As Connecticut office space vacancies continue to rise, commercial real estate owners will be decreasing asking rents and making concessions to attract credit- worthy tenants in the market today. Smart owners will aggressively work to fill their buildings and lock in their cash flow now. Connecticut office space is going on sale in 2009! How can your small business benefit from this economic downturn? If your business is stable, now would be a great time to consider trading up to class A space in that swanky office building you've been longing for.
According to the Cushman & Wakefield1Q 2009 market report, vacancy rates in Hartford County rose to 18.2% (22% in the Central Business District) and Fairfield County rose to 16.3% (19% in the CBD). That means over 11 million square feet of office spce is available right now in just these two counties alone! And that's only in buildings that are tracked; there are many small buldings that are not even included in this survey.
If you're coming close to the end of your lease and you are in a financial position to take advantage of this oversupply of space on the market, now is the perfect time to start shopping and trade up to class A space without breaking the bank. Here's how.
Yes, there is still a gap in the asking rents between class A space and class B space, there always will be, but, with careful planning you may be able to make that move affordable now. In spite of the higher rents that class A buildings generally command, there can be offsetting savings that can make a move financially possible if you shop carefully. Here are some tips to make the most out a move up to a class A location.
- Efficient layoutand lower loss factors- When looking at space, look for a building that has a low loss factor. (See how buildings are measured). A lower loss factors mean more usable area, so even if the rent is a bit higher per square foot, overall the rent can be affordable if you take less space in a building with greater efficiency.
- Better management - In general, larger Class A buildings tend to have better professional management than smaller class B or C buildings, particularly if they are part of a portfolio or complex of buildings. A well managed, modern building can have lower operating costs than older class B and C buildings with comparable services. Energy efficient windows, HVAC management systems, and upgraded lighting fixtures can offer considerable operating savings. In addition, an owner or manager of a portfolio of properties can frequently purchase goods and services such as cleaning, building supplies and landscaping services at wholesale prices driven by their enhanced buying power. When shopping for your new space, pay close attention to the operating expenses and how they are charged.
- Amenities - A frequently overlooked asset to a small company is the amenities offered by larger class A buildings, which can save you a fortune! For instance, many small companies think they need their own conference room, but if this space is infrequently used, finding a building with a "community" conference room is a much better alternative. Many class A office buildings offer fully equipped conference rooms with Internet access, video conferencing and presentation capabilities, either free to tenants or at reasonably hourly costs. To put this in perspective, a conference room that is just 12 feet by 16 feet equates to 231 SF with a 20% loss factor; at $28 PSF, that conference room is costing you about $6450 a year. Consider if this is a necessary expense. Using a small office for impromptu meetings is more cost efficient and using the building's conference room or even a hotel conference room for those rare meeting for a crowd can be better alternatives. The same reasoning applies to break rooms. A building with a cafeteria is a less costly alternative to using your valuable leased space for an eating area. Provide a coffee area for your employees, but avoid paying rent for lunch table space if your building can provide it. Finally, storage is important. This is an expensive mistake many small companies make for the sake of convenience. Don't pay $28 a foot to keep old files, broker computers, and other accumulated junk. See if the building has some less expensive storage space on site, or rent a storage unit nearby. Invest in scanner technology to cut down on your need for file space...just remenber to back up your files and store them off site!
- Experienced advice - Many companies feel that by avoiding a broker, they can save money. This is generally not the case. In fact, the knowledge of an experienced broker can actually save you money. See How Do I Find Office Space. Usually a customary brokerage fee is already built into the rent and in almost all cases, the owner is paying the broker so there is no charge to the business for brokerage representation. The trick is to find a broker that has a lot of experience in commercial real estate and has negotiated many deals, experience matters in this case. While we try on our blog to help novice tenants understand the complex world of commercial real estate, there is no replacement for the years of experience a seasoned commercial real estate professional possesses and they can add value far beyond their compensation. Some companies, such as Sheridan Real Estate Solutions will provide a preliminary asessment for a small fee as well as full representation for helping you find space.
- Concessions - Property owners may be offering offsetting concessions to attract new tenants. These concessions can include free rent, generous work allowances, paying your moving expenses or even taking over the remining obligation you have on your old lease. Ask your broker or the property owner what types of concessions he is willing to offer to new tenants.
So, if you have been looking the opportunity to upgrade your office space, 2009 many be the perfect time to trade up to that class A building you thought you could not afford in the past. You can start your search for space on MySquareFeet,the premier commercial real estate listing service specializing in office space listing throughtout Connecticut and teh Northeast US.
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