You’ve Checked the Couch Cushions, Where to Look Next?

According to a survey by Wave, a bookkeeping and financial software provider to small businesses, most small businesses have less than $5,000 cash on hand. For these businesses, we’re still in a period of cash conservation. Where might we look to reduce expense and keep some of those dollars from leaving home? Perhaps you should consider reviewing the monthly check you’re writing (OK, admittedly old-school) to your landlord.

Whether you rent or own the space you’re using, the dollars you’re devoting to real estate are probably, behind payroll and benefits, your third largest outlay. My friend and colleague, Justin Rayburn of Fountainhead Commercial, a leading commercial real estate brokerage in the Denver metro area, points out that business owners looking to conserve cash or to simply reduce expense often overlook the cost of owning or using real estate – at least until it becomes a real problem.

Add to this expense some uncertainty of whether employees might continue to work remotely, and whether new employees may even be available, and the long-term commercial real estate solution is even more challenging.

Justin describes his service as “allowing our clients to not have to be an expert in my business in order to run theirs.” This may sound like an extravagant luxury to most small business owners, but Justin says he’s proud to offer “big firm” experience to small business clients. His goal is to look for the best lease terms, including termination and renewal rights, expansion or contraction options, and rent abatement deferral, and he says the small and middle market is under-represented in these areas.

With each new client and engagement, Justin and his team perform a deep diagnostic of the business’s goals and objectives and a financial analysis on the company’s real estate commitments. This helps both them and the client create a suitable real estate strategy and understand what the financial obligations are going to be moving forward. From there Justin and his team identify suitable building/space options for the client’s requirement and commence the tour and negotiation process. During deal term negotiations, Justin’s team identifies comparable properties that have recently either sold or leased to understand the market dynamics and to be able to better negotiate either a lower purchase price or the lowest possible rental rate. Justin shared that understanding what the market is doing and observing how properties are moving is one of the most important tools Justin and his team use to help their clients negotiate the best deal.

Justin shared that his favorite projects are those that have a lot of moving pieces and that allow him and his team to leverage their networks and market knowledge to find – or create – good results for the client. For example, Justin is working with a client that is in a building that is far, far too big. Justin is helping them downsize by selling the existing building and moving into a new space that is suitable for their newly projected growth. Justin is helping his client downsize from 400,000 square feet to approximately 32,000, and as a result the client will substantially reduce their real estate expenses while at the same time improving their manufacturing, logistics, and distribution processes.

In another example, Justin helped a developer assemble 3 separate retail parcels that together made up 1/2 a city block. Justin worked the town council to become actively involved in planning the project with his client, and the city participated in the project by contributing the other ½ of the city block and in return the client provided over 200 new parking stalls for visitors to the town. Justin was successful in securing purchase and sale contracts with three separate businesses and, even though several other developers and their brokers had previously attempted to assemble and develop the lots, Justin and his team were able to succeed where the others had failed.

Justin helps clients primarily with real estate needs between downtown Denver and Castle Rock and along the Boulder Turnpike between Denver and Boulder. He and his team have experience in the technology, financial, and bioscience arenas, but he shared that he’s most excited to help small and medium sized business owners, regardless of industry.

While our real estate market is improving, the office segment is still struggling to recover from COVID and the recent shift to remote working. The highest vacancy rate is in downtown office space, largely due to the slowdown in the oil and gas industry, companies going out of business, and downsizing due to the dynamics created as a result of COVID. Justin and his team help their clients figure out the best way to innovate their work environment to accommodate the challenges of tight labor markets, changing regulations, and employee demands for remote work options and flexibility.

As for what you can do for your own business right now, Justin says, “Start real estate planning early. Pay attention to your real estate holdings because they’re a costly part of your business and can sometimes make or break your company’s success. Put the right people on the bus as far as who can help you achieve your goals. Find a real estate professional who can recommend quality industry professionals and make sure you’re getting quality representation in all parts of the transaction. What you miss at the beginning will cost you in the end.”

Justin shared that the most important qualities a broker can bring to the table are integrity, market knowledge, and experience. “Our industry is one in which it’s easy for people to take advantage of a client in order to make the most money on a single transaction,” he says. “I’d rather do right for the client in all circumstances, maybe making less money today but ensuring I’m in a position to work with that client again in the future.”

If this sounds like a relationship you’d be interested in cultivating, please reach out to me. I’d be honored to connect you.