In changing economic times like these it's good to remember that change often brings with it new opportunities. Our economy spent so long in an expansive mode that many have lost sight that profits can be made from contracting as well as expanding. Here's a recent example...
Recently a client of mine needed to modify their corporate commercial leased space needs from approximately 18,000 sf down to about 6,500 sf. Whether you call it "right-sizing" or "down-sizing" it was going to be a challenge because the deal had several interlocking components and the timing of all these components had to be perfect.
When I accepted the assignment from the client, their President expressed his desire that he wanted us to find a replacement tenant for the 18,000 sf building within 60 days. This was critical because their lease didn't expire until the end of 2012. The client also wanted me to negotiate a new lease agreement with the property owner for the 6,500 sq ft adjacent to their current location.
My client also was very clear that it was his company's desire that they be released from all lease obligations for the 18,000 sf building. In other words, they did not want to sublease! Making this happen was a huge undertaking because it required finding a new tenant for the 18,000 sf building with a credit rating equal to or greater than my client's credit worthiness in order to meet the requirements of the property ownership. As you might imagine, the building owners were not especially warm to the idea of releasing one of their major tenants from the lease obligation...unless we came up with a replacement tenant who had an equally stellar business rep with a balance sheet to match.
I and my team had our work cut out for us...beginning with an exhaustive search of North Bay businesses whose space needs, reputation and business plans meshed with those of our client. However, within the required time, we found a tenant to occupy the 18,000 sq ft that had been experiencing pressure to expand. Our deal came along at just the right time for them.
Simultaneously, we negotiated with the property's ownership to release our client from their original lease obligations and to relocate into the adjacent 6,500 sf space. In so doing we reduced our client's overhead while increasing both their profit and their margin. The savings we achieved between the time we completed the transaction and the end of their original lease term in 2012 was in excess of $350,000.
There were other parts of the deal that worked well for all the parties involved. For example, we were able to address a number of other lease terms and conditions to clear up confusion in the previous lease and add value to the subject property. The approximate value these efforts added to the property is estimated at $562,500.
In the end it was a win-win-win situation for all concerned. Our client relocated into more appropriately sized quarters. The landlord / property owner actually increased his revenue and the new tenant that we'd located for the 18,000 sf building found space that was ideal for his growth.