Imagine navigating the streets of post-pandemic San Francisco, eager to find the perfect office space that suits your needs and budget. Armed with newfound leverage as a tenant in a market rebalancing post-pandemic, you're ready to seize the opportunity and return to the office. Yet, as you delve into the market, you encounter a puzzling phenomenon – landlords and their brokers keeping the asking rent undisclosed.
But why do they do this? What's the rationale behind concealing the starting point of lease rates, leaving tenants in the dark even when they hold the upper hand?
If you asked a landlord’s broker why they don’t quote asking rates, most will tell you it's because they don’t know how much tenant improvements (TIs) will cost for any given tenant. That's not a very honest response because nearly all landlords have market driven TI allowances factored into rental rates. Why is it that unknown TI costs don't prevent other landlords and brokers from quoting asking rates?
Traditionally, asking rates have served as essential guideposts for both tenants and landlords, offering clarity and efficiency in the leasing process. However, in today's market, where tenants wield increased bargaining power, withholding asking rates has become a strategic choice for some landlords and brokers. Withheld rents are a good way for the brokerages and the landlords to pump up the rates they get.
Enter the realm of "Asking Rent: Withheld." In post-pandemic markets, where tenants hold more sway than before, this practice remains more prevalent than ever. It's a playground where tenants, despite their newfound power, are left to navigate a market with limited information.
In such a landscape, seeking the guidance of a tenant representative emerges as a practical solution. Tenant representatives specialize in navigating the complexities of the real estate market, advocating for tenants' interests, and ensuring transparency throughout the leasing process.
Armed with knowledge and a trusted advisor by your side, you can navigate the intricacies of the commercial real estate market with confidence. In a post-pandemic environment where transparency is paramount, leveraging professional guidance becomes essential for leveraging your newfound power as a tenant and securing the ideal space for your business.
At CroninCRE we are a tenant-focused, conflict-free commercial real estate advisory that maximize your leverage in every transaction. In the world of commercial real estate, fortune favors the informed and empowered tenant.
The current state of the office market in San Francisco presents both challenges and opportunities. Here's our perspective on the market and a prediction for the coming year.
Embarking on the journey to find the perfect office space can be both one of the most exciting and disruptive challenges for a business. Success lies in your ability to make informed decisions from the very start. In this guide, we'll walk you through the crucial steps of initiating the office space search, outlining key considerations, and providing insights to help you navigate the process seamlessly.
How to Start:
To set the stage for a successful office space search, begin by clearly defining your business and real estate objectives. Whether it's planned growth, specific location preferences, transportation and parking requirements, estimated space needs, optimal configuration, or technology specifications – having a comprehensive list of needs is essential.
Minimizing disruption and enhancing the efficiency of your search requires a deep understanding of your needs, budget constraints, and specifications. Achieve buy-in from all stakeholders upfront to prevent potential setbacks later in the process. Recognize that the timeline is a critical factor, and if you're pressed for time, it will inevitably impact your available options.
Who Should Be Involved:
Internally, designate a project leader as the central point of contact. Involve key departments such as IT, HR, and finance from the outset. The project leader should possess significant experience in corporate real estate and facilities.
Build a team of advisors to guide you through the process. Beware of potential conflicts of interest when choosing a commercial real estate broker. Opt for professionals who exclusively represent tenants, ensuring your interests are prioritized. Utilize tenant representatives, who are compensated by landlords, providing you with expert advice at no direct cost.
Engage an experienced real estate attorney to negotiate flexibility into your lease terms and ensure fairness and protection. Many initial lease drafts can be tenant-unfriendly, and a skilled attorney will help you navigate potential pitfalls while maintaining cost-consciousness.
When to Start the Process:
Underestimating the time and effort required to find suitable office space is a common mistake. While securing an executive suite or co-working space in 30 days is possible, it's an exception rather than the norm. Factors like space size, market conditions, negotiations, space planning, documentation, permits, and build-out time influence the timeline.
For spaces under 10,000 square feet, plan a search timeline of at least 6-9 months. Larger spaces, exceeding 10,000 square feet, necessitate a lead time of 9-12 months. By understanding the intricacies of the process and planning accordingly, you position your business for a smoother transition into its new workspace.
In the wake of the transformative impact of the pandemic, businesses worldwide are navigating uncharted waters, seeking the optimal balance of office space to support a hybrid working model. The question of how much space is needed is complex, and traditional approaches no longer suffice.
Hybrid Workspace Evolution:
The pre-pandemic shift from enclosed offices to open designs has now given way to a new era of workplace flexibility. Hybrid working models require a reimagination of office spaces, emphasizing collaboration and adaptability. A recent HqO report predicts a shift from 70% individual workstations and 30% collaborative space to a balanced 30% individual and 70% collaborative space by 2025.
Out with the Old, In with the Hybrid:
As the hybrid office design takes center stage, the traditional large conference room becomes a relic of the past. In its stead, innovative alternatives such as Zoom rooms, huddle rooms, phone booths, and flexible private workspaces emerge. This shift doesn't necessarily mean a reduction in space but rather a strategic reallocation to meet the evolving needs of the workforce.
Rethinking Square Footage:
Gone are the days of a one-size-fits-all approach to office space calculation. With only a fraction of the workforce present at any given time, the average square footage per employee model falls short. Enter the Space Allocation Approach, a tailored method considering the diverse elements of hybrid workspaces.
Space Allocation Approach:
This approach provides a nuanced understanding of usable office space, factoring in various components essential for hybrid working:
Navigating the Seas - The Pirate's Code:
Embrace the Space Allocation Approach, but remember, it's more of a guideline than a rigid rule. Anticipate growth, project headcounts, and lease space strategically to optimize occupancy throughout the lease term. Efficiency matters; rectangular spaces often trump angled corners. Your unique needs will determine the ideal mix of flexible, collaborative, and private spaces.
As Barbossa shrewdly pointed out in Pirates of the Caribbean, "The code is more what you’d call ‘guidelines’ than actual rules." In the evolving landscape of hybrid workspaces, these guidelines provide a compass, but the final map is yours to chart. Tailor your office space to the unique needs of your organization, embracing flexibility, collaboration, and the ever-changing nature of work.
#CRE #CommercialRealEstate #HybridWorkspace
A commercial real estate broker who represents both landlords and tenants in a transaction is a “dual agent”. Some states don’t allow dual agency because they recognize that brokers can’t effectively represent the best interests of both sides of a transaction. Yet, dual agency is a common practice in California.