Less is More - Thoughts from the staff of PointLine, Inc. 

Practical advice, case studies, cutting-edge theories, and humorous musings on how corporations can create value, reduce expenses, and make quantum leaps in productivity by implementing aggressive strategies to use real estate as a competitive advantage.

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The Burj Dubai

The world's tallest building is perhaps the greatest architectural and engineering accomplishment of man.  While most construction methods used for our local homes and buildings have not changed in the last 50 years or so, the Burj Dubai pushes the envelope of technology, sustainability, and functionality.  

The fact sheet is amazing.  For example, the concrete used in the structure would be sufficient to build a sidewalk 2,065 miles long - about the distance from NYC to Monterrey, Mexico.

Here's an infographic with more detail:


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Tape on the Floor

Here's a simple technique that has saved several dozen of our clients literally millions of dollars in lease costs, and is very applicable to the changes happening in today's market. We call it the Tape on the Floor Option.

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Market Rate Audits for Commercial Leases

One of the easiest and most effective ways for a corporation to keep real estate costs low is to regularly perform Market Rate Audits on their leased locations.  Often many companies get caught up in reactionary tasks such as simply handling leases as they come up for expiration, so they never get ahead of the curve with a proactive approach.

Here’s how the Market Rate Audit usually works:  Whether a firm has just a handful of locations or several hundred, each lease with less than 5 years remaining in term is evaluated and compared to actual available alternative spaces in their respective markets.

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Upcoming Lease Expiration - Renewal / Relocation Planning


On Top of the World - The View from One World Trade Center



Every corporate real estate consultant on the planet would like the opportunity to help a client lease space in this building, if just for the education.  I was fortunate enough to have the building included on a property tour of NYC recently.  After an exciting construction elevator ride up, I took the photo above.  That tall building in the center right of the picture that you’re looking DOWN on is the Empire State Building. 

Note also that there’s no glass or fence between my camera and the pavement, nearly ⅓ of a mile below.  You can bet I had a good grip on the railing (Less would certainly not have been More in this case!).

By any standards, the new One World Trade Center is impressive.  Here are some stats:

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Using KPI Benchmarking to Apply a Portfolio Approach to Corporate Real Estate


Industrial Market Update

CoStar released it’s annual year end Industrial Summary recently without much press fanfare.  Why?  It seems that most people are now used to the slow and steady drip of the economy and the report doesn't seem to offer many surprises.  Until you dig into the data.....


The U.S. Industrial Market had four consecutive quarters of positive absorption last year.  In fact, for  the last two years absorption has been 2X to 3X the new construction deliveries in every single quarter.  New construction has been less than 20% of the 30 year annual average for the last four years.  National vacancy is at 8.8%, and it is considered to be a “Landlord’s Market” anytime vacancy dips below 8%.  Do you see where this is going? 

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Establishing Corporate Real Estate Best Practices Using Metrics

Every business has a learning curve as it grows, and the collective wisdom learned along the way becomes an invaluable knowledge base.  This is especially true in regard to your facility strategy.  By analyzing  what was done right and what could be improved in each new location or lease renewal process, you can develop rules to achieve the greatest return and avoid pitfalls.

If your firm has multiple branch locations, try this simple exercise:  Take your annual Total Occupancy Costs (Rent + all Operating Expenses) and divide by an annual revenue metric such as Adjusted Gross Profit or Gross Sales.  For example, if a location has $240,000 in TOC and AGP at that location last year was $5M, then your real estate costs represented 4.8%. Now do that for each site.

What you’ll find, of course, is that each location has a different real estate cost as a percentage of revenue.  The magic question is:  WHY?

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A Better Way to Manage Commercial Construction

If you were around and fortunate enough to have a cell phone 30 years ago, you most likely had a Motorola “brick”.  It made calls.  It did not have a camera, email, mapping or navigation function, calculator, clock, or play music.  It could act as a paperweight, mini-dumbell, or a defensive weapon in a pinch.  Now, think about how much has changed in cell phones in the last 30 years.

Do you know how much has changed in the construction process during that same 30 year period?  Not much.

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How Smart Companies Manage Multiple Locations

Any corporation with more than one office/branch/site is large enough to have real estate portfolio objectives.  With just a handful of locations, the C-level executives are likely very hands-on in determining the best solution as real estate opportunities or decisions present themselves.  Once the number of sites grows to a point where that oversight is delegated though - whether placed under the responsibility of another staff member such as Regional VP's, Controller, VP of Finance, General Counsel, or a dedicated Director of Real Estate - there are three styles that the management can typically be classified under:

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Project Management Rule #1: No Surprises.

We have a rule for our real estate project management process:  No Surprises.  Typically our clients are either doing a major construction project to build out or expand their business space, relocating to another facility, or both.  Usually these are operations critical to providing their products or services to their customers.  

So what happens when a freak storm like Hurricane Sandy arises well after the usual season, misses the tropical coast, and heads for NJ & NY?  Isn’t that a surprise to everyone?  Well, no.

Here’s why:

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The Only Two Ways to Protect Yourself on Operating Expense Pass-Throughs

I'm not crazy about condominiums.  Here's why:  Other people (the condo association - which is often controlled by a very small group of individuals) get to vote on how to spend your money.  Some of those choices may not add value for you or to your property.  Operating expenses on leased commercial property work the same way.  The management company, which is the property ownership or someone under their direct control, gets to decide what expenses get passed through to the property tenants.  So what expenses do they pass through?  Every single one that they can possibly get away with.  There are only two methods of protection for tenants, and I'd estimate that more than half of all leases don't fully take advantage of them.

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Thinking Inside the Box  

While companies are continually seeking new and smarter ways to use technology to boost productivity in their business, there is one particular consideration that often gets overlooked:  How they utilize space.

In case you hadn’t noticed it, the offices and cubicles in your workplace likely have a lower utilization rate than they did 10 years ago.  By utilization, I mean that people are less likely to be sitting in their chairs.  

Here’s why:

  • Staff used to have to sit at their computers to access data, now they can access it from anywhere.
  • Work was the place that you used to go to get things done and avoid interruptions that occurred at home.  Now staff goes home to get things done and avoid the interruptions that occur at work.
  • Execs used to need to be next to their support staff.  Now they can either communicate with that staff remotely, or the ease of email and auto-correct has reduced or eliminated that support staff entirely.
  • Company telephone systems were the lifeblood of communications and the primary way to voice communicate.  Now they’re quickly becoming functionally obsolete in favor of smartphones.
  • The primary advantage of being in the office is now collaboration, not seclusion, so even when present many staff members are more likely to be in a meeting than at their desk.

There are two ways to reduce real estate costs even when rental rates are escalating.

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Captive Tenant Syndrome

In my last post, Newtons First Law, we discussed how the “house odds” favor landlords since the overwhelming majority of tenants renew their leases.  Why?  Because:

  • It is a hassle to move
  • Evaluating options would require time and effort
  • A move would cause disruption to already stretched staff resources
  • It is expensive to move

OK, good points.  However, tenants who adopt the above mindset without actually quantifying or verifying those suspicions, are commonly said to be suffering from “Captive Tenant Syndrome” - the mistaken belief that they are being held hostage in their own space.

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Newton's First Law

Newton’s First Law of Inertia is:  An object at rest tends to stay at rest.  The Landlord’s First Law of Inertia:  A tenant in place is likely to renew.  How likely?  It is hard to find precise data although many Real Estate Investment Trusts report that in excess of 80% of their commercial portfolios renew.  With those kind of odds, most landlords will presume a low risk of vacancy at renewal time and in-place tenants will be offered less favorable rental terms than a new tenant coming in off the street.

So a renewing tenant often pays more?  Absolutely. 

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Do M&A Real Estate Due Diligence or Pay Your Dues

When companies do acquisitions of other competing or complementary firms, real estate is, as a part of the transaction, generally a small overall concern. Understandably.  

However, we frequently see major risk being absorbed by the acquiring firm with potential for a very negative surprise down the road.

Here’s the error:  Due diligence of the real estate is often relegated to their investment advisory firm and/or an M&A legal team to simply provide a cursory review of the legal terms of leased real estate without much attention to the business terms.  

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Amazon’s Prime Logistics Strategy

A few months ago, I joined Amazon Prime.  That’s a $79/year program that Amazon developed that gives members free 2 day shipping on Amazon-stocked products (which is most of the stuff that they sell).  For me, having nearly anything I want conveniently delivered anywhere I want in two days is fantastic.  However, the second time I bought from them, I was given a choice:  Free 2 Day Shipping, as I had signed up for, or Free No Rush (5-7 day) Shipping with a $1 credit to their Amazon MP3 Music Store (with most songs priced $1 or less).

Now the offer isn’t a huge incentive, but you have to appreciate the strategy behind it:  Many times customers just don’t need things as fast as we’re able to deliver them.  By effectively “polling” my needs, Amazon just created an amazingly flexible logistics model.  Can you imagine having a pool of pending deliveries that you can pick and choose when to fill and when to ship based upon your labor and transportation capacities?  That’s what Amazon has accomplished.

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7 Red Flags That May Indicate the Need For a Lease Compliance Review 

By Ed Harris 

(Editors Note:  Ed Harris is VP of Commercial Tenant Services, a NYC-based auditing firm that specializes in corporate lease review. We hope you enjoy this guest article.)

Few areas hold as much impact on capital outlay as real estate and leasehold expenses. Ensuring that your company is not overpaying is integral to fiscal management.

1. Significant Jumps in Operating Expenses / Additional Rent

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A Primer on Assignment Clauses

Assignment clauses are no-doubt a big reason for the inherently tough nature of commercial lease negotiations. 

An assignment clause provides tenants with protection from long-term negative impacts of having to move before the lease's termination date or in the event of a change of ownership. 

When activated, a tenant can "assign" a new tenant to the lease. The new tenant then falls under the same terms in the same space. The original tenant is then absolved of future lease obligations. 

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The Evolution of the Corporate Campus

Zappo's is turning the idea of a corporate office campus on it's head. They could have followed the majority of other California internet firms and built or bought property in a Silicon Valley suburb.  Instead they packed up and moved - to Vegas.  


Not the high glitz strip in a Class A building, either.   They're taking over the City Hall building in the old Las Vegas downtown.  The building and 12 acres of surrounding land and buildings will have apartments for staff and retail to support company amenities  and concessionaires,  with an option for them to purchase another 10 acres for expansion.   They're moving into town, and turning it into one giant Zappo's workplace experience.

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