Real Estate 101 From Marc Realty

Welcome to Marc Realty's Introduction to Real Estate, an opportunity for you to learn the fundamentals of leasing commercial office space, whether you are a first-time tenant or an experienced commercial renter. We hope this information will help you prepare and plan before heading to market, and then help you evaluate and compare your various office space options once you get there. By working with you as your business partner, our goal at Marc Realty is to help you select the commercial office space that is the right fit to help your business grow and succeed.

THE BIG FOUR

Each commercial real estate transaction is comprised of four main components. They are Qualitative, Operational, Geographical and Financial:

Qualitative

The qualitative component of commercial real estate relates to the quality or kind of space you need for your business. It includes the look, feel and size of the space; the interior and exterior design of the building; and the building’s age and character. Essentially, qualitative factors relate to: What do you want your office space to say about your business and what do you want your office space to look like?

INSIDE SCOOP FROM OUR BROKERS: Brokers make it a point to listen carefully to the qualitative needs of the person who will be signing the lease, to get a sense of style and taste that best suits the image and culture of their company.

"We'll ask right off the bat whether the business owner is looking for space that is modern, traditional, loft space or something altogether different,” says a Marc Realty broker. “Understanding your design preference from the start saves time and money.”

As you start looking for a space, prioritize your needs and focus your building design preferences in order to facilitate the process.

Operational

The operational component covers all aspects of how you work and function in your space day-to-day, and how those operations interrelate with your office space. Everything should be considered, including but not limited to: the operational hours of the building; security policies; elevator access (and whether your business needs access during holidays and weekends); heating and cooling policies, etc. Here, also, are the operational aspects of the interior space itself to consider: the design, layout, the “fit and finish” of the space, and how these elements relate to your daily operational requirements.

As a business owner, it is important to consider the kind of office environment and the layout of the space that will enable your company to run efficiently. For example, if you run a sales office, you may require an egalitarian design, which is an open space without perimeter or private offices. Conversely, if you’re a partner in a law firm or principal with an ad agency you probably will require a hierarchical space plan, which includes private offices of varying sizes and conference rooms. A business operating a call center may have completely different design needs, with smaller space requirements per employee.

The operational component also covers lease, rent, and terms of the lease agreement.

It's a good idea to predetermine your lease requirements and the amount of space you will need, and, if possible, forecast your future space needs as well.

INSIDE SCOOP FROM OUR BROKERS: Once brokers understand the type of business you operate, they'll usually want to know how many employees you have on staff.

"Are these full-time people or part-time people, people that come in once a week, or a mixed bag? This helps us to determine how large the office has to be," says one broker.

On average, our brokers approximate 200 Rentable Square Feet (RSF) per person for an open space. That figure changes, of course, if tenants require more private and perimeter offices, like a law firm or any other kind of hierarchical business.

"If the tenant has not clarified those issues," says one broker, "it becomes the Goldilocks Syndrome. We're showing them spaces that are too big or too small. And that's a waste of time."

Geographical:

Fundamentally, real estate is about location. As you determine where your business should be located, you will need to consider how important location is to the success of your company.

If your business needs to maintain a stylish image for your clients, you'll actively seek out the prime locations; if ease-of-access is important, both for your clients and commuting employees, you may want to consider centrally located areas, near all modes of public transportation. Perhaps you're looking for a suburban location to handle satellite needs or a growing clientele in outlying areas; or, you're an established outfit with a strong suburban presence, looking to open a downtown office to receive out-of-town clients. It all depends on what's most important to the success and growth of your business.

INSIDE SCOOP FROM OUR BROKERS: When thinking about where to locate your business, it's important to consider as many factors as possible, and then rank them. For example, it might be more important to have a space that is more accessible for employees than for clients, simply because clients rarely visit your space. Or vice versa.

"If you're looking downtown, we’ll want to know, where are your people -- clients or employees -- coming from? Do they all come in from one of the Metra stations or perhaps different ones? We will use that information to help you find your ideal location,” says one broker.

"If they come from many places, and you’re trying to cater to employees and clients, we’ll help you find a central location. If most employees drive into the city, we’ll want to get you close to expressways and garages,” our broker adds.

"Again, it all depends on what’s right for you, your employees and your line of work.”

Financial

You found the perfect space, with the perfect views, and it meets most if not all of your Qualitative, Operational and Geographical needs. Now you have to determine whether you can afford it.

As part of your planning process, you should meet with an accountant or financial advisor to determine what you can afford to allocate for rent and related costs. If you're shopping for space, you will want to know: What does it cost to rent and to operate? How much are utilities, insurance, taxes, any/all costs associated with maintaining a modern, functioning office space? Are there additional expenses for maintenance, cleaning, heating and cooling?

Once you have a general idea of fixed expenses, you'll be able to determine what you can afford.

INSIDE SCOOP FROM OUR BROKERS: Without question, cost is one of the most important, if not THE most important, consideration for prospective tenants. After everything else is said and done, it will come down to a question of dollars and cents.

"We're sensitive to the money issue," says one of our brokers. "We know people are, in many cases, working with tight budgets, and we want to help them get the most value for the money they've allocated to rent."

Our broker says one of the ways to cut to the chase on this issue is not to ask how much a tenant can afford, but rather how much is too much.

"Encouraging tenants to think about financials in that sense is always helpful to us, and allows us to do a better, more efficient job of showing them spaces that are easy on their eyes and their wallet," says one broker.

Conclusion

These four components -- Qualitative, Operational, Geographical, Financial -- identify separate issues, but they are also directly related. Alter or change the variables of one, and you may change them all.

Ideally, you'll want to think about what is essential to you: the look and feel of the space; the operational aspects of the property; the location; and the rent. Working with your facilities director and/or one of our brokers, you can prioritize those considerations, ranking them in order of importance to strike the perfect balance and land the right space, in the right place, for the right price.