Save money and reduce risk – understanding commercial property, the multiplier effect
11 September 2018,
by Dean Croucher
New Zealanders often pride themselves on our DIY culture. Remember the Mitre10 ad from about 10 years ago, with the kids in the sandpit?
Apart from being a classic piece of advertising, the banter is typical of our “can-do”, “give it a go”, “can’t be that hard” philosophy! While the spirit of DIY is commendable and there is a place for it in both business and personal life, you often can’t beat hard-earned experience and technical expertise.
Like any endeavour, those of us who specialise in a particular profession, hone our craft and knowledge over time. This first-hand experience and deep understanding of what works and what’s possible can often add significant value, save time and mitigate risk.
Leasing commercial premises is a prime example. Many New Zealand organisations take the DIY approach – can’t be that hard surely? Look at some options, negotiate a deal – “I do deals everyday”.
Those that are perhaps a bit busy will supplement their own skills and time by using an agent/broker to source options and do the “leg work”. And they may even ask their lawyer for some advice on the lease and any contract related stuff. In my experience most business people enjoy looking at property and getting involved in a project – as it is a bit of light relief from their day job.
So what’s wrong with this you’re probably asking?
Despite good intentions, these strategies often come undone as the complexity of a property transaction can mean businesses:
Don’t really know what they need for their business (and can over or under specify).
Don’t’ get the best deal as they don’t know the market or the right questions to ask.
Take on a lot of financial cost that they didn’t foresee.
Inherent significant contingent liabilities that eventually impact on their business.
The TwentyTwo Multiplier Effect infographic is a simple way to show how the fine tuning of several elements of a transaction can result in significant savings and reduced risk – two key things to sing about at your next Board meeting.
Area, rent, lease term, furniture and fit-out, lease end/exit obligations, landlord works and landlord incentives – these are just some of the key elements you need to be considering when looking at moving your organisation or setting up a commercial space.
Invest in independent advice. Commercial property experts have honed experience, industry knowledge and can take the time to really understand what it is your team needs now and potentially in the future.
Loves anything blue. Avoids routine and making plans. Dreams of playing golf on the senior tour. Should have been a chef or writer. Fond of chardonnay and food (any kind).
Dean is one of NZ's leading property advisers with 30 years of consulting experience acting for major tenants and owner-occupiers. He specialises in property strategy, tenant representation, project leadership and major transactions. He also continues to provide peer review advice across all major projects.
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