THE STATE OF THE CBD OFFICE MARKET – Q3 2011

Market Lens Newsletter Q3 2011

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BIGGER IS NOT BETTER

Our business has been steadily growing over the past three years. Because of this we’ve found ourselves needing to hire additional staff members, develop new vendor relationships for graphic design work, accounting, corporate structure evaluation and human resource advice and coaching. In our search for new vendors, we’ve found both large and small service providers and have found the differences between them startling.

The value we’ve found we can expect for our dollars spent, the level of service provided, and the ability to customize solutions and think clearly and creatively didn’t correlate with vendor size.  In fact, our experience has been that bigger is not at all better, but often worse.

When a company aggressively pursues expansion, more often than not the quality of their product or service will suffer if they are focused on the bottom line only.  Take Toyota, for instance.  While the car maker is known for their quality vehicles, there have been numerous problems that have developed in their vehicles in the last few years.  CEO Akio Toyoda himself admitted,

“Toyota’s priority has traditionally been the following: first, safety; second, quality; and third, volume. … These became confused.”

They had allowed their pursuit of volume …

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DO YOU KNOW HOW BIG YOUR PIECE OF THE PIE SHOULD BE?

Research by George Wu a professor of behavioral science at the University of Chicago Graduate School of Business, indicates even skilled negotiators may have underestimated the amount that it was possible to gain in a negotiation.

He states,

“When two people are negotiating over an issue such as price or salary, the amounts that each person is willing to give or take (i.e., their bottom lines) determine the range of possible settlements, commonly called the “bargaining zone” or “pie.” Put differently, the pie is the total value available for negotiators to split, and is defined by the size of the bargaining zone—the difference between the maximum amount that one person (e.g., a buyer) is willing to give and the minimum amount the other person is willing to take (e.g., a seller). There will only be an acceptable deal if one person is willing to pay as much as the other person needs. However, most savvy negotiators will not tell their counterpart how much they would really be willing to pay or accept. While each person might have ways of developing informed guesses about the other’s situation, perfectly accurate guesses are hard to come by, and mistakes are inevitable.”

Be sure …

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WHEN IT COMES TO YOUR OFFICE SPACE, IS IT REALLY BEST TO JUST “STAY PUT”?

In the last few years we’ve helped our clients renew their office leases more often than we’ve helped them acquire new office leases.  Why, you ask?  Some of our clients have thought it too risky to move to another location and commit to a longer lease, complete a full interior build out, and interrupt their business operations; others have simply opted for the path of least resistance at a time of great uncertainty about the future. Some have found themselves with reduced credit capacity, which has made acquiring new office space and posting a Letter of Credit difficult or impossible. Others have simply not had the mental capacity or human capital to think long term about their business, brand, and talent needs.

BUT, IT’S EASY.

The landlord has made these types of transactions relatively easy and attractive to these tenants by crafting, in partnership with the tenant’s professional, “blend and extend” solutions.  “Blend and extend,” as it’s known in the office leasing market, is the name given to the process by which a landlord renews a tenant with unexpired term on their lease by blending the unexpired term with the new term.  The tenant is happy because they …

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WHY HIRE A COMMERCIAL TENANT REPRESENTATION PROFESSIONAL?

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