Expand or Relocate?

Commercial Real Estate, Real Estate, Uncategorized

Daily Herald Business Ledger

Expand or relocate? Some things to consider

By Paul Martis

Thursday, July 03, 2014 8:00 AM

Despite the continuing challenges of our local economy, many businesses in the Chicago area are hoping to expand in the near future, especially in burgeoning sectors such as health care and the tech industry.

One of the most important issues these businesses will face in planning for their growth is their physical location. They must decide whether they are best served by expanding their current footprint or relocating to new, larger facilities. Too often, however, business owners put off such decisions until the last minute and are forced to scramble to find new space or negotiate a deal.

It’s best to start the process early — at least nine to 12 months before your current lease expires — and give yourself time to weigh the options. There are many factors to consider when it comes to finding a new home for your business, including:

Local Market. Does your company have market penetration or an established customer base that might be lost if you move to a new location? Sometimes you don’t have to move far to lose connections with key customers or clients. On the other hand, your research may show it’s possible to relocate to an area that has a stronger market for your product or services. You might also be able to move nearer to assets like transportation hubs that can help you reach new markets and save time and money on logistics.

Physical Space. Have your facilities been improved or customized to fit the needs of your business? That could include special communication cabling, computer server rooms, restaurant equipment or other infrastructure that might not be available to you at another location. Be sure to factor in the cost of replicating these features should you decide to move. In the current market, few landlords are willing to foot the bill for major improvements unless they are part of a long-term lease for a major company.

Amenities. If you’re expanding your current footprint, you may be able to secure benefits such as larger signage and additional parking spaces from property owners at low or no cost. Parking is an issue that may seem minor but can affect your space planning. For instance, many villages require a set number of parking spaces per 1,000 square feet of use, and that number is often higher for facilities like medical offices than for retail spaces like restaurants or shops. If you expand, will your current location have enough parking to accommodate your growth?

Workforce. A company’s workers are among its most important assets. Be sure to consider how a move might affect your employees, especially if you have a strong team with valuable skills or training that would be difficult to replace. While you might be able to save money in a new location, would you risk losing longtime employees whose commute times have doubled? On the other hand, however, a new location might give you access to a new labor pool.

Lifestyle. How does your company’s location affect the lifestyle of you and your employees? Would you like to be closer to home or to amenities like restaurants or child care? While lifestyle issues may seem superfluous, they are often a big factor in determining where businesses decide to relocate. Chicago’s world-class cultural institutions, for instance, have long been a draw for major corporations that have decided to locate their headquarters in northeastern Illinois.

Cost. Will a new lease help you save money? Or, alternatively, will a more expensive new location be worth the investment in the long run? Be sure to review your goals for your company’s move or expansion and don’t forget to factor in all the costs. After additional expenses such as moving and building out a new space, you may only realize marginal savings on a new lease.

No matter your objectives, however, there’s no doubt that planning for the future of your business is an important decision, so don’t put it off and don’t go it alone. Take the time now to set goals, compute the possible costs and benefits, and work with someone to evaluate your options and your current lease well before it expires.

By giving yourself time to work through the all options ahead of time, you can position your business for future success and avoid the growing pains that can often accompany expansion.

• Paul Martis is a broker at Coldwell Banker Commercial NRT in Oak Brook and Current Chair of the Mainstreet Organization of REALTORS® Commercial Investment Committee.

Tim  Frisbie Senior Account Executive Kathy Schaeffer & Associates, Inc. | 17 N. State St., Ste. 1690 | Chicago, IL 60602

 

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