Commercial real estate: picking the right space - Special Feature

New Mexico Business Journal, Oct, 1990 by Susan Gaines

Commercial Real Estate Picking the right space

New York-based Metropolitan Life Insurance Company announced it would move one of its larger claims operations to Albuquerque last May.

By the time Mark Vicars, a lease analyst for Met Life, was told about the move and assigned to the real estate search, Albuquerque's commercial real estate community had already been buzzing with the prospect of a big deal for two days.

Five days after the New York announcement, Vicars and his partner, Mary Jackson, were on their way to Albuquerque - the first of several trips to the Duke City in search of the right space at the right price.

They were wined and dined, and shown the best that Albuquerque has to offer.

Vicars and Jackson considered at least a dozen buildings, representing each of Albuquerque's six commercial real estate submarkets - West Mesa/Rio Rancho, Northeast Heights, Jefferson Corridor, Airport/Southeast Heights, Uptown and Downtown.

After two months of intensive real estate analysis, Vicars negotiated a temporary lease for Downtown's First Plaza, managed by Eric Schoen of J.S. Karlton Management Company. Schoen was congratulated by other brokers, while Vicars and Jackson were satisfied that First Plaza met most of the company's top priorities for space.

Vicars and Jackson were contracted by virtually every commercial real estate representative in town, but they quickly narrowed their choices to a dozen properties.

Albuquerque has some 1.5 million square feet of vacant commercial space - an overwhelming prospect for anyone new to the commercial real estate market or unsure of their own business mission. Vicars, however, had relatively few choices. He knew what the company needed - and what it didn't need.

"This information tends to be common sense to larger companies with site location experts," notes Ron Brown, president of the Albuquerque management, development and leasing firm, Brown & Associates.

"The site location expert can very quickly figure out where the business should be by asking the right questions," says Brown, who is also past president of the New Mexico Chapter, National Association of Industrial and Office Parks (NAIOP).

To start, Vicars knew that Met Life wanted to confine their operations to one or two floors in order to streamline productivity.

The company needed 35,000 square feet with room to expand to 50,000 square feet. First Plaza's floor plates are 46,000 square feet - more than twice the size of any other building in Albuquerque, according to Building Manager Schoen. Finding a site with convenient amenities for the employee-intensive operation was another top priority. At First Plaza tenants have access to restaurants, a full-service bank, shopping and an athletic club - without ever having to leave the building.

Of course, there was a budget; Met Life did not need Class A space, defined by CBS Property Services, Inc. as: "Relatively new project, prime location, highly competitive rental rate." In other words, image was not an important consideration for this back-office operation.

First Plaza is Class B space: "Older building, sometimes renovated, good location, or a new project in a non prime location, average rental rate." And, Met Life needed it quickly; the company began operations in early August.

While Vicars, who negotiates Met Life's leases in 13 Western states, agrees that he's been trained to ask the right questions, he says the search for space is never simple. "Quite a bit went into the decision." Vicars recommends hiring a reputable professional broker to help you assess your business needs and assist in the arduous search.

Questions to Live By

You need to move. Your space is too small, too large, too pricey, or in the wrong location. You do not have an inhouse lease analyst. How do you begin?

Before you even choose a broker or begin talking with landlords, you must answer three basic questions, according to Millie Arnold, senior vice president of CBS Properties, Inc.

"Time, cost and procedure," she says. "These are questions I live by."

* How much time do you have to get situated?

* What are you trying to accomplish? Do you need high image, medium image or warehouse space?

* What is your budget? What is the total amount you are willing to pay?

Price, however, should definitely be the last question, according to Arnold and Paul Silverman, area partner with Trammell Crow Company.

"Buying real estate is not like buying apples off a shelf," says Silverman, who was 1988 president of New Mexico Chapter, NAIOP. "There are differences, and some are worth paying for. In retail you could be a half block off and be dead.

"You could be a half a block off in an office space, and it may be survivable. There are about a hundred other questions you ought to ask before you ask how much."

Image and Objective

The answers to many of the important questions boil down to one thing, according to Silverman: Know your market. Know your business objective.

"People tend to not focus on their objectives," says Brown. "They shop for space on the basis of how cheap it is. In most cases the business objective is not to rent cheap space. It is to conduct a successful business."