“Attack this day with an enthusiasm unknown to mankind”, is what the father of two current National Football League (NFL) head coaches said to them when he dropped them off for school each morning as they were growing up. That father is Jack Harbaugh and he is the proud father of Jim Harbaugh – head coach of the San Francisco 49ers and John Harbaugh – head coach of the Baltimore Ravens. Based on the careers of both Jim and John it is apparent that their father’s entreat to them each school day provided them with the drive to be successful.
In these difficult times that many in business face, Jack Harbaugh’s advice to his sons should resonate with everyone. Enthusiasm (or passion) for what it is you’ve chosen to do in life is critical, especially if you want to be successful. It may be difficult to maintain your enthusiasm when you look around at the competitive landscape; and if you’re going to survive and grow your company not only do you have to be enthusiastic, but everyone in your company needs to exhibit the same trait. Every organization, regardless of the size, needs a leader or leaders that can help guide it through the ups and downs that surely will take place over the life of a business and help instill the enthusiasm that Jack Harbaugh instilled in his sons. Without enthusiasm, you’re doomed.
After all isn’t that what real estate is really all about; Independent, localized acquision or disposition of real estate? My head spins from all this Integrated Services stuff, this strategic portfolio analysis insuring alignment of the real estate with business objectives. Don’t get me wrong, I love all that stuff but I think that more focus should given to the transaction. There are a lot of places where the basic transaction can be improved especially in deals from 5,000 to 25,000 square feet.
Let’s look at several areas where the transaction process can be substantially improved:
- Communication – In today’s world with Ipads, Ipods, Androids and Quad Core Desktops the creation, dissemination and management of information should be finely honed to provide the real estate team with timely, accurate, relevant, information. Dashboards, repositories, archives and managed databases can easily be used to improve the communications channels for each transaction.
- Architectural and Construction – I can’t think of a weaker part of the transaction than the mystery that surrounds the issues related to construction; cost as well as fit. This is the place that receives the least attention from the acquisition team of a 5-25,000 sf office deal.
— We need an architect day 1! We need to know what we are looking for, how big it needs to be and what special issues will make the space work or not. It should be done by the architect, I repeat, day 1!
— We need a construction estimator every time we plan to make an offer on space. Without knowing how much it will cost to construct the space and what the cost differences are between spaces we are shooting in the dark every time we make an offer and end up suffering the consequences.
- Demographics – Now surely no self respecting 5000 square foot tenant would even consider doing demographic analysis before they start looking for space. Certainly his broker never did! It goes back to the theory ” forget about where they say they want to be, where should they be”. It’s really not that hard to take everybody’s zip codes and pump them into a simple program to estimate commuting times and access to current and future labor pools. Also it’s probably a good idea to know where their competitors, vendors and customers are and throw that into the mix as well. Deciding where to locate is influenced by numerous factors including employee attraction and retention, workplace productivity, proximity to labor and alignment with your corporate brand. This applies to equally to small tenants as well as large ones.
- Supervision – Every deal should include the involvement of a senior level broker. These deals are too important to our customer to be handled by the junior trainee so they can “cut their teeth”, while the senior brokers are off chasing big deals. Proper use of communications tools can insure that senior brokers are kept integrally involved in every transaction, no matter how small. It kills me when I hear a senior broker say “let the junior broker learn from their mistakes”. Not only do I not believe that they will learn anything by making mistakes, I certainly don’t think it’s fair to our customers.
Let’s improve the Transaction Process before we analyze the portfolio.
After a short hiatus we are back writing about the New York Office Market. Expect features like: “What would I do” if Iwere you and “Who’s Koolaid are you drinking” reflecting todays market conditions and trends in New York City Real Estate.
– The up-tick in leasing activity in December sent the talking heads of NYC real estate to proclaim that the worst is over, leading landlords to believe that they will be able to achieve the inflated rents needed to stay solvent.
– In contrast, Goldman Sachs put 1.5 million square feet of office space on the market; 1.1 million square feet still looms at 11 Times Square; and Ogilvy has left behind a block of 740,000sf.
– To add more confusion, enter Cushman & Wakefield’s latest appointed leader quoted in Crain’s Feb 2, 2010: “as the country emerges from the recession there will be ample opportunities for success.” He says that banks will eventually foreclose on buildings and they will need to be sold.
More than ever, securing the best space at the lowest price requires greater due diligence to reveal the hidden opportunities.
We understand the market and know where your best opportunities are.
Deals of Note
One very significant transaction of note is Hachette Fillipachi’s signing of a sublease for 132,000sf from Time, Inc at 1271 Avenue of Americas. They are downsizing from the 263,000sf at 1633 Broadway as well as paying a discounted sublease rent. The fact that it is from Time, Inc just proves that recessions make strange bedfellows.
Featured Sublet Spaces:
– 25,000sf on Broadway until 2015
– 4,500sf on Broadway until 2014
– 8,000sf on Hudson Street until 2017
Jonathan Rudes, Senior Vice President and Principal in Lance LLC announced that Lance LLC closed a transaction Friday involving a “AA-rated” credit tenant, with a Tri-state region Landlord. The transaction’s structure provided Credit Tenant Lease/Improvement financing of just more than $100 Million in proceeds and included financing more than $15 million of tenant improvement issues related to the transaction.
We sat down this morning and discussed the best advice we could possibly give to a company considering their options for their New York office space. Here’s what we came up with:
- We believe the market will start coming back by April of 2010.
- We would go out and find the best deal we could and take it for as long as we could.
- We would look for subleases from companies that are either desperate or need to get out. These companies may offer significant concessions, include furniture, equipment or have installations that you would never consider building for yourself.
- Talk to your landlord, he may have lots of issues that you are not aware of that might motivate him to renegotiate your lease.
- Of course use a professional. Times a wastin’ and you need to be efficient and thorough while the market is still in your favor.
By Dana Rubinstein August 17, 2009 | 12:20 p.m
Should a businesswoman faced with declining revenue, an uncertain future, and enough vacant office space to host a U2 concert decide to put said empty space on the market, she’s bound to encounter a nasty truth: There’s stiff competition out there, a lot of it from Goldman Sachs. “There’s actually more sublease space on the market than during the last downturn,” said Jones Lang LaSalle vice president James Delmonte, referring to the 2001-2004 recession. “There’s more direct space as well.” To wit: New York City’s supply of sublease space has mushroomed a preposterous 139.2 percent since the second quarter of 2007, from 7,141,426 square feet to 17,083,224 square feet. During the height of the last recession, sublease space peaked at the much lower quantity of 14,366,608 square feet. By way of comparison—though, really, what American city’s office market can really compare to New York’s?—Washington’s sublease supply has grown 84.2 percent in the same time period; Los Angeles’, 70.1 percent; Chicago’s, 37.6 percent.
Most of New York City’s sublease space is coming from the devastated financial sector. The No. 1 source of sublease space—citywide and nationwide—is Goldman Sachs, with 597,000 square feet available at 77 Water Street. No 2: Barclays (Lehman Brothers), which has 456,842 square feet available at 277 Park Avenue. Perhaps needless to say, the surfeit of sublease space has sent rents marketwide plummeting. “When there’s more sublease space on the market, there’s more pressure on landlords to be competitive,” Mr. Delmonte said. In the third quarter of 2008, the average rent for a square foot of space in Manhattan was $73.14. In the second quarter of 2009: $59.36. email@example.com
There are a lot of things to consider when you are thinking about subleasing your space. First we need to know how long is your lease, what you are paying in relation to market value, and how long a term you still have left. Then you want to review the legal issues relating to the sublease, are there any restrictions or are you even allowed to sublease according to your lease. Let’s look at the competition, the market and the potential clients. Would you like to know the costs of subleasing, how long it takes and what other “team” members you might need to help out. Happy to discuss it, confidentially, candidly and professionally.