Think before you move
Raine & Horne
This month, Raine & Horne Commercial Newcastle took the momentous decision to move offices for the first time in 10 years.
In the end, our decision to shift to a new commercial location proved easy, with the NSW Liberal Government forcing our hand with its desire to be seen to be creating activity in the city of Newcastle. This commotion resulted in the loss of our car park for a light rail track. For a real estate office servicing properties across the entire region, our staff require ready access to their cars.
Therefore, the move was a no-brainer, yet there was something of a vocational silver lining as it reacquainted me with the pain and cost involved in changing commercial addresses. As a commercial agent, I have warned tenants threatening a move unless a rent reduction was conceded, to be careful of what they wish for. As a rule of thumb, a tenant can expect to pay the equivalent of a year’s rent to move to new premises, whether they’re paying $20,000 or $500,000 annually.
My trusty rule of thumb is well short of the mark! It’s significantly more than a year’s rent to move, especially if a fit out is necessary. So, what lessons did I learn from the recent move?
1. Set your Timetable
Your existing lease will have deadlines that you can respond to in a timely manner. These include options and the date that your lease will expire. Armed with these dates, you can create a timetable, which includes a deadline for finding a new location.
The timetable should also include fitout milestones and your intended moving date.
2. Choosing your new premises
Your key staff are a valuable source of counsel and research, so talk to them to gain ideas and to discover their expectations for a new location. At the same time, make sure the key people have some ownership of the move and changes. Other suggested steps to ensure your staff collaborate in the move include:
• Appointing a team to coordinate the move and the decisions
• Establishing what type of location creates a balance between staff and customers
• Determining what location suits your suppliers
• Verifying the location that best matches the council zoning required by your business operations
• Listing your top five criteria for a new office, and weighing each in line with their importance
• Agreeing with your financial advisors or upper level management about the rent you can afford to pay. This will help you zero in on the size of the premises.
• Resolving the size of the location you need. A Raine & Horne Commercial agent can email you a copy of our space calculator to help you determine an appropriate size.
• Discovering whether your company has a policy that predetermines space per employee. This is a question for your firm’s head office.
• Determining what features do you need such as:
a. Number of offices or open space
b. Amenities for staff including a lunch room, kitchen, toilets, showers or a changeroom
c. Car parking – how many spots and who gets what.
Warehousing is another factor. If this is required, you’ll need to determine the shape and configuration of the property, the height, number and size of access doors, the size and number of cranes it can cater for, power supply, yard space, car parking, and whether gas is required. Finally, don’t overlook internet speeds and how much data you need.
3. The Lease negotiations
Lease negotiations are a very important aspect of all commercial moves, and it’s safe to say we had it well covered. For years, I have been negotiating leases from a landlord’s perspective, protecting their interests. Therefore, negotiating a lease from a tenants perspective I relearned several lessons including:
• The importance of reading the lease yourself as a business owner
• The significance of asking questions of your solicitor
• The possible impact each clause could have on your business.
The changes I made to the proposed lease were enormous – and professionally helped put me in the shoes of the tenants we work with, which proved a fabulous reality check. I was also reminded that you should make sure you gain permission for the fitout during the lease negotiations. As the owners of our previous premises, we could do whatever we wanted. That is not the case now.
4. The Fitout
Again, we were reminded to be careful in relation to installations and redecorating. The old rule of thumb for a suitable office refit was $700 per square metre. We discovered it to be up to $1,000 a square metre. So, for a 200-square metre office, this could mean $140,000 to $200,000 for a refit. If the rent is $40,000 to $60,000 p.a., the fitout costs can be enormous – (3) to (5) times your new rent.
Therefore, it’s critical to determine what you require from a fitout. Here are some tips I’ve developed based on the recent fitout of our new office at 92-94 Darby Street Cooks Hill.
1. Plan your layout – many of the commercial fitout companies will provide free indicative designs to get you started.
2. Choose a company to run the fitout for you, otherwise you’ll be distracted away from your business trying to supervise tradespeople.
3. Don’t forget your premise is just another piece of tooling. Therefore, its functionality is of the utmost importance. You have the chance to design how this tool works and you can’t just replace it if it doesn’t work!
4. Be prepared to make numerous decisions on the run – so have a clear vision of the look and function of the premises.
You’ll need to decide on:
a. Carpets, tiles, linoleum - colour and quality
b. Paint – colours
c. Wall finishes, glass, metal, brick, concrete, wall paper
d. Ceiling tiles and colour – and whether you need or want fixed ceilings
e. Power outlets and lighting – how many points and lights and where they should be located
f. Data outlets – how many – engage with your computer technicians early so they are fully aware and working to the same timetable
g. Telephony – I bet you’ll be told your phone system is out of date! And it probably will be.
h. Desks and chairs – who sits where and who gets an office.
Other considerations include the location of reception and security. You should nominate who has access if there are restricted areas. Also, don’t overlook staff amenities, including the quality of the finishes in the kitchen area, whether a dishwasher is required or not and down to the size of fridge. Do you need a freezer? Don’t laugh these are decisions and some won’t agree with you. Air conditioning can be one of the biggest bugbears in any office.
If you’re moving equipment, bring the removalist in early and provide them with the timetable too.
5. The Move
We found that we had so much clutter and gear that had built up over the past 10 years. There were two tonnes of shredding for example, and antiquated equipment tucked here there and everywhere. So, the fundamentals for a commercial move should be:
a. Clean out and be ruthless.
b. Take your staff through the new premises especially before the fitout starts – listen to their concerns as change affects people in different ways.
c. Take your staff through the new location during the fitout to excite them with their new working environment.
d. Take your staff through just before the end of the fitout – and show them their area or if you are hot desking, walk them through how it will work.
e. Provide one box for personal effects each.
f. Set clear policies about how workspaces should look. If the policies are tough, you can always relax them down the track, but it’s hard to get tougher later.
g. Have each person pack their own work area files.
h. Mark which furniture is to go where, and where each file box is to end up.
i. On the day of the move, provide your staff with lunch and drinks and at the end of the day make it a little celebration.
When all is said, and done, moving is an expensive exercise for any business and can cause plenty of stress especially for the owner-operator. So, make sure the need to move, and the rewards, are greater than the cost.