Nothing Beats Knowledge of Local Market

There are two countervailing trends in commercial real estate services. On the one hand, certain firms have grown organically and through acquisition of competitors, trying to achieve dominance in key U.S. markets while also having a presence overseas to assist multinational companies with their space needs. On the other hand, many specialized real estate services firms with intense knowledge of local markets continue to thrive, delivering street-savvy service unmatched by the global firms.

The truth is that despite consolidation, the commercial real estate industry remains highly fragmented. The nation's largest real estate services firm, CB Richard Ellis, acquired one large firm (Insignia) in 2004, and another (Trammell Crow) in 2006, but still only has about 10.5% of the U.S. commercial real estate services market. The next largest firm has about 3.4% of the market, leaving the vast majority of transactions to smaller independent brokerages and service organizations.

Many of these independent firms do band together to share knowledge and best practices, such as the Alliance of Tenant Representatives. The independent firms also often develop expertise in specific services (such as tenant representation), specific geographic areas and/or specific industries (such as law, engineering, biotech, accounting and high tech).
But it is the independence of the most entrepreneurial firms and their street-level market knowledge that keeps the commercial real estate business personal and local. This trend is aided by advances in computer and internet technology that give smaller firms access to vast databases of properties and other software that are comparable to or even superior to those available to the large international firms.

So while some firms seek the global market, in the end it is local market knowledge that adds the most value to a real estate transaction, and quite often that local market knowledge can best be found within the smaller independent real estate services firms.

Better Lease Starts with Properly Prepared RFP

The time when a tenant has the most leverage with a landlord is when that landlord knows he is in competition with other buildings. That is why major commercial space lease negotiations should begin with a prospective tenant sending several landlords a formal request for proposal or "RFP." An RFP is a great way to compare and contrast the business points and characteristics of several buildings, as well as to get an idea of how willing landlords are to meet specific terms.

Typically a landlord's standard proposal will include the basic economics of a lease, such rent, escalations in rent, operating expense pass throughs and tenant improvement allowance. But well developed RFPs force landlords to acknowledge (and compete on) other features of their lease and/or building. For instance, an RFP can request that a landlord commit to cover the entire construction cost of a specifically referenced space plan (incorporating a "turn-key" delivery of completed space). The RFP can also ask landlords to describe the sort of parking they have available (and at what rate), their building's operating expenses, and how energy-efficient their building is.

Other key business points the RFP can help establish include security and rent deposits (if any), the ability of a tenant to expand, lease renewal options, the range of amenities, the condition of the heating and cooling systems, or the availability of signage. Electrical supply, communications, and space planning can also be included in the RFP. In short, the RFP can be used to address all the tenant's office space needs and core business requirements at a stage when no legal fees have been expended and a landlord knows the tenant is still looking at other options.

Because the RFP becomes the basis for all subsequent lease negotiations, great care must taken in preparing it. The tenant's needs should be thoroughly analyzed and answered in the RFP stage, since it is much more difficult to try to introduce new points late in the negotiations.

Wi-Fi Is Going Citywide

Business travelers with laptop computers know the joys (and pains) of Wi-Fi service, the wireless radio connection to the Internet that comes standard on most laptops these days and is available at most airports, hotels, and coffee shops.

Soon businesses that stay put will also be able to use Wi-Fi as a way to access high-speed Internet service right from the office. More than 300 cities and counties are installing or considering area-wide Wi-Fi wireless networks, and the availability of such networks could present new alternatives for locating businesses and allowing employees to telecommute.

Among big cities, Philadelphia is farthest along in launching a citywide Wi-Fi network or "cloud," with San Francisco close behind. Many other big cities are in the talking stage, and an estimated 81 smaller cities already have citywide or regional Wi-Fi networks, according to Muniwireless.com.

Cities have a variety of goals for offering a municipal Wi-Fi cloud. One is to bring simplified Internet access to people who can't afford cable or DSL service. Another is to improve the efficiency of the mobile workforce. And a major goal is to have a high-tech base to attract and retain businesses.

Having citywide Wi-Fi service should offer businesses more location choices, as well as making it easier for employees to telecommute. Having an alternative to cable or DSL lines should also bring access prices down.

Expect a lot of tinkering as cities try various Wi-Fi systems. But when it comes to your city, it's a good bet that you'll think of a way to use it.