Navigating the Transaction Process – Part I
By Liz Roberts
Transaction Management Process is a term that is frequently tossed around the commercial real estate industry. Most every Corporate Real Estate Executive has at least one, if not many, process flow charts sitting in binders on their bookshelves. Personally, flow charts give me headaches, but they fill an important role in demonstrating process and developing best practices for every type of real estate user.
The transaction process can be broken up into six buckets:
-Define Requirements
-Decision Support
-Analysis/Negotiation
-Design Development
-Construction
-Move-in
Let’s start at the beginning – Define Requirements. In a perfect world, the real estate requirement is defined via a clear and articulate strategy that was developed months, or even years, prior to an action taking place. But this is not always the case, so before launching into a real estate goose chase, ask yourself the following questions:
-What is driving this decision? Is it a business action—like employee growth—or a real estate action—like an upcoming lease expiration?
-If it is a business action, how does this affect the real estate? Does it create a need for more space? Will you need flexibility? What are the key factors, and what is the business horizon that you are examining? Three years? Five years?
-If it is a real estate action, how does this lease currently complement the business drivers?
-Where does the lease fit into the bigger picture? What are your overall real estate goals?
Once you’ve developed answers to some, if not all, of the above questions, the next step is to determine preliminary criteria. There are four items that every group should address:
Financial Criteria
-What is the current financial situation? How much do you pay each month? Don’t just focus on rent but on your true “pay rate”, i.e. what is the amount of the check that is written on the first of the month?
-How does your current rental rate compare with the real estate market? Are you above or below where transactions are closing today?
-What is your financial wherewithal? Can you afford more? Do you need to cut costs?
Location Criteria
-Does your current location work for you? Are you near amenities, major highways, or public transportation?
-How are employee commute times? Are you close to your customers? Do you need to be?
-If you relocated, how would that affect the employees?
-Does your location impact your tax burden? Would changing municipalities help or hurt you?
Operational Criteria
-Does your current space complement your business needs?
-Is it too much or too little? Does the configuration of offices, workstations, and common areas create the right kind of environment?
-Are you in a “conventional” office? Would considering Alternative Workplace Strategies make sense for your organization?
Image/Quality Criteria
-Does your office space properly reflect your business and/or brand?
-How does the space and building look? Is it new? Old and tired?
By examining each of the listed criteria, one can create a strong roadmap for identifying and securing the ideal office. Your commercial real estate advisor can help you to answer all of these questions, and then work with you to develop the appropriate deliverables. These deliverables include a space program which details how many offices, workstations, conference rooms, etc. that are needed. This also includes a preliminary market survey that will include the options in the market that fit your preliminary criteria. Lastly, these criteria help to develop a preliminary budget of relocation costs, as well as an expected timeline of events.
Now you have a clearly defined requirement and the associated tools to begin your Transaction Management Process. I will discuss the subsequent step—Decision Support—in my next entry.
Tags: corporate real estate, process, real estate requirement, TM
This entry was posted on Wednesday, November 3rd, 2010 at 9:00 am and is filed under Transaction Management. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.