From the initial planning to signing the dotted line, there are a number of steps that come with developing an effective commercial real estate acquisition strategy. One of the most important steps in building a successful strategy, however, is establishing proper selection criteria.
Deciding on selection criteria entails conducting a needs assessment with your real estate broker to understand what your realistic expectations are and what features are non-negotiable in your desired space.
The final criteria will vary from company to company—so while there is no standard process, if you methodically approach the acquisition and ask the right questions, you’ll be well-positioned to achieve those crucial business objectives and find a space that fulfills all your needs.
This post is part of a larger series to help guide you in establishing an effective asset acquisition strategy.
Preparing Your Strategy
Your first and foremost objective should be to identify the key indicators of success for your project and determine crucial milestones. To do this, you must have a thorough understanding of what exactly your organization needs from the new asset. To determine these requirements, conduct a needs assessment.
What is a needs assessment?
Each organization’s needs are different but all assessments share the same goal: to align the organization on what it needs most.
Effectively pursuing and achieving these goals takes a coordinated effort of all team members involved. This means you must communicate with your team throughout the process to ensure alignment and that progress is being made. Who you choose to involve will depend on your organizational makeup, as well as the scope of the project. Common members include:
- Project stakeholders
- Decision-makers and leadership
- Contractors or third-parties
- Commercial real estate advisor
- Architect
Just as members of the selection team vary, so do the evaluation criteria per project. While the criteria will reflect your unique organizational needs, common evaluation criteria often include:
- Office size and layout
- Location parameters
- Financial budget
- Lease terms and conditions
- Amenities
- Timing
Once the assessment is complete, be sure to conduct a kick-off meeting. The finalized needs assessment should serve as an outline for what you and your team will discuss during this meeting. It will also provide each member with a clear view of big-picture goals, objectives, and set the framework for important decisions to be made in the future.
The next step is to ensure that everyone agrees on what success looks like. Without alignment on the outcome, the plan could splinter in different directions based on different interpretations of what the final objectives look like. Have routine check-ins with your team, too, to gauge where everyone stands throughout the asset acquisition process.
Consult Your Real Estate Broker
Once you’ve completed your needs assessment, you’ll have a much clearer understanding of what you need to do to achieve those goals. As helpful as a needs assessment is, you’ll likely have many questions to answer before setting out on pursuing those goals. This is where a real estate broker’s experience and guidance are invaluable.
Depending on your project, your questions may be quite simple to answer, but most projects require significant planning. You’ll want to consider strategic, financial, and operational objectives—and seek a broker’s guidance to provide clarity on reaching these objectives.
If you haven’t yet clarified your objectives, your real estate broker can help you identify your most immediate needs, and help you plot a path for reaching them. For example, you must determine how much you can afford for rent, utilities, and free cash to cover things like new furniture, build-outs, and unforeseen expenses. A qualified broker can help you build a realistic budget that accounts for both obvious and unexpected expenses.
Defining Essential Considerations
Next, you’ll need to define your facility selection criteria, programmatic requirements, and success factors. For example, if you’re seeking office space, you’ll need to identify square footage requirements, as well as consider other unique needs for your organization, including:
- What building attributes will help you reach your objectives, or need to be augmented to do so?
- What features are available throughout the building to enhance the health and safety of my employees?
- What amenities will my company have access to? Would these align with my employees’ expectations?
- What cosmetic features are available? Modern fixtures, abundant natural lighting, and green design are all attractive in today’s real estate market.
- What sustainable practices would you like to see being used in the building?
If you’re seeking industrial space, you’ll need to pay attention to the square footage as well as other criteria such as:
- How accessible is this location to my suppliers and customers for shipping purposes?
- What are the ceiling clear heights?
- What sprinkler systems and other safety features are available?
- How many loading docks and at-grade drive-in doors?
- How many trailers can the lot fit?
- What systems are already in place in this facility that my company can leverage?
If you’re entering a programmatic venture, you’ll need to take your partner’s or sponsor’s requirements into consideration. They should also be included in the kick-off meeting and a part of the success factors, project strategies, and timeline discussions.
After phase one is complete, your broker will summarize your critical project objectives, all selection criteria, and your strategic action plan. The plan will include an appropriate timeline and decision goals to help you reach your objectives within a period that works for you and your stakeholders.
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