January 29, 2021
Define Your Needs
When I was a young boy, my mother would always ask me a very simple question when I would discuss with her something I wanted to buy with my hard-earned money. She would say, “David, do you need this, or do you want this?” She always said that and it was very aggravating at the time. I now understand that it isn’t wrong to buy something you want but do not need, but you have to recognize when you are making that decision and how it impacts you financially both right now and in the future. I did not realize when I was a child how relevant this lesson would be in all aspects of life for the rest of time. So when you are looking to rent or buy real estate, the very first question you need to answer is, “What do I absolutely need from a piece of property in order to run my business, and then what would be nice to have but not necessary?”
The real estate search can be a long process with many options, so it is in your best interest to remove as many variables as possible before beginning the process, otherwise you will look at ten different properties that could all potentially work, but not be able to confidently proceed because they all may possibly fit. I’ve seen it time and time again. Here is the process to use in order to make decisions about what you need and what you want.
A typical search for new property to lease, negotiation with the landlord, and attorney’s review of a lease document can take anywhere from a weeks to months. Finding the right property for sale, negotiating terms, going through due diligence, and then closing can take anywhere from a few months to possibly over a year. Step one is to talk with an agent who specializes in your type of real estate about where you are in the market and what to expect based on your business and current market conditions.
Based on where you are in the market and the projected timeline to go from start to finish, the next question is, “Do you have the time you would like to comfortably make a decision?” If you do, you will have the flexibility to be more selective about looking for what you want in addition to only what you need. If you do not have time for whatever reason, you need to be honest with yourself and adjust your expectations accordingly.
Once you understand your timeline and adjusted your expectations, here are the aspects about the property itself that need to be defined in order to quickly and decisively find your new site:
- Standalone building or multi-tenant building
- Indoor square footage and outdoor square footage
- Ceiling height
- Building amenities
- Commercial and passenger vehicle parkinG
- Drive-in loading and dock height tailboard loading
- Amps, volts, and phases of power
- Municipal water or well water
- Municipal sewer or septic system
- Gas, oil, or electric heat
- Floor capacity
- Range of what you can afford in rent and security deposit.
Here are a few other questions to help frame the conversation for what you need and what you want:
- Do your employees and contractors see the needs and wants of the company the same way you do?
- Is what you need to run your business today the same thing you would need to run your business if you had ten times your current sales?
- How long do you plan on being in this new location?
- Do you plan on opening more locations? If so, would an additional location change what you need and want today?
Once you are confident in what you need and what you would like to have, the work of decisively highlighting which options to delete and which options to pursue becomes much easier, and it helps your agent know what to look for if they find an off-market opportunity. The question in defining how to consider new real estate is, “Do you absolutely need it, or do you want it because it is nice?”
We created a download with all of these questions to use as you work through your needs and wants with your team on your next real estate project, you can find it on the video page of our website, www.thecrecoach.com.
I’m David Skinner, and this is the CRE Coach, where together you and I are lifting the hood on Commercial Real Estate.