Business Relocation, Advisory and Commercial Property – How it all works!

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Businesses are required to upscale or downsize in order to meet market demand, growing trends and cultural changes.

Without a degree in property, some businesses may get caught up in the daunting task of shifting their operation of many years to a new location.

The questions mostly asked are 1) where should our business be located – should it be close to staff, clients, public transport or attention of new prospects. 2) how much space – should we plan to secure and for how long. 3) what changes do we want to make to the business during the transition – do we want to expand, remove, merge or grow parts of the business 4) how should this new space look and function  – should it bring wow factor to our clients, comfort and ideas to our staff or added functionality and efficiency to our processes. 5) downtime –  And finally 6) what is this going to cost- factoring in Fitout and relocation costs, depreciation over time and the lifecycle of a lease including increases and market reviews.

A tenant advisor assists businesses great and small by analyzing its position in the market, generating a performance brief to the property industry and evaluating the options; financially, culturally and operationally well in advance. This is Usually 5-10 years from now considering growth and direction of the business.

A tenant advisor focuses on staff engagement, factors that influence change, management meetings and business forecasting to position a business mentally and financially for the next decade. This is why it is important to stick to what you do best and have someone skilled in the market take the reigns for the best outcome.

Advice by most advisors are usually at no cost to the business as they are picked up by the incumbent lessor, much like an agency fee to a commercial agent.

In order for a business to make the most informed decision, it is best to submerse your self into the market, much like when buying your first home. No matter how much advice is given to you about the best value, location and potential, no-one is comfortable signing the dotted line unless they have made an informed decision. 

The best way is to do this is to get involved in the selection process by shortlisting properties with your advisor, discussing the pros and cons and of course visiting those that you like the most. Most often the selection process is carried out using the process of elimination. Asking the earlier questions to yourself, your management team and your staff can also assist in finding that stand out site.

Once you have your top 2-3 properties selected, the next step is negotiating. I have had some of the most key executives law firms and residential real estate  agencies in Sydney tell me that they know how to negotiate and that they don’t need an advisor, but the commercial property industry operates intrinsically different to any other. To understand the synergies usually takes as long as it does to start and build an established business in Australia. What I have learnt in my 10 year directorship at Niche is that if you don’t know how to do something in the best way, employ someone who does. It’s called investing in knowledge.

Negotiations take the form of a pre-contract document called a Heads of Agreement, this is where you can secure the best market rental rate including outgoings, rates of increase, terms of Makegood, incentives and room to grow and expand or exit the agreement if required. Unlike a residential lease which is heavily regulated by fair trading, the commercial property market is not so heavily regulated for fairness, which means if a lessor writes clause into the contract stating that on termination you need to turn the office into an amusement park, it must happen in order to spare financial consequence. Knowing what to look out for in a commercial lease is best attended by someone with the experience in fair lease negotiations opposed to a solicitor with a hard stick approach.

The idea behind lease negotiations is that an advisor should be involved to the extent  required to set up a fair arrangement between a lessor and a tenant and then extract themselves so that there is a good relationship for the lease term ahead. This is why setting the foundation within a fair Heads of Agreement is paramount.

Once the “heads” is drafted and agreed, a solicitor should then prepare a lease which mirrors and compliments the Heads to avoid confusion and ambiguity when administering the contract.

It will then be the responsibility of the business to put the services of design, approvals, construction and relocation of their new office to the market for pricing and best fit. The sooner in the piece you can involve these disciplines the better. I have found that the more time spent on planning a Fitout with meetings and communication, the more successful the venture is. You must put time into the design and development of your new corporate home.

You also want to engage firms that fit your culture and understand your business and those that have a proven track record working together and with your incumbent lessor. You should maximize any early access negotiated within the heads of agreement for Fitout to minimize the cost of doubleup in rent and any liquidated claims from your previous lease for failing to exit when required.

An advisor can also assist with the process and if your businesses corporate governance requires or if the size and/or value of the investment is significant, you may also consider seeking the services of a client side project manager who can advise and instruct you on best value and process for your Fitout.

Once you have your fitout underway, do not overlook your company’s obligations under your existing lease. There may be requirements for you to seek council approval and carry out a make good of your existing premises in order to surrender your lease and get your bond back. Your tenant advisor can help with negotiations with the aim of seeking the best value outcome. 

So if a tenant advisor can help you select a new space and a project manager can help coordinate your relocation and Fitout, you might be wondering how to select these services. 

The best way to select an advisor is to find one that listens, engages you and your team, is proactive and independent from landlords and agents. After all they should be acting in your best interest and it should not be motivated solely by financial outcomes.

If you are looking for a tenant advisor with the experience and know how to support your business growth, contact Niche Tenant Advisory.