Economic Development Through Innovation

What makes a city grow? In the early days of this country, development was tied to a city being a seaport or on a major river. Later with the spread of railroads, being a major transportation hub became important, and this continued with the creation of airports and interstate highways. Manufacturing of all types was the engine for robust rounds of growth, as was being a center of trade, corporate administration, and finance.

While location and accessibility remain important factors, more and more often these days, innovation is the key factor in a city's economic development. It was innovation that led to the dot-com boom, and innovation that helped rescue areas hit by the dot-com bust, creating more diverse economies less dependent on particular technologies.

The key to innovation is having a population of young, highly educated and highly motivated knowledge workers on hand. They are attracted by the challenges of new industries and companies, and by the opportunity to enjoy a vibrant culture with plenty to do. These knowledge workers can live wherever they want, and so once they pick an area, more jobs tend to follow them there.

With large populations of knowledge workers, some cities have become innovation centers already. In other cities, the process of creating the new industries that are attracting the knowledge workers is underway, usually based around "magnets" like universities, business incubators and research parks. Forward thinking commercial real estate tenants need to properly identify the cities (and areas within the cities) that are headed in the right direction from the standpoint of innovation. Company management needs to strategically consider the impact a location decision will have on recruiting qualified workers, accessing key clients/vendors/partners and tapping into the right intellectual infrastructure.

Understanding Your Work Letter

When moving into office space, a tenant will usually require some construction to be done. This can range from a fresh coat of paint to a complete build-out from a fresh shell or previously demolished space. The tenant "work letter" is the document that covers the scope of the initial tenant improvements, and as part of the lease, it is fully negotiable.

One key item to be negotiated in a work letter is how much the landlord will pay toward improvements. Sometimes it is stated as an allowance per square foot while other times, it is described as a specific scope of work that the landlord will deliver on a "turn-key" basis. Typically, furniture, fixtures and equipment are excluded from the landlord's financial obligation, but often, when there is an unused component of a build-out allowance, the tenant can allocate a portion of the allowance to these and other items. While most commercial landlords will deliver certain items within the space as part of base building improvements, most of the work is provided as a tenant improvement cost. The work letter needs to clarify the gray areas such as HVAC systems, duct work, electrical panels and signage.

Another key point is identifying who is in charge of the tenant improvement project. Some tenants may have the ability to manage the project themselves while others may require or prefer the landlord to oversee the work. Key issues related to project management could include the landlord's project management fees (if any), approvals of contractors and architects, and the handling of change orders. Defining completion and setting penalties for delays should also be part of the work letter language, along with an arbitration procedure in the event the landlord and tenant come to a stalemate. Timing of payments, insurance, and handling possible hazardous materials are other important issues that should be addressed. The more detail the work letter contains, typically the better, as it should reduce the chance for disputes before, during and after tenant work construction.

Making Office Equipment Greener

Interest and awareness in saving energy and protecting the environment is growing and more people are looking for "green" approaches to doing business. However, office tenants may feel there is little they can do to make their building more energy efficient, other than encouraging the landlord to look into sustainable practices. In reality, a tenant has control over its own office equipment, and that is an area where energy efficiency can often be improved.

To help identify the most energy-efficient office equipment, the federal government has set up a rating system through the Environmental Protection Agency called the Energy Star program. Standards are set for each category of office equipment, including computers, monitors, copiers, fax machines, mailing machines, multifunction devices, printers and scanners. Office equipment that earns the Energy Star rating uses 30% to 75% less electricity than standard equipment. They not only use less energy to perform regular tasks, but also enter a low-power or "sleep" mode when not in use.

While copiers and other office equipment have been set up to automatically go into the sleep mode when not in use, the same has not been true for computers and monitors. They had the capability, but it had to be turned on. The new Energy Star standard for computers and monitors introduced this summer calls for the sleep mode to be turned on at the factory, so new computers will be set up to go into sleep mode after 30 minutes of inactivity. For more information on choosing Energy Star office equipment, go to www.energystar.gov.