2020 was a challenging year for every industry but there is much excitement and hope that 2021 will turn things around. If you’re looking to make some strategic moves in commercial real estate this year, here are some practical tips on making the right decisions as the world continues to change.
- Review your existing leases for upcoming options and notification periods
Read your ability to sublease your property to determine which options exist if you decide to relocate, downsize or to purchase a building versus lease. Knowing your lease is the first step in understanding your options to strategically shift gears in changing times. There are specific requirements for exercising options to renew and specific methods of notifying the property owner. In some cases, the renewal option is at a discount to current market value depending upon how the lease was first negotiated.
- Eliminate inventory
In your warehouse there is inventory which has been abandoned by your clients or inventory which has not sold based upon shifts in trends and customer tastes. Don’t carry this inventory for one second more, donate it, discard it or sell it at a discount versus paying rent on these items, which do not generate any revenue. Find a charity willing to accept these items and let them go. Reduce your actual inventory and focus on increasing turn rate instead of storing it in the warehouse.
- Consider ownership vs. leasing
Good buildings are coming available for purchase and market liquidity is still good as banks seek to loan to owner users. Notes are coming due and many family trusts are seeking to cash out so members can go separate ways and reduce debt loads. Work with your CPA to compare the tax advantages of owning versus leasing and you will be surprised how affordable ownership can be after tax considerations.
- Match your commercial real estate with your business planning
See if you can find sublease options for temporary requirements instead of signing long term leases. Identify owners who are willing to accept shorter term leases for projects which may not continue for more than a specified period. Match your credit and occupancy requirements with landlords of similar character who want to help you succeed and take a personal interest in your success.
- Be mission-focused and clear on what you hope to achieve in 2021
If your goal is to maximize profitability or to accommodate rapid growth, your action plans for commercial real estate will be correspondingly different. Your commercial real estate game plan should be written down just like your operations, marketing and financial goals for the new year. Remember each building is different and each lease structure is different, make sure that your selection of the right version of each is best suited to achieve your mission and goals.
Strategic commercial real estate in 2021 is one of the keys to your success. If you’re ready to make your move and would like to work with a trusted partner who can help you navigate through these uncertain times, reach out to APEX. Our team is ready to help you analyze commercial properties and identify the best options to match your objectives. For more information, please contact our office at 310-377-3456.