rates, and a favorable business climate. This trend does persist, and as companies continue to increase the amount of contract manufacturing being utilized, the trend won’t go away. But more and more companies are at least considering whether or not it is right to shift overseas and, more noticeably, whether some operations should be brought back to the United States.
There are many reasons that companies have begun to realize that shifting manufacturing operations overseas might not be as advantageous as it was just a few short years ago. Cost of operations is the main driving factor. Wage rates that were once substantially less in India and China have seen sharp increases as these economies have had tremendous economic growth. The other factor is the increase in the cost of fuel. As fuel prices increase, the cost of shipping something halfway around the world goes continually higher. This, coupled with excessively long lead times and decreased flexibility, put constraints on the supply chain that many companies are deciding just isn’t worth marginal gains in manufacturing cost. Other issues that are driving a closer look at bringing manufacturing back to the U.S. are control of intellectual capital, a depressed dollar, and job incentives coming out of Washington and the states. Some studies have shown that in just a few short years the total actual cost of producing and transporting goods from overseas to the states for distribution and consumption will surpass the total actual cost of manufacturing the product locally.
What does all of this mean for industrial real estate? Developers have done very little speculative building in the past three years. Positive absorption is beginning to occur, signaling a tighter industrial real estate market going forward. If manufacturing begins to flow back to the states on a large scale, which some experts believe will happen, it will drive up rents to a level that kicks off a new round of speculative development.
CresaPartners has the capability to evaluate the supply chain from start to finish, including offshore manufacturing and its impact on supply chain costs. If you would like to discuss the onshoring phenomenon or any other issue related to industrial real estate and supply chain operations, feel free to contact me at rwheeler@cresapartners.com.
Tags: corporate real estate, industrial, offshoring, onshoring
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Modest Job Growth Helps Recovery in Select Markets, Q3 2011
October 19th, 2011
By Bill Goade, CEO
As Q3 2011 comes to a close, the recovery has not picked up any momentum and in fact has slowed. The few markets that showed recovery in the first half of the year (Silicon Valley, the Bay Area, Cambridge, Mass., and high-rise midtown New York) continued to show strength. However, in most office markets, job growth has remained modest, and demand has been relatively flat. It will be another year before national vacancy begins to fall significantly and average rental rents rise. A full market recovery does not seem likely for some time unless job growth accelerates dramatically.
The national availability rate of 17.3% is slightly down from Q3 2010, the high point since 1993. Meanwhile, average rents are still well below the highs by more than 25% in 2008 in most markets.
In most places it remains a tenant’s market and an especially good time for credit-worthy tenants to exercise their leverage in negotiations with landlords. While some landlords are becoming more bullish, most are focusing on tenant retention at almost all costs as demand remains sluggish in markets nationwide.
Along with modest job growth is the phenomenon of unused “shadow space.” Companies will backfill that space as they hire rather than expand. At the same time, over 70% of transactions continue to be renewals rather than relocations.
Bright Signs
Positive indicators include the following: The amount of occupied space increased slightly for the third straight quarter, and average office rents also rose slightly, their first spike since Q2 2008. In addition, investment activity rallied last year, recording $168 billion in sales, up 60% from 2009.
Opportunities for Tenants
The window is still open for tenants in most markets, and we continue to encourage companies to be proactive in negotiations before their leverage begins to slip. In some instances, one- or two-year extensions are available as landlords anticipate a better market in 2013 and beyond. Because of the likely tightening in availability, we rarely recommend the short-term extension strategy at this time, unless the business plan simply cannot support a longer commitment. However, tenants need to weigh flexibility versus likely rent hikes in two or three years. In other instances, tenants, especially those with strong business plans, have an opportunity to lock into leases of eight years or more. Finally, given low interest rates and impending changes in lease accounting, this may be an excellent time for some tenants to buy real estate.
Click here to read about your local market.
Tags: corporate real estate, job growth, landlord, recession, tenant, unemployment
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So You’re Thinking of Becoming a Facilities Manager
October 12th, 2011
By Jim Ricker, Vice President, Corporate Services
One of the most interesting and rewarding careers in corporate real estate is that of Facilities Manager, either as in-house employee or as an outsourced provider. In this blog post, I’ll offer some compelling reasons for taking the step into FM. If you’re on the fence, this might help you make the move.
Do you like a job that is unpredictable, amazingly diverse, technically challenging, and that requires excellent written and verbal communication skills, leadership abilities, and lots of MBWA (managing by wandering around)? Do you want to manage tangible, physical assets? Do you like to be able to see what you’ve accomplished in a day’s work? If yes, than a career as a Facilities Manager awaits you.
I can vividly remember when, during the early 1980’s, I worked in the Corporate Real Estate group at Digital Equipment Corporation (DEC) as a lease negotiator. When I decided to move into facilities management for one of the international business groups, my CRE associates thought I had lost my mind. “Why would you leave a professional organization, Jim, and become a glorified custodian?” That type of question was one of the reasons I did make the career change. My associates in CRE were isolated from the business units and were perceived as a necessary evil when space was needed. In contrast, I wanted to become more closely aligned with the business of DEC and to have a job that was more challenging and diverse.
In my new job I was able to:
-Go from a pure overhead role to one where I was perceived as an integral part of the business unit;
-Have P&L responsibility for substantial operating and capital expense budgets;
-Become responsible for a broad spectrum of facilities services including space planning, project management, maintenance and operations, office services, cafeteria, travel, security, telecom, EH&S, finance, and reporting;
-Manage a diverse staff of facilities professionals;
-Learn something new several times a day;
-Communicate with other employees (my customers) ranging from administrative assistants to vice presidents;
-Have the opportunity to leave my desk several times during the day to observe, train, and communicate;
-And enjoy the benefits of being close to the physical, tangible real estate assets of the company.
Since I was the first person to leave a perceived lofty role in CRE, many of my former associates stayed in touch to find out how my new job was working out. My enthusiasm obviously rubbed off as I observed several of them making similar moves during the next few years.
Go for it. Reward yourself with an incredibly challenging and exciting career.
Tags: corporate real estate, FM
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How to Hire Green Vendors, Part II
September 14th, 2011
By Mike Tobin, Director of Sustainability
In Part I, I discussed some first steps in the process of hiring green vendors: recognizing that the number of green vendors has grown exponentially in the last few years and defining your company’s objectives and requirements for hiring the vendor.
Once you have clearly defined the objectives and requirements, then the next thing to do is think through how you will rate the different vendors. You will need to outline what criteria you will need in order to make a selection. In this emerging field of sustainability, there are some criteria that I suggest are important to request of any vendor:
1. Experience – Ask for specific experience they have had providing the requested products or services. Ask them to detail the service provided including the type, size, and scope of their client engagement plus the results. In addition, ask for references that you can contact. This is a young field and everyone is trying to get into it. So be wary of “green washing” where the marketing looks good but is different than what is actually practiced.
2. Professional Credentials – Having credentials from a third party accredited organization bears a lot of weight when working in a new or unknown field. For example, a prominent credential in the market today for design and construction
professionals is a LEED Accreditated Professional (AP) designation. If your tactical goal was to achieve a LEED certification for a new office space, it would be prudent to bring on vendors that understand the LEED program which can be illustrated by their LEED AP status.
Fortunately, many professional organizations are mobilizing to provide education and training for their members that
specialize in sustainable real estate practices. Unfortunately, a lot of these efforts are still in their infancy and are underdeveloped. So, as you review credentials for vendors, you may have to do some investigation of your own to validate the authenticity and strength of those credentials. For example, there are two major certifications for sustainably harvested wood products: Sustainable Forest Initiative (SFI) and Forest Stewardship Council (FSC). One is a self prescribed certification (SFI), and one is third-party verified (FSC). By asking the questions and doing some investigation, you will quickly find out which ones have sufficient merit for your needs and those that do not.
3. Financial relationships – Ask what their compensation structure is and what their revenue streams are within the company. This will quickly tell you if they are a sales company masquerading as a consultant or a solar power rep trying to be an all encompassing renewable energy engineer.
4. Cost – Ask for cost of service broken down into understandable pieces. Hourly rates should be easy to decipher and compare to other similar services.
5. Green costs – Ask if there are any other unknown costs or expenses that may be associated with their services as it relates to your sustainable goals. One common example is that some companies will charge an additional cost for the documentation associated with the LEED certification program. The goal is to compare proposals as “apples-to-apples” and expose any potential cost additions.
Next you must develop a list of potential vendors. Since this is a young field of service, you may have to cast a wider net than you may normally. It is not uncommon to go quite a distance geographically to find the expertise that you need. Do not be afraid to do so as this will likely increase your odds of finding the right fit for your need. For that effort, I would recommend contacting
the local and national trade organizations for recommendations or other sustainable resources (e.g. UGBC, GreenSpec, etc.). You will be surprised at how small the world gets when looking for the best sustainable vendors.
As a side note on this step, I have found it beneficial in some instances to select vendors from a distant geographic location to join a local team. The transfer of knowledge and the adaptation to change has been much faster in those instances. Subsequently the local vendors adapt too and become more competitive in the future which helps the future bottom line.
The final step is to send out the request for proposals, receive the proposals, conduct interviews and make the selection. Easy enough! Well maybe not that easy but hopefully you will have the information you need to make an educated decision to support your sustainable real estate strategy.
Tags: corporate real estate, green, vendor, vendor selection
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How to Hire Green Vendors, Part I
September 8th, 2011
By Mike Tobin, Director of Sustainability
So you have decided to implement sustainable real estate strategies within your organization. Congratulations are in order as that means you have gone through a strategic planning process that included a focus on sustainability and its relation to the built environment. Now comes the hard part of implementation. How do you find vendors that know how to help implement your carefully crafted strategy?
First and foremost it is important to recognize that there are MANY different types of vendors that claim to support sustainable
practices—a number which has grown exponentially in the last five years. So whereas before there were one or two choices for vendors providing a specific sustainability service, there are probably ten times that amount today. In addition, they each say roughly the same thing but in a slightly nuanced way so that they all seem to blend together. I like to think of it in the same was as assessing how to select an air conditioner repair vendor. There are hundreds to choose from and some can repair all systems, some can only work on major brands, some on only one brand, some also sell new systems, some sell components, some are licensed, etc. At this point, before you just give in and go with the first one that appears on a Google search, stop and recognize that a simple search will not suffice. You will need to set up a selection process.
The next step is to establish this selection process. Again this is no different than any other vendor selection process, but now, because you recognized how complex the sustainable vendor field has become, you must think of this as a more complex vendor selection. The first thing you must do is clearly define your objectives and requirements for hiring the vendor. This will help your organization think through the details of the implementing the strategic goals before you let a vendor enter into the conversation and potentially steer you one way or another. Now you may talk to a few different vendors to better understand the tactical options available in the market—this is not a selection interview, just an informational interview. The amount of time and effort you put into this step—tackling your internal issues first before you expose them to the vendor community—will pay off handsomely down the road.
In Part II, I will discuss the remaining steps in choosing vendors to implement sustainable real estate strategies: developing your criteria for the selection process, developing a list of potential vendors, and sending and processing RFPs. I will particularly concentrate on the criteria I think you should focus on in your selection process.
Tags: corporate real estate, green, vendor, vendor selection
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Engineering Value, Not Value Engineering
August 31st, 2011
By Phillip Infelise, Chairman
In this edition I want to explore the difference between Engineering Value and Value Engineering, or specific ways that the New Day Project Manager can bring value to the project and put dollars back in the client’s pockets.
Any client that has been around projects long enough understands the term Value Engineering. And, frankly, shudders when they hear it. In the vast majority of projects, value engineering is a reactive position. It usually means the following:
-We have listened carefully and incorporated everything you wanted into the design of your project.
-We forgot to mention that some things you asked for (and we agreed to include in your design) you simply can’t afford in the context of the budget we (the whole team presumably) agreed upon.
-Now we have to show you the ways we will take thing that you really want (and maybe even really need) out of the project so that we can all say we delivered it “on budget.”
-In most case this means you get something close to what you wanted, but not quite. It may perform at a level lower, but hey, it costs a little less, right? Wrong!
In other words, Value Engineering is rarely a good thing—it means we are taking something from you that we promised we could provide. (The “We” means everyone on the Project Team that should know better; the client isn’t expected to know unless they have been told in advance).
In a proactive world where we hope most New Day Project Managers live (at least I know the CresaPartners ones do), it is appropriate to reverse the process and begin Engineering Value from the outset of the project. Engineering Value is a proactive approach wherein the Project Manager encourages the Project Team to always explore more cost-effective solutions wherever they may be, whether or not the client can “afford it”—since many times the same aesthetic and performance can be achieved at a much lower price point. It should be our everyday mission to always find a value-creating solution, no matter how big or small the client (or their pocket books). To do so requires that the Project Manager has a very strong grasp of what everything (absolutely everything) on a project costs and the experience to draw solutions from a variety of projects and source.
There are a deep and wide variety of opportunities to Engineer Value and here are just a few of them an experienced Project Manager will offer:
-Set the right budget (not just a too tight budget) in the first place and do the client the favor of avoiding Value Engineering entirely. Dig deep to make sure all of their needs are covered in the budget and help them envision items they may not anticipate themselves.
-Save square footage and save huge dollars. Understanding their business needs, creating appropriate but tight requirements, and producing efficient space programming creates a value home run that will mitigate the need for the bad value engineering phase.
-Right Size everything—offices, workstations, file rooms, take periodic storage offsite, etc. Again, economizing on square footage creates the biggest value right up front and can create an enhanced workplace.
-Hire the right project team that wants to partner on value creation and is not paid on a percentage of costs, which creates a potential disincentive to engineering value as a team.
-Force the design team to attach a specific dollar amount to every design solution that they offer so that the client understands the price of what they are falling in love with.
-Question any procurement where the client suggests they have “great national purchasing agreements.” There is so much exposure here that we often offer to work for just the savings on that specific item, as value gaps on big ticket items like furniture can cover our PM fees many time over.
-Explore “pre-owned” furniture in this aggressive market so long as you understand the full costs involved—but be prepared to buy all new as manufacturers have adjusted pricing to compete head to head against that market.
-Specify carpet face weight based on the years the client will be in the space—use lower carpet face weight for a seven year term, higher for a ten, and highest for a twelve. Face Weight = Cost. Don’t pay for value you will never be able to access.
-Purge. Force the client to energize a serious purge campaign so that they are not paying to relocate stuff they will never use.
Note that none of these suggestions sacrifice quality or performance; they simply suggest alternatives that cost less money. That’s Engineering Value. That’s what we do.
If you are following this blogger, you know we have followed an evolving pattern of subjects since day one. For the next edition in a few months, I am ready to take suggestions. Let me know what you want to hear about in this wonderful world of the New Day Project Management approach.
Tags: corporate real estate, cost savings, engineering value, PM, project manager, value engineering
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Supply Chain and the Triple Bottom Line
August 24th, 2011
By Rob Wheeler, Vice President
Sustainability continues to be an important issue to corporations. Eighty-one percent of Fortune 500 companies now have some type of corporate responsibility report or CR statement on their website. In the last four decades we have moved from energy audits, to environmental audits, to sustainability assessments. These various audits and assessments have now evolved into what is being termed the “Triple Bottom Line.”
The triple bottom line involves thinking not just of corporate profit but also along three pillars of responsibility. Along with economic concerns, a company should also consider the ecological and societal impact of their decisions.
Quantifiable environmental impacts include water utilization, consumption of finite resources, energy use, and pollution emitted. Societal issues include the health and safety of the employees and visitors, diversity, education, and community involvement.
What does this have to do with supply chain? A lot, actually. The supply chain can have a very big impact on the triple bottom line. Through an effective corporate sustainability assessment of the chain, decisions can be made to improve the organization in all three aspects of the Triple Bottom Line.
Most people think of sustainability in environmental terms. Think about the various decisions that can be made in the supply chain to affect the environmental impact of the organization. While a network optimization may be geared at lowering overall transportation cost, it might also reduce overall resources and energy utilized. Fewer miles driven means fewer gallons of diesel fuel burned. There could also be a greater emphasis on intermodal transportation to lessen the use of fossil fuels. What about the real estate? Is there a way to incorporate alternative energy methods such as solar energy into a warehouse? All of these considerations typically help the monetary bottom line, but they also help the bottom line of the planet.
The people side of the Triple Bottom Line is a little more interesting. To sustain a business it pays to keep quality employees happy and healthy. It has been proven time and again that maintaining this positive work environment will lead to greater profits in the long term. What does this have to do with industrial real estate? There are ways in which choosing an industrial facility impacts the workforce. Does the warehouse let in natural light? It is truly convenient for the disabled? These are factors to consider, and they may lead to unexpected productivity gains.
Corporate responsibility and measuring the Triple Bottom Line can also lead to gains on the top line of the income statement as well. Large organizations, especially large retailers, have begun to include various social responsibility measures into their criteria for measuring vendors. Better shelf space, and possibly better business terms, could be awarded for doing what is right. This should be a definite incentive to ramp up corporate sustainability measurements.
From an initial supply chain assessment, to a full organizational sustainability plan, the Industrial/Supply Chain team at CresaPartners can help your organization toward success in all three pillars of the Triple Bottom Line. Let us know how
we can help.
Tags: corporate real estate, corporate responsibility, industrial, sustainability, triple bottom line
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Workforce & Location Planning: The First Step in the Real Estate Process
August 3rd, 2011
By Tim Myllykangas, Principal
Founder, Workforce & Location Planning
Earlier this year, when I was speaking at the CFO Rising conference, I asked those attending my session if they knew how Workforce & Location Planning (W&LP) could help them with their corporate location planning. More than 90% indicated they had never used a workforce planning consultant. But by the end of the session, many said they could definitely benefit from this service and wanted to learn more.
Indeed, it is important for C-Suite executives to be familiar with this offering as part of an integrated package of corporate real estate services. Accordingly, I thought this would be a good time to address what W&LP is all about and how it can meet your needs.
The Process
In a nutshell, W&LP is primarily about business and workforce strategy, not just real estate strategy.
Often, companies first examine their current portfolio and try to work within those parameters. This is a function of Real Estate Portfolio Strategic Planning, which is actually step 2 in a typical portfolio optimization process.
In a typical portfolio or multi-city project, W&LP is the first step in the process since it starts with a clean-slate perspective—i.e., it looks at the broader picture beyond the current real estate portfolio. Addressing what the C-Suite is typically most interested in upfront, it focuses on finding ideal corporate locations based on workforce recruitment, retention, labor market sector saturation, competition, turnover, and salary levels. In other words, W&LP is ensuring that the most valuable asset and largest expense—people—is driving the location decisions for existing and new locations. The goal is to create an optimized workforce footprint, whether that involves existing locations or not.
In addition to workforce, other non-real estate location factors we research, analyze, and compare include: power costs, power reliability, natural disaster risk assessment, and incentives.
The Pitfalls
Some companies think they can short-circuit the process by working with brokers or consultants who don’t specialize in W&LP. For example, they will pull labor costs from a web site and plug that into a cost-line analysis. This is a dangerous approach for several reasons:
-Companies need to take a “deep dive” into competition levels, recruitment, retention, turnover, etc. A slightly lower-wage city might actually have higher turnover, making total labor costs higher when re-training and recruitment costs are considered, or a lower-cost community may have an insufficient amount of labor.
-Our research has found that in many cities there is an inverse relationship between unemployment rates and workforce supply. In some cities, the higher the unemployment rate, the lower the available workforce, often due to a lower work ethic. In some cities with lower unemployment rates, there can be more available workforce. This is due to higher levels of under-employment, a factor that is far more indicative of the ability to recruit and retain than unemployment.
-Companies need to work with experts who can interpret the data collected from multiple sources and understand its limitations, where and how data is often over-averaged, especially if the source is a free web site. Without the benefit of more comprehensive, “real data,” companies often ill-advisedly eliminate cities that might potentially be great candidates, or they might keep poor choices on the short-list that should be eliminated.
The added value lies in analyzing and interpreting the data from many sources, then turning that into strategic, actionable recommendations.
Tags: corporate real estate, cost savings, location planning, Site Selection, unemployment
Posted in Workforce & Location Planning | Comments Off
Valuations Still Uneven, Vary by Product Type
July 27th, 2011
By Jim Leslie, Principal
Valuations of commercial real estate product continue to vary by product type. Primarily due to the housing crash and the continued fallout of the mortgage debacle, most multifamily rental communities are showing signs of stability as well as rent increases. The industry is welcoming back individuals who had become home owners with the relaxed mortgage underwriting but now find themselves renting again. The experiment of making everyone a homeowner has shown to be unsustainable, recharging demand for apartments. Investors are rushing to purchase this product type at very competitive cap rates as they feel rent will continue to increase in the foreseeable future.
Office product has not been embraced by these same capital sources, and it is still difficult to find money (debt or equity) to fund new construction. Other than 100% fully leased build-to-suit opportunities, very little new construction is occurring in most areas of the country. In addition, landlords are still working to modify their capital stack to reduce leverage and extend terms. As a result, many landlords are finding liquidity to be a challenge and that is creating problems for them in negotiating renewals as well as limiting their ability to close new leases. Tenants should be looking at their current portfolio of leased properties to identify those landlords with liquidity issues and approach the landlord now to probe options which will be beneficial to the tenant and may also be helpful to the landlord. For example, a recent transaction allowed for the tenant to pay for tenant improvements in exchange for a reduction in rent, giving the tenant a 15% annual return on the capital it invested in the improvements. That is a 10 year investment return of 15% compared to a 10 year treasury rate of 3%. How many Chief Financial Officers would love to get a 15% return on their own operations and not worry about the investment? These kinds of returns are more the norm than the exception and can have a meaningful impact on the stated rent in the lease agreement. It also allows the tenant to effectively gain long-term occupancy at below market rates regardless of who eventually owns the building. Other opportunities exist for tenants to purchase the buildings they occupy at below replacement cost values. They will eventually be able to take the building back to market in a sale leaseback transaction utilizing the credit of their balance sheet to maximize value. We are seeing some developers beginning to sell some of their owned portfolio to free up liquidity for their remaining assets. They recognize this is not a strategy that maximizes value, but they are going through a unique time and are looking to keep what they can. It seems all of them are repeating the mantra: “it is what it is.” This is an ideal time for a tenant to approach their landlord to see if a transaction can be accomplished. There is no harm in pursuing those assets which you feel are quality and strategic to your core business.
This opportunity will exist throughout 2011 but it is beginning to appear that all “troubled” real estate investment portfolios will be either recapitalized or sold by 2012, creating a much more stable and patient landlord for the future. Now is the time for tenants to aggressively review their own portfolio to see if opportunities exist within their markets.
Tags: corporate real estate, landlord, tenant, valuations
Posted in Capital Markets | Comments Off
Modest Job Growth Helps Recovery in Select Markets
July 20th, 2011
By Bill Goade, CEO
In mid-2010, economists declared that the recession was over, and the recent unemployment rate of 9.5% seems to confirm modest job recovery. But as Q2 2011 comes to a close, the recovery has not picked up any momentum and in fact seems to have slowed. The few markets that showed recovery in Q1 (Silicon Valley, the Bay Area, Cambridge, Mass., and high-rise midtown New York) continued to show strength. However, in most office markets, job growth has remained modest, and demand has been relatively flat. It will probably be another year before national vacancy begins to fall significantly and average rental rents rise. A full market recovery will probably not occur until 2013, when we likely will reach pre-recession employment levels, and that will occur only if the job growth picks up. For the most part, there is little velocity for class B space, and suburban areas are generally suffering more than CBDs.
The national availability rate of 17.3% is slightly down from Q3 2010, the high point since 1993. Meanwhile, average rents are still well below the highs by more than 25% in 2008 in most markets.
In most places it remains a tenant’s market and an especially good time for credit-worthy tenants to exercise their leverage in negotiations with landlords. While some landlords are becoming more bullish, most are focusing on tenant retention at almost all costs as demand remains sluggish in markets nationwide.
Along with modest job growth is the phenomenon of unused “shadow space.” Companies will backfill that space as they hire rather than expand. At the same time, over 70% of transactions continue to be renewals rather than relocations.
Bright Signs
Positive indicators include the following: The amount of occupied space increased slightly for the third straight quarter, and average office rents also rose slightly, their first spike since Q2 2008. In addition, investment activity rallied last year, recording $168 billion in sales, up 60% from 2009.
Opportunities for Tenants
The window is still open for tenants in most markets, and we continue to encourage companies to be proactive in negotiations before their leverage begins to slip. In some instances, one- or two-year extensions are available as landlords anticipate a better market in 2013 and beyond. Because of the likely tightening in availability, we rarely recommend the short-term extension strategy at this time, unless the business plan simply cannot support a longer commitment. However, tenants need to weigh flexibility versus likely rent hikes in two or three years. In other instances, tenants, especially those with strong business plans, have an opportunity to lock into leases of eight years or more. Finally, given low interest rates and impending changes in lease accounting, this may be an excellent time for some tenants to buy real estate.
Click here to read about your local market.
Tags: corporate real estate, job growth, landlord, recession, tenant, unemployment
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