Jim Simpson is the CEO and Co-Founder of Crelow, the industry’s first demand-driven marketplace for commercial real estate. We recently checked in with him about the evolution of the commercial real estate marketplace. Here’s what he had to say:
Tell us about Crelow? Why did you want to change the way business owners search for office space?
I’ve always thought there had to be a better way. I’ve been self-employed my entire career and I’ve also been a landlord. It’s hard for business owners to find office space, especially if they’re looking for something smaller. Crelow was designed to give business owners a choice and put them in control of the process. They can fill out a Bid Request themselves and deal directly with landlord reps or they can use our Rep Matcher service to find a tenant rep to help them. Either way, our goal is to help business owners get the great office space they deserve.
What are some of the challenges facing tenants in finding the right office space for their business?
If you’re a tenant looking for less than about 2,500 square feet, you may have trouble finding a tenant rep to help you. The commission on the deal sometimes isn’t enough to get them interested in many markets. If you try to go it alone, the listing information that’s out there is incomplete and can be very expensive to access. There’s also the challenge of finding a perfect fit.
This industry always talks about space as a commodity – location, square feet, price per foot and lease term. However, that’s not the stuff that really matters to the tenant. They’re looking for things that will make it easier to hire great people and keep them engaged. The image and style of the building, whether or not it’s pet friendly, or LEED certified, or has a place to store bicycles. Whatever. No two tenants are alike but they all tell us the same thing. In the end, finding the right fit is more important than getting a low price. That’s exactly what Crelow was designed to do.
What considerations should business owners make when searching for the right space for their business?
Obviously, you should have a clear budget in mind and think about whether you’re likely to grow in the next few years. Don’t just focus on dollars and square feet, though. Look at the big picture and think about all the things that will help you attract and retain great talent over the long haul, even if it’s something that doesn’t really matter to you personally.
For example, make sure you know where the bulk of your employees live and pick a location that’s walkable or makes good use of mass transit. That’s a huge factor for Millennials. Think about the “vibe” of your space, too. People coming into the workforce now are looking for experiences, not jobs. Pick an office space that will make them want to “belong” to your company. A company is a community of people, after all.
What do you think are the most common mistakes or oversights businesses make when searching for office space?
A lot of businesses are leasing too much space. They’ve maybe always occupied 5,000 feet and just assume that’s what they need. However, with the new, wide-open collaborative workspaces and the shift away from cubes and offices, the space per head is going way, way down. Hire a good space planner to analyze your needs first and tell you what’s possible. The money you save by cutting your square footage could be invested in amenities that make your employees love coming to work. Always hire a real estate attorney, too. Business owners sometimes think if you’ve read one lease you’ve read them all. Big mistake. Office leases are complicated and it’s always money well spent to hire an attorney.
What are some red flags tenants/agents should be on the look out for that would demonstrate that a potential space is not a good fit?
That depends on the business but I would start by looking at the surroundings. Check the building directory first. If you’re a law firm, make sure your clients won’t be walking past a competitor every time they visit you. If there’s a call center or training facility in the building, you can bet there will be hoards of people coming and going at certain times of the day. It could be a real disruption for your business. Look at the condition of the building, too. The entryway and lobby is generally the best maintained space in an office building. If you see dirty windows and worn carpeting in the lobby, property management could end up being a sore spot. It’s an interesting topic.
How can real estate agents help business owners navigate this process?
A seasoned, hands-on tenant rep who has built a lot of relationships and really knows a market can be tremendously helpful to a business owner. They can help a business owner figure out what type of office space they need, where they should be looking, roughly how much space may be needed and roughly what they should expect to pay. They can also likely connect the tenant with other professionals like space planners, attorneys, contractors and so on. On the landlord rep side, they can help a business owner translate their vision into a workable reality and explain certain advantages of a property that might not be obvious from the outside. It’s all about listening to the tenant’s needs.
What advice can you offer on negotiating a fair lease term?
What’s “fair” depends on your point of view. Tenants generally want shorter terms because it gives them flexibility and landlords generally want longer terms because it locks in cashflow. Sometimes it’s possible for both parties to get what they want by bundling other factors into the decision. For example, if you’re a tenant and you expect your business to grow quickly, you might be willing to sign a longer lease than you wanted as long as it comes with expansion rights into an adjoining space. On the flip side, a landlord might be willing to offer a shorter lease term than they wanted if the tenant agrees to a smaller tenant improvement allowance or takes the space “as is.” No two situations are alike and nearly everything is negotiable.
How is the way business owners seek commercial real estate space evolving?
Technology is changing the game. All of the surveys show that 60 percent or more of office space searches start online, and that’s only going to go up. Think about Millennials. Their first thought is always to use a mobile device. For transportation, food, entertainment, dating, pretty much everything. As they rise through the ranks and become the business owners who are looking for office space, you can bet they’re going to start with a mobile device. They’re going to expect that’s how it’s done, because that’s how everything else is done. This industry is going digital fast and whoever delivers the best experience is going to win big.