The current and near-term state of real estate markets throughout the Midwest offers every organization an opportunity to maximize the value of facility investments. Whether your organization is looking to lease, buy, build, upgrade current space, or evaluate your real estate portfolio, opportunities are abundant to gain the upper hand in your real estate costs. But what kind of transaction or strategy should you pursue — lease, buy, or build — and how can you ensure your “good deal” is really a good deal in your specific market and industry?

Plante Moran CRESA’s team of real estate professionals, financial consultants, engineers, architects, and construction professionals can help. 

Lease, Buy, or Build?

When deciding whether to lease, buy, or build, here are some thoughts to consider:

• In a lease? In a relentlessly stagnant market, most users are finding this to be an ideal time to upgrade their current space or move to a new one, as landlords continue to offer reduced rental rates. Tenants should expect many concessions to accompany their new deal, if they know what to ask for. Another good alternative in the current market is to extend existing lease terms, regardless of lease expiration dates; landlords are often willing to offer immediate rent reductions for lease extensions.
• Want to buy? As a potential buyer, you gain a significant advantage by knowing what’s available and the facts associated with each property. Smart buyers with comprehensive market awareness can create leverage that enables them to optimize their purchases.
• Ready to build? With local soft building prices competing with strong material costs nationwide, new construction in the Midwest is noncompetitive with the existing stock of comparable properties. However, your specific business needs may actually make new construction more desirable. New construction could enable you to maximize efficiency, meet space demands, and get exactly what your organization wants. Further, municipal incentive programs exist that can make the cost of building cheaper than you think.

Making the Right Decision: What Steps Should You Take?

Selecting the best real estate option for your organization requires a thorough understanding of three project cornerstones: organizational objectives, needs of the facility, and financial capacity. In other words, what does your firm want? What does it need? What can it afford?

What does your firm want? — Often, facility transactions are driven by larger organizational goals, such as brand management, operational efficiency, and changing space needs. Before moving forward with a real estate decision, it’s important to evaluate the impact of facilities on the firm’s overall organizational goals. Changes in real estate arrangements should align with the “big picture” for the firm.

What does your firm need? — To understand your firm’s needs for the facility, you must first answer, “How do you operate?” People and facilities are closely tied, and facility design should follow function. What services are provided within your facility? How do departments work together? How can today’s facility planning accommodate tomorrow’s needs as well as minimize long-term costs? Project planning helps the team define the most efficient use of space, given existing needs and future growth expectations.

What can your firm afford? — Before embarking on a project, examine your current financial situation and define fiscal limitations. Be sure to consider operational cost improvements. By creatively analyzing all factors, including market rental rates, improvements needed, operating expenses, space efficiency, and incentives, a clear decision can be made to stay, lease, buy, or build. 

Plante Moran CRESA Can Help

Plante Moran CRESA helps clients analyze what they want, what they need, and what they can afford. We serve as an independent buyer’s advocate and provide unbiased, independent analyses of your options to help you make the best decisions. To learn more, give us a call.