How Will the Economy Affect Office Space in 2007?

The forecast from economists about the year ahead in the U.S. economy is hopeful with a few things to watch, such as housing and manufacturing. The housing slump is on everyone's minds, for fear that a prolonged lowering of home prices and activity will spread into the general economy, lowering consumption and slowing growth.

Less construction affects certain manufacturers right away, such as lumber, drywall, and furniture producers. Housing-related industries shed 145,000 jobs from May through November last year. And auto manufacturing is weak. But other areas of manufacturing are adding jobs, such as industrial, medical and computer equipment, and the housing slump is expected to clear up in 2007, so the picture is mixed.

Commercial construction is actually strong in many cities, and so far there are no indications that demand for office space will slow down. That's because of strength in the service sector, which makes up 80% of the national economy and added 1.1 million jobs from May through November. Technology and software companies are growing, and restaurants, hospitals, and consulting companies are doing well.

In 2006, markets on the East and West Coasts saw upward pressure on rents due to strong job growth and international trade. This year, many inland markets are predicted to follow the upward trend, with some variations due to historic high vacancy rates or large amounts of new construction coming online.

So unless the housing and manufacturing slumps spread, most economists feel the year will see moderate growth, low inflation, and steady interest rates that will keep putting upward pressure on office rents in most cities.

Keeping a Lid on Operating Expenses (Part I)

When you have negotiated the base rent for your office lease, remember that only half of your work is done. You and your tenant representative must also pay close attention to operating costs, a volatile and potentially costly component of total occupancy costs.

It may be possible to negotiate a cap on increases in operating expenses such as, "not to exceed 5% per year," or based on the Consumer Price Index. This type of language will generally work for most operating expenses such as janitorial, repairs and maintenance, or landscaping. Unfortunately most landlords are savvy enough to exclude "non-controllable" expenses such as insurance, real estate taxes and utilities in the cap language.

There are other ways to help control these expenses. We will deal with utilities this month.

Some landlords like to add "administrative charges" to utilities. You can avoid that by requiring that no premiums are added to utility costs. Pay only the rate that the landlord has negotiated with no mark ups.

It may also be possible to bypass the landlord and arrange to have your utilities separately and directly metered by the utility company. After all, a landlord may be less inclined to find the best deal if the cost is being passed to the tenant. Our office can help investigate if this approach will work, as there are some up-front costs, and a large landlord may already have the best volume discount.

Next month we will present ideas for controlling two other areas of operating expenses: insurance and taxes.

Protect Your Laptop Data from Loss

The ease and convenience of carrying a laptop computer on business trips makes many people forget how vulnerable the data on that computer can be if it falls into the wrong hands. We have all read news stories of how databases with personal information on thousands of people were on laptops that were stolen.

There are things you can do to secure your laptop before you go on the road that will both protect your data and make it easier to recover from a loss. The three keys are passwords, encryption, and backup.

To prevent someone from even being able to access your laptop, you can use a strong password to secure it. Strong passwords contain letters, numerals, and symbols that can't be easily guessed. You can also protect individual programs and files with additional layers of passwords. Be sure to never keep a cheat sheet of your passwords with your computer.

In addition to strong passwords, the data itself can be stored in a form that can't be read by anyone but you. This process is called encryption. Your logon password will be the only key that can unlock these files. There is a program to encrypt data built into the Windows XP operating system, and encryption programs are available from software companies as well.

Finally, always back up your information before you take your laptop on a trip. Flash drives that fit on your key chain let you carry a copy of important data, and these drives can also be password protected and encrypted. Security may add some work, but will ease your mind if things go wrong.