Relocating an Office or Business

Considering a new address for your growing firm? It's all about location, location, location.

This, and nine additional key factors every business owner should consider before relocating to a new site. With the vacancy rate for office space dropping nationwide, more and more business owners are considering office moves - either locally or out-of-the-area. Thomas J. Bisacquino, president of the National Association of Industrial and Office Properties, answers 10 questions about company relocations.

1.      What are the top three issues that companies need to consider when they relocate?

Of course, the old adage in real estate is “location, location, location,” which is the primary issue that companies must evaluate when relocating. And in today’s age, companies are taking into consideration more bottom-line-based factors: economic shifts and the ability to downsize or increase quickly, availability of quality employees, and managing risk of either housing core operations under one roof, or separating mission-critical operations.

2.      What should companies look for in retaining a broker to search for space?

A good broker doesn’t just find or sell property, but works like a member of the client’s business who is trying to satisfy short- and long-term business strategies. The first step is to know what the business’ needs are, and solicit brokers who specialize in that specific type of building or area.

Interview brokers to evaluate expectation, personalities and communication styles. Ask that your broker stay up-to-date in specialized training or aware of the latest market trends.

Good brokers have the knowledge and sophistication to guide a client through a series of options to determine the best fit. The broker’s recommendation should strike a balance that is mutually beneficial.

3.      What costs can companies expect to incur when relocating?

Costs for moving an office vary, due to building standard and building design specifications, the size of the project and the project schedule.

In addition to the cost of the square footage, factors such as build-out construction (demolition, ceilings, flooring, mechanical); interior items above building standard (including wall finishes, plumbing, mechanical), and tenant costs (telephone, design and engineering fees, cabling) all come into play.

Relocation and tenant improvement are often covered by the landlord and offered as an incentive to attract new tenants.

4.      What are the various types of office spaces and what is their significance?

 Office buildings are generally classified as A, B or C space, with classifications based such criteria as location, rents, building systems, and building finish and services. The NAIOP Research Foundation funded a project last year to standardize office real estate terminology; the finished glossary, entitled “NAIOP Terms and Definitions: U.S. Office Market,” is available at www.naiop.org.

5.      What steps can a company take to secure the best deal when relocating to new office space?

Since office space is typically the second highest business expense, second only to employee wages, negotiating for the best lease is a profitable move. The ability to negotiate depends greatly on leverage – are other companies vying for the space? What’s the vacancy rate in the area?

Take into consideration all of the factors of the lease – the space needed, terms, rent escalations, tenant improvements, etc. Owners may make concessions for longer-term leases, although the lessee takes on the risk that the company’s space needs may change or the market rate may decline.

6.      How big a factor are taxes when considering relocation?

 Businesses may be offered a myriad of incentive packages when considering a relocation, and tax credits are typically a large part of the offer. Depending on where the business relocates – whether it is an area under revitalization, an environmental/brownfields property or a suburban location – the tax credits vary.

Tax incentives encompass everything from property tax abatement, income tax reductions, sales tax exceptions, utility rate reductions and infrastructure improvements.

Local economic development authorities typically can provide detailed information on the incentives available to businesses moving in or within their jurisdiction.

7.      Is subleasing still a viable option or should companies relocate into their own space?

Subleasing remains a viable option, given that corporate real estate executives want the ability to be able to react quickly to economic conditions, giving them more flexibility and options for early termination or expansion, as the need arises.

8.      When is the best time of year to relocate?

 Unfortunately, there is never a “best time” to relocate an office – that depends on space needs, economics and the time it takes to find and secure new office space.

9.      How long can a company expect the relocation process to take from initial search to move in?

There is no magic number on the relocation timeline, as the length of time from site selection to move-in can vary widely. The amount of time needed to fully relocate a business depends the size of the company and the distance of relocation, as well as the amount of time it takes to research, secure and build-out the new space. This can range anywhere from six months to years, and each company’s timeline will be unique.

10.  What is the current office space market like in the Washington, D.C. area, particularly Fairfax County?

The market is picking up nicely. Fairfax County in particular, remains one of the top locations in the country – for both businesses and residents alike.

The county’s proximity to Washington, D.C., and government agencies, its highly-educated labor force and large high-tech corridor are expected to continue fueling business expansion, relocations and new business start-ups. In addition, the services the county provides – from its school systems to its recreational facilities – will also continue to serve as a strong draw.

As a result, office vacancies are continuing to decline in Fairfax County, thanks in part to a decreased amount of space becoming available and decline in future speculative projects. Last year, for example, leasing activity reached more than 12.6 million square feet in new transactions, an increase of 84 percent from year-end 2003.