New York City's commercial real estate market is one of the most complicated in the world.
Your lease is expiring and you are focused on running your business. Real estate is one of your largest expenses. This an opportunity to improve your bottom line as well as morale. Should you renew or move?
Recently, there was an article in Bloomberg News entitled Negative Rates Hit Global Shipping Market.
The article details remarks from Nils Smedegaard Andersen, CEO of shipping giant A.P. Moeller-Maersk (“Maersk”). Andersen makes a good case for the assertion that “cheap money” is hampering consolidation in his industry. Low-interest rates have been enabling banks to keep marginal shipping companies in business, according to Andersen, and the result is lower shipping rates and excess supply. One of Maersk’s competitors, Hanjin Shipping Co. of South Korea, has recently been forced into debt restructuring in order to cope with lower revenue.
Last year I had the pleasure of representing a foreign client who wanted to find a retail space. One of the storefronts we were considering was adjacent to a large corner unit that was leased to an accessory unit of a world famous brand. Recently, I found out that the tenant, who had only been in the space for less than a year, decided to close the store and sublet the unit for the remainder of the lease—even though the tenant had invested millions of dollars into the construction and design of the space.
Many financial advisors tell their clients that past performance does not guarantee future results.
“Don’t let a crisis go to waste.” This proverb from Winston Churchill, made famous again in 2008 by Rahm Emanuel, is applicable to many things in life, including the expiration of a commercial lease.
Most companies are reactive in their commercial real estate needs, especially as their business locations increase. To become proactive, companies need to see the big picture - there needs to be a vision that comes from the top. If the CEO or Division Manager hasn't defined a vision for the business, it's hard to be proactive with real estate. A vision tells people where they want to go, so real estate can be planned and managed in order to support that vision and those business goals.
“Total cost” encompasses more than the rent.
When negotiating a commercial lease the “total cost,” including each of these factors, must be considered: