The following is my article in the May 5 issue Colorado Real Estate Journal. The digital version is only available to subscribers.
After months of decline and inactivity in real estate, 2010 seems to be more active in terms of leasing. One interesting observation is the activity is dispersed over a variety of market sectors, which has property owners thinking beyond their traditional box of desired tenants. Take, for example, the neighborhood retail center that has filled vacancies with non-retail uses such as churches or libraries. Office building owners are leasing spaces to schools or urgent care centers. This stems from the effort to maintain rent rolls and to keep the lenders at bay. With the non-traditional uses come non-traditional issues that ultimately affect the schedule and, more importantly, the bottom line. Do you have the right team to address your non-traditional issues?
Property owners should surround themselves and their projects with consultants and contractors that possess a diverse history with their expertise. With experience comes knowledge. With diverse experience comes the ability to merge the knowledge to understand how one issue may affect another. Can your retail architect take on a medical project? Can your office tenant finish contractor build out a restaurant? Now more than ever, your team needs to be sharp and be able to think on their toes – but most importantly, that thinking needs to be accurate. Your team needs to know the building code and construction practices for the proposed uses. Not just for their own discipline, but each should also have a general grasp of the other disciplines in order to better understand how they interact. The more the team knows at the outset, the quicker you can reach a more accurate and reality based solution.
For example, what are the impacts to a building when changing from a Mercantile (M) occupancy to a Business (B) occupancy? What about changing to an Assembly (A) occupancy? There are varying fire rating requirements depending on the size of the building and the proposed use. What if a significant storage area was required – is your sprinkler system appropriate? Are the restrooms adequate for the new use, or do they need to be brought up to current ADA/ANSI standards? The building code defines numerous requirements for each occupancy, and each requirement may trigger additional requirements. The snowball effect can be detrimental to the budget and to the schedule. Depending on the condition, the associated cost can significantly alter a pro forma and may even kill a deal.
The right team can help determine what difficulties and obstacles may exist, even before a project moves forward. A visit to the space should be performed with the architect, engineers, and the contractor to review conditions. Ideally, this is done prior to space planning. A good discussion amongst the team can generate a host of ideas that may even enhance the owner’s bottom line. The group can evaluate costly items up front and perhaps discover ways to address them in a better way. Two heads are better than one, and potential project pitfalls will likely be discovered, solved, and budgeted for early on in the process.
Perhaps the prospective tenant joins the group at a probable space to convey their needs. A quick floor plan layout can be established on the spot to get everyone on the same page. A good consultant and contractor will aid the owner or broker in “selling” the space by engaging the tenant and helping them visualize their potential home. When a tenant senses the team’s sincere interest in making the project successful, a tenant will likely retain a more favorable opinion of the property.
Owners and tenants are getting creative in order to get deals done. With tenants in short supply, it is imperative to find every advantage you can for your property. Your consultant and contractor team should be able to think outside their usual box, or be able to create a new box altogether. Diverse and experience based knowledge can be a hidden advantage in today’s tight real estate deals.
