ByCraig Wilson, Executive Vice President | Dallas
With the holiday season quickly approaching, we are seeing news reports to “start shopping now” as supply chain and labor disruptions are wreaking havoc on the distribution patterns of goods and services. And while it’s important to make sure you can get your hands on the latest Playstation 5 or Elmo (did I date myself there?), let’s discuss what all of these material and human capital challenges mean as companies contemplate their future real estate needs—particularly office users.
The labor and supply chain constraints are elongating the real estate design and construction process right now—at a time when companies desire agility to react to the ever-changing demands of their workforce. Virtually all components of the construction process for new office space are running longer than they were pre-pandemic. Permitting that used to take 2-3 weeks in some municipalities in can now take 4–8 weeks or longer; particularly without an expeditor. Furniture that used to take 8-10 weeks to deliver can now take upwards of 24 weeks or LONGER. Building a ground-up office building used to take roughly 20–24 months but now that schedule is 30–36 months in many cases; particularly in Uptown and more urban areas. In short, a “soup-to-nuts” interior construction move-in process may take twice as long as it did pre-pandemic, depending on decisions and material selections made by the user.
For companies planning a “return to office” strategy–even a hybrid model–this is not welcome news. How can companies make decisions about what they want their new space to be 12+ months from today when they don’t even know how their workforce will respond to “return to work” strategies or how will the environment be different when people are all back in the office?
Here are a couple of concepts to consider as companies manage this challenging paradox:
1) Get Ready to Get Ready
Companies need to engage in the due diligence and planning process well in advance of any critical date (i.e. lease expiration or “back to work” target date). It’s almost hard to start too early in evaluating what environment your firm will want to create and implement in your future office. To help you through this process, engage the appropriate team members, both internally (finance, HR, IT, operations) and externally (real estate broker, architect, workplace strategist) as soon as you realize that a real estate decision is looming. Working with these teams, you can take a project to the point that you don’t have to implement the final strategy, but at least when you do elect to, you are not starting from scratch and up against the clock.
2) Mind Your Critical Dates
Be aware of any critical dates that might exist in any current leases or documents. Expiration dates, renewal notice dates, expansion/contraction notice dates, etc. will help you determine an optimal schedule to manage this process. Allot more time than expected in advance of these dates to complete the due diligence required to make a decision. Too often, we see companies either let these dates pass with inaction or wait too long to start evaluating their needs, and are then forced to make a decision that may be compromised because of a compressed schedule.
3) Recognize That Time Creates Leverage
In any decision, being well prepared and having the necessary amount of time to maintain flexibility will create the ultimate leverage as you negotiate various options against each other. If you ultimately determine that big changes aren’t required, but simply renewing a lease in an existing building is your best plan, your negotiations with the existing landlord will likely be more fruitful if you take the time in advance of any critical date to really price and compare alternative solutions.
Like all major decisions for companies today, being nimble is critical. But from an office lease perspective, the best way to be nimble is to always be prepared, and being prepared means giving yourself time to evaluate multiple options and ideas. So don’t wait too long to start considering your office space needs. And don’t wait too long to start your holiday shopping either! Waiting too long, in either case, might leave you with a lump of coal instead of a cool new toy!
Craig Wilson is an Executive Vice President of Stream’s office tenant representation division in the greater Dallas market. He specializes in office tenant representation, advising corporate clients on headquarters relocations, local and multi-market site selection, acquisitions/dispositions, and lease and purchase negotiations.