July 23, 2012 • An Advertising Supplement to the San

July 23, 2012 • An Advertising Supplement to the San Fernando Valley Business Journal

This special advertising supplement did not involve the reporting or editing staff of the San Fernando Valley Business Journal.

COMMERCIALREAL ESTATEQUARTERLY

Shaking off a prolonged impact fromthe recession, fundamentals are grad-ually improving in all of the major

commercial real estate sectors, accordingto the National Association of Realtorsquarterly commercial real estate forecast.The apartment rental sector, in fact, hasfully recovered and is growing, accordingto the report.

These findings also are confirmed inNAR’s recent quarterly Commercial RealEstate Market Survey, which collects datafrom members about market activity.

Lawrence Yun, NAR chief economist,said new jobs are the key. “Ongoing jobcreation, which is at a higher level thisyear, is fueling an underlying demandfor commercial real estate space, assistedby a steady increase in consumer spend-ing,” he said. “The pattern shows gradu-ally declining commercial vacancy rates,with consequential but generally modestrent growth.”

Yun expects the economy to add 2 to2.5 million jobs both this year and in2013, on the heels of 1.7 million newjobs in 2011, assuming a new federalbudget is passed before the end of the

year. “Although we need even strongerjob growth, by far the greatest impact ofjob creation is in multifamily housing,where newly formed households strikingout on their own have increased demandfor apartment rentals - this is the sectorwith the lowest vacancy rates andstrongest rent growth, which is attractingmany investors.”

Rising apartment rents also are havinga positive impact on home sales becausemany long-time renters now view home-ownership as a better long-term option,Yun noted.

A large problem remains for purchas-es of commercial property priced under$2.5 million. “Our recent commerciallending survey shows that there is verylittle capital available for small busi-ness, which is significantly impactingcommercial real estate transactions,although funding is less restrictive forbigger properties.”

NAR’s latest Commercial Real EstateOutlook offers projections for four majorcommercial sectors and analyzes quarter-ly data in the office, industrial, retail andmultifamily markets. Historic data for

metro areas were provided by REIS, Inc., asource of commercial real estate perform-ance information.

Office Markets

Vacancy rates in the office sector areprojected to fall from 16.3 percent in thesecond quarter of this year to 16.0 per-cent in the second quarter of 2013.

The markets with the lowest officevacancy rates presently are Washington,D.C., with a vacancy rate of 9.3 percent;New York City, at 10.0 percent; and NewOrleans, 12.6 percent.

Office rents should increase 2.0 per-cent this year and 2.5 percent in 2013.Net absorption of office space in the U.S.,which includes the leasing of new spacecoming on the market as well as space inexisting properties, is forecast at 24.7 mil-lion square feet in 2012 and 48.0 millionnext year.

Industrial Markets

Industrial vacancy rates are likely todecline from 11.0 percent in the currentquarter to 10.7 percent in the secondquarter of 2013.

The areas with the lowest industrialvacancy rates currently are OrangeCounty, with a vacancy rate of 4.7 per-cent; Los Angeles, 5.0 percent; and Miamiat 7.2 percent.

Annual industrial rent is expected to rise1.6 percent in 2012 and 2.4 percent nextyear. Net absorption of industrial spacenationally is seen at 44.1 million square feetthis year and 62.4 million in 2013.

Retail Markets

Retail vacancy rates are forecast todecline from 11.3 percent in the secondquarter to 10.7 percent in the secondquarter of 2013.

Presently, markets with the lowestretail vacancy rates include San Francisco,3.7 percent; Fairfield County, Conn., at4.0 percent; and Long Island, N.Y., at 5.0percent.

Average retail rent should rise 0.8 per-cent this year and 1.3 percent in 2013.Net absorption of retail space is projectedat 8.0 million square feet this year and21.9 million in 2013.

All Commercial Real EstateSectors Continue to Improve

Continued on page 28

26_31_sfvbj_re_supplement_072312.qxp 7/20/2012 1:55 PM Page 26

July 23, 2012 San fernando valley BuSIneSS Journal 27

San Fernando Valley Business Journal I 2012 Special Event

AttorneysDavid AdelmanGreenberg & Bass, LLPThomas P. ChristopherChristopher Law GroupRobert A. CohenAnker Reed HSCMatt CrowleyCrowley Corporate Legal StrategyDavid M. De CastroDe Castro & Morrow, LLPJonathan Fraser LightLightGabler, LLPKaren L. GablerLightGabler, LLPAndrew GoodmanGoodman & Faith, LLPAnthony B. GordonGordon & Gordon, APLCBarry KurtzKurtz Law GroupChristopher MelcherWalzer & MelcherSanford MichelmanMichelman & Robinson, LLPCaren R. NielsenLaw Offi ces of Caren R. NielsenJoyce PearsonPearson Law CorporationJudith PerezPerez & Hawes, LLPPierre RodnunskySantiago Rodnunsky & JonesRichard S. RosenbergBallard Rosenberg Golper & Savitt, LLPSteven C. SereboffSoCal IP Law Group, LLPGeorge ShalhoubLaw Offi ces of George ShalhoubCharles SchultzWasserman Comden Casselman & Esensten, LLPWilliam C. StaleyLaw Offi ces of William C. StaleyKeith Todd ZimmetLewitt Hackman

Business BankersMarianne CederlindMission Valley BankRudy CedillosUnion BankClint CreadoWells Fargo Bank

Madlen GhookassianJP Morgan Chase BankCarlos HerreraUnion BankJonathan HersholtJP Morgan Chase BankRobin IsraelJP Morgan Chase BankGreg Martinez-MillerWells FargoR Hank MillerBoston Private Bank & Trust Co.David A. RossoCommunity BankBrian M. SchimelpfeningJP Morgan Chase BankJahun SmithMission Valley BankRussell T. SunFirst BankHebah A. TahounJP Morgan Chase Bank

CPAsSally AuburySingerLewakSteven J. BanksJ. H. Cohn, LLPJim ChevalierMoss Adams, LLPDavid M. CieslakArxis Technology, Inc. Michael S. FredlenderMichael S. Fredlender, CPA, APCPatrick GreeneWhite Zuckerman Warsavsky Luna & Hunt, LLPAndrew GreySolomon Ross & Grey, LLPSheri GrossbergSolomon Ross & Grey, LLPLarry HaworthBessolo Haworth & Vogel, LLPKevin D. HolmesJ. H. Cohn, LLPDaniel M. HowardLodgen Lacher Golditch Sardi Saunders & Howard, LLPSabita JagtianiJagtiani & CompanyRobert JensenKing King Alleman & JensenMichael KaplanMiller Kaplan Arase & Co., LLPDennis KingKing King Alleman & Jensen

Stephen LandsmanSquar Milner Peterson Miranda & Williamson, LLPPeter MagidoffMagidoff Sadat & GilmoreDerek McGowanMoss Adams, LLPDavid L. NadelNadel CPA’s APCRochelle NakajimaJ. H. Cohn, LLPStephen RedmondMoss Adams, LLPWarren SacksWhite Zuckerman Warsavsky Luna & Hunt, LLPMartin D. SeidengishSEIDENFima SklyarKellogg & Andelson Accountancy Corp.Martin SniewskiCrowe HorwathLloyd SredenStone Kory Sreden & MorganJames WaltersKellogg & Andelson Accountancy Corp.

Insurance ProfessionalsKendra BootsQuisenberry Insurance, Inc.Matthew CarlsonRisk Strategies CompanyKyle DeVriesDeVries Financial a National Financial Partners (NFP) CompanySteven DrissLifeline Employee Benefi tsTeri S. FrankelTaking Care of Benefi ts Insurance SolutionsTimothy GasparGaspar Insurance Services, Inc.Gary GuentherB&B Premier Insurance SolutionsTobias KennedyMontage Insurance SolutionsLindahl L. Lucas IILucas Insurance ServicesDavid MauldingJones & MauldingThomas MeansStoneTapertDarrow MilgrimWells Fargo Insurance Services USA, Inc.Gwyn PetrickState Farm Insurance Agency

Matthew PondellaArroyo Insurance AgencyJim ScanlonScanlon & Associates Insurance Brokers, Inc.Jeannene ScearceMontage Insurance SolutionsRon SmithSGB NIA Insurance ServicesJoshua SpitzUSI of Southern CaliforniaScott ZimmermanCorporate Strategies, Inc.

Wealth ManagersLouis AshamallahUBS Financial ServicesJill CampbellCampbell Tax & Financial ServicesStephen W. DavisMerrill Lynch, The Davis GroupDennis DeYoungFinancial West GroupMaziar EsmailbeigiMorgan Stanley Smith Barney, LLCGary KelmanUBS Financial ServicesDaryl H. KibotaMorgan Stanley Smith Barney, LLCBrad LevinLegacy Wealth PartnersLon MortonMorton Capital ManagementBruce C. MunsterMorgan Stanley Smith Barney, LLCGarry C. PaceMerrill Lynch Wealth ManagementCharles PerryMerrill LynchJason RomanoMoss Adams Wealth Advisors, LLCAnthony A. SaccaroProvidence Financial & Insurance Services, Inc.Randall Sanada, Jr.Alliance FinancialJason SandsWells Fargo AdvisorsBrandi L. SchnathorstMerrill LynchJeff SorensenSorensen Wealth ManagementAli ZamaniMorgan Stanley Smith Barney, LLCReza ZamaniMorgan Stanley Smith Barney, LLC

Join us as we honor our 2012 Valley’s Trusted Advisors nominees:

Platinum Sponsors: Gold Sponsor:

Silver Sponsor: Legacy Wealth Partners

Reception and Awards Program: Wednesday, August 8, 2012 • 5:30 PM - 7:30 PMWarner Center Marriott Hotel, 21850 Oxnard Street,Woodland Hills$60 per ticket • Reservations required by July 27thReserved tables of 10 are available through the purchase of an advertising package

For sponsorship and registration information, please visit www.sfvbj.com/bizevents, or contact us at (818) 676-1750

28 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL JULY 23, 2012

By WAYNE WIRTH

Even in today’s tough financing mar-ket there remain a number of under-utilized options for small business

owners seeking funding. When it comesto the purchase, refinance or renovationof commercial real estate, borrowers oweit to themselves to take a close look atthe Small Business Administration’s 7(a)Loan Program.

While not widely known or under-stood outside the lending industry, theSBA 7(a) Loan Program offers borrowersup to 90 percent financing for the pur-chase of owner/user commercial realestate that is fully amortized with no bal-loon payments. For the purpose of theloan program, owner/user is defined as aminimum of 51% of total occupancy.

With a maximum loan amount of$5,000,000 and terms as long as 25 yearsfor commercial real estate acquisition,construction or refinance, the 7(a)Program could serve as a real solution tomany borrowers.

Due to the inherent nature of SBAfinancing, in some instances qualifying foran SBA loan may actually be easier thanqualifying for other, more traditionalforms of financing. SBA programs general-ly allow for a higher loan to value ratio,longer amortization periods and may evenconsider the projected income of the busi-ness and not just historical cash flowswhen making a credit decision. These fac-tors can be extremely helpful, particularlyto a rapidly growing company.

SBA 7(a) loans can be used by qualifyingborrowers to purchase or renovate or refi-nance real estate, additionally these loanscan also be used for acquiring fixed assets,

such as heavy machinery or other equip-ment, restructuring current debt, workingcapital and in some cases can even be usedto fund the acquisition of a new business.

It is important to understand that theSBA does not make loans directly to smallbusinesses. Rather, the SBA sets the guide-lines for these loans, which are thenmade by the SBA’s lending partners.

Because the SBA guarantees the lenderthat a portion of the loan will be repaid, itsignificantly lessens the risk to the lendingpartners. So when a business applies for anSBA loan, it is actually applying for a com-mercial loan that is structured according to

SBA requirements with an SBA guaranty. SBA loan guaranty requirements and

practices can change as the Governmentalters its fiscal policy and priorities tomeet current economic conditions.Therefore, you can’t rely on past policywhen seeking assistance in today’s mar-ket, which makes it all the more impor-tant that you work with a lender that willhelp guide you through the process andidentify what type of program may bestfit the needs of your company.

SBA 7(a) loans and other types of spe-cialized lending make it possible for qual-ified businesses to get the financing they

need, often times with much more flexi-ble terms than more conventional loanoptions. Two resources to help you learnabout SBA and other forms of specializedlending are available at www.sba.gov orwww.MissionValleyBank.com.

Wayne Wirth is senior vice president andmanager of Mission Valley Bank’s SBA LoanDivision. Mission Valley Bank is a locally-owned, full-service, independent, commercialbank with Preferred SBA Lender status serv-ing the San Fernando and Santa ClaritaValleys. Wayne can be reached at (818) 394-2329. MissionValleyBank.com

Looking to Purchase, Refinance orRenovate Commercial Real Estate?

COMMERCIAL REAL ESTATE QUARTERLY

By RAFFI D. KRIKORIAN

While the overall economic cli-mate continues to pause chal-lenges for a full recovery, the

investment real estate market has beenexperiencing notable resurgence in trad-ing activity, especially with the multi-family sector.

Compared with last year, the first sixmonths of 2012 has already witnessed asignificant increase in sales of apart-

ments, and all classes of leased invest-ment properties. In terms of demandand valuation, multifamily leads allproperty types, with notable tradingvelocity covering hospitality and retailproperties. Stabilized, larger apartmentbuildings are now commanding capital-ization rates typical of pre August 2008levels. Similarly, we see well occupiedanchored shopping centers approachingcap rates not seen since 2008.

The market will continue with this

uptick driven by unprecedented lowinterest rates, and demand for new apart-ment units. In-fill located land, suitablefor both multifamily and commercial useis now commanding values not seen inseveral years, helped by increased avail-ability of construction financing.

Although we are in an election yearwith unpredictable set of expecta-tions, the commercial real estateindustry is in a rebound, expecting tocontinue with this same pace for the

balance of the year. This premise issupported by the enormous depth ofliquidity found in the current market,and continuing demand to deploymore capital in the acquisition ofincome producing properties.

Raffi D. Krikorian is the founder, Presidentand CEO of Investment Real EstateAssociates, headquartered in Encino. Formore information, please contact (818)386-6888 or visit www.irea.com.

Investment Real Estate on the Road to Recovery

Multifamily Markets

The apartment rental market - multi-family housing - is likely to see vacancyrates drop from 4.5 percent in the secondquarter to 4.3 percent in the second quar-ter of 2013; apartment vacancy ratesbelow 5 percent generally are considereda landlord’s market with demand justify-ing higher rents.

Areas with the lowest multifamilyvacancy rates currently are New YorkCity, 2.1 percent; Portland, Ore., at 2.3

percent; and Minneapolis at 2.4 percent.After rising 2.2 percent last year, aver-

age apartment rent is expected toincrease 4.0 percent in 2012 and another4.1 percent next year. “Such a rentincrease will raise the core consumerinflation rate. The Federal Reserve, inturn, may be forced to raise interest rates,possibly as early as late 2013.”

Multifamily net absorption is forecastat 215,900 units this year and 230,300in 2013.

The Commercial Real Estate Outlook ispublished by the NAR Research Division

for the commercial community. NAR’sCommercial Division, formed in 1990,provides targeted products and services tomeet the needs of the commercial marketand constituency within NAR.

The NAR commercial componentsinclude commercial members; commer-cial committees, subcommittees andforums; commercial real estate boardsand structures; and the NAR commercialaffiliate organizations - CCIM Institute,Institute of Real Estate Management,Realtors Land Institute, Society ofIndustrial and Office Realtors, and

Counselors of Real Estate.Approximately 78,000 NAR and insti-

tute affiliate members specialize in com-mercial brokerage and related services,and an additional 232,000 members offercommercial real estate services as a sec-ondary business.

The National Association of Realtors, “TheVoice for Real Estate,” is America’s largesttrade association, representing 1 millionmembers involved in all aspects of the resi-dential and commercial real estate industries.

Continued from page 26

Because the SBA guarantees

the lender that a portion of

the loan will be repaid, it

significantly lessens the risk

to the lending partners. So

when a business applies for

an SBA loan, it is actually

applying for a commercial

loan that is structured

according to SBA

requirements with an

SBA guaranty.


By JEFF MCGUIRE

The buzz is back in the Los Angelesmulti-family investmentmarket.Sales volumes and prices have

rebounded sharply as interest rates havedipped to an all-time low.

Some market veterans are apprehensivethat low interest rates have or will causeanother real estate bubble such as the onethat burst in 2007. Understandably, theyare asking whether low interest rates areresponsible for the rebound in themulti-family resale market.

Over the 2000-2006 period, dramaticincreases in debt and equity availabilityand increased investor demand producedmaterial declines in cap rates and increas-es in prices as the graph here illustrates.

It’s clear that low interest rates were atleast partly responsible for fueling resalevalues as the average 10-year treasury ratecompressed from 6.7% to 4.05% in 2003while the average price per unit in LosAngeles increased from $62,999 to$97,108 over the same time period.

Fast forward to the current market. Ina recent transaction of a 71-unit, rentcontrolled apartment building that closedin Canoga Park, the buyer paid a 5.7%cap rate, very close to the 2007 peak val-uation for this particular area. The buyersaid that the deal worked for him becausethe 4.05% interest rate he was able tosecure enabled him to have positiveleverage to meet his minimum first yearcash-on-cash return requirement of 5%.

Should investors be worried about ris-

ing interest rates? In my view, higherrates will be a byproduct of the next realestate cycle as the outstanding debt herein the U.S. is enormous and continues togrow. If left unchecked the bond marketwill ultimately have its way and demandhigher yields which in turn will translate

into higher borrowing costs. When interest rates inevitably increase

those owners that purchased properties atlow cap rates and employed short term orvariable rate financing will face a veryreal refinance loan risk.

Jeff McGuire, a Principal of Lee & Associates-LA North/Ventura, Inc., specializes in multi-family investment sales in the Los Angelesarea. He can be reached at (818) 444-4960or by email at [email protected].

Low Interest Rates Driving Multi-Family Sales ... Again

JULY 23, 2012 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL 29

INVESTMENT REAL ESTATE ASSOCIATES

Investment Real Estate Associates16501 Ventura Boulevard I Suite 448 I Encino CA 91436

www.irea.com I 818.386.6888 I 310.328.5208 I f: 818.386.2805

- Established 1998 & Setting Milestones for 14 Years -

TOP California Commercial Real Estate Brokerage

10 Years Running!

Yubin TaoClark Everitt

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Congratulations To Our Top Advisors YTD 2012


10%

9

8

7

6

5

4

$200,000

150,000

100,000

50,000

’00 ’01 ’02 ’03 ’04 ’05 ’06

Avg. Cap Rate Historical 10-yr.Treasury Rate

Avg. $/Unit

Los Angeles Multi-Family Sales, 2000-2006

Source: CoStar (5+Units); U.S. Treasury

It’s clear that low interest

rates were at least partly

responsible for fueling

resale values as the average

10-year treasury rate

compressed from 6.7% to

4.05% in 2003 while the

average price per unit in

Los Angeles increased from

$62,999 to $97,108 over

the same time period.


By WILLIAM S. GOODGLICK, SIOR, AIR

The concept of revitalizing and rein-venting unused or obsolete com-mercial real estate assets, has a long

and colorful history. I recall attending anational meeting of the Society ofIndustrial and Office Realtors (SIOR) backeast some years ago and viewing a pres-entation on the dramatic adaptation ofan abandoned flour mill into a highlyprofitable and exciting retail center.Around the same time, I witnessed thetransformation of the old GhirardelliChocolate factory in San Francisco intoGhirardelli Square, a vibrant retail facilityfeaturing a wide variety of specialty storesand eateries. (Ghirardelli Square has sub-sequently gone through another meta-morphosis incorporating trendy bou-tiques and restaurants, with the top floorsconverted into Fairmont Heritage Place, aprivate residence club with fractionalownership units.)

Both of the above are excellent exam-ples of the application of so-called adap-tive reuse utilizing exciting and inventivereal estate techniques and design innova-tions to create new uses for obsolete indus-trial, retail and office properties. Thesetechniques, which were initiated andrefined on the East Coast, have been uti-lized effectively in older urban core areasof West Coast cities, including SanFrancisco and Seattle. However, they arenot always successful. A good example ofthis was the failure of The Cannery, aretail center across the street fromGhirardelli Square in the Fisherman’sWharf area of San Francisco. Created outof a former Del Monte Foods cannery, theproject was never successful and is current-ly under-going additional renovation.

In my estimation, to be truly consid-ered adaptive reuse a project must notonly be transformed, but must be transfor-mative for the area or neighborhood inwhich it’s located. Examples would be thedevelopment of residential lofts in whatformerly was an industrial area or the

opening of an up-scale restaurant by atrend-setting chef in an office park former-ly served only by fast food establishments.

Because of our tendency in SouthernCalifornia to tear down rather than rein-vent older buildings, adaptive reuse camelater to our communities. Some of us, how-ever, were initiating the process withoutrealizing it. Fairly early in my career, I wasinvolved in the conversion of a majorsupermarket near LAX into a two-storyatrium office structure; the redevelopmentof a manufacturing building into a bowl-ing alley and white table cloth restaurant,and, even the conversion of a parochialschool and rectory into a strip center andoffice complex. With the real estate econo-my awash in money during the early partof this century, condominium developersset their sights on acquiring older industri-al and commercial buildings to convertinto town houses, flats and lofts. They sig-nificantly over paid for these assets whichpriced those considering other adaptivereuses for these properties out of the mar-ket. Obviously things have changed signifi-cantly since those heady days. If one canacquire financing (and that’s a big “if”),other opportunities exist for adaptivelyreconfiguring these facilities. Examplesabound of private schools which are notrequired by law to meet the stringent

earthquake standards demanded of publicschools, turning unused industrial facilitiesinto innovative and highly flexible educa-tional facilities. Our firm was also recentlyinvolved in negotiating a 30-year leasewith Equinox, the nation’s most exclusivetotal fitness company, to open a state-of-the-art sports club in what was previouslyan ordinary two-story concrete office build-ing in the city of Hawthorne. The fitnesscenter and spa occupies 45,000 square feetin the 72,000 square foot building.Additionally, the strength of the building’sconcrete shell allowed the construction ofa running track on its roof and the installa-tion of a swimming pool on a portion ofthe expansive parking lot. In all the abovecited cases, the adaptive reuse of theseproperties has had a transformative impacton the areas in which they are located.

One thing to remember is that “cre-ative space” isn’t a synonym for adaptivereuse! Creative space is broker-speak for aproperty that’s seen better days, but retainsone valuable asset; a location on theWestside of Los Angeles in close proximityto the entertainment industry in all of itspermutations. In this case, a plain vanillabuilding has its exterior sandblasted andpainted in bright contemporary colors,while its interior concrete floors are pol-ished, its ceiling painted black to empha-

size its exposed beams, trusses and air con-dition ducts, new track lighting is installedand modern glass window walls replaceold loading doors. Toss in a coffee bar andcreate an architecturally inventive entryand lobby and voila you have a spacethat’s likely to cost 50 percent more torent than if had retained its original form.

The current economic turmoil is mak-ing it difficult if not impossible forlenders to finance conventional projects,leaving unique and esoteric adaptivereuse programs for stronger, less fearfultimes. Nonetheless, the attraction tocompanies wishing to express their ownindividuality within a unique space willcontinue to be the siren song to many ofthe so-called “gazelles”, emerging entre-preneurial companies inhabiting theWestside and the South Bay areas of theSouthland. There are a variety of reasonsfor this attraction, including convenientand accessible locations, abundant freeon-grade parking and expansive openinterior spaces with industrial ceilingheights allowing for flexible planningand design. However, it’s important toseek the services of a real estate profes-sional who knows the area in which theproject is to be located. There are a vari-ety of potential time bombs ticking forthe unwary. An example of this could bethe reluctance of a local municipality tochange zoning to allow for an adaptivereuse project to be constructed or a needto meet expensive ADA access require-ments and the ever present environmen-tal considerations which occur whenchanging a project’s use.

In summary, adaptive reuse eithermakes sense or it doesn’t and that needsto be determined up-front in consultationwith the property’s owner and your ownreal estate consultant. If it clicks, theprocess can be a heady experience, as wellas profitable for all parties concerned.

William S. (Bill) Goodglick, SIOR, AIR, ispresident of the Goodglick Company.

Adaptive Reuse: Thinking Inside the Box

30 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL JULY 23, 2012

By LUKE ALBARN

Growing a company can be excit-ing, but it can also be pretty try-ing. Even handling the infrastruc-

ture can bring headaches. If you findyourself saying “We’ll just squeeze Bob inhere,” when your new hires are about tostart, perhaps it’s time to consider a moveto roomier headquarters.

A commercial real estate broker willhelp you find office space, but before youeven start talking to one, you should cal-culate roughly how much space you’llneed. Private offices range between 120-200 square feet each, workstations 36-80square feet, and conference rooms 200-375 (up to 10-12 people) square feet.You’ll likely also want to consider otherancillary spaces like storage areas, closets,a faxing/mailing room, or a kitchen.

Then, spend some time thinkingabout where you’d like to move, as wellas what that space should look like. Is itimportant that you be near public trans-portation or your customers? Or perhaps

an alarm system is a must-have. Knowingwhat you’re looking for beforehand canhelp you get a sense for costs, so that youcan adjust your budget or your criteria asnecessary.

Real estate costs — measured in dollarsper square foot, vary greatly. The Building

Owners and Managers Association(BOMA) classifies buildings according totheir location, appearance, and cost. ClassA space, for example, is typically a mod-ern, attractive, secure building in desirablelocation. But Class A space in a metropoli-tan area is far more expensive than ClassA space in a less-populated region.

Once you know what kind of spaceyou want and how much you can pay,it’s time to find a broker. Brokers areplentiful, and each tends to specialize ina particular type of space (manufacturingvs. office, for example) and geographicalarea. Particularly in a hot market, it’sadvantageous to find a broker who is inti-mately familiar with the area you are eye-ing, because they often get the insidescoop on space that’s about to becomeavailable; you can at least have a chanceof getting to it before it’s widely market-ed. Brokers also can provide insight onthe quality of different landlords.

However, there are brokers who workfor the building owner, not you. Some bro-kers work on commission, which is paid by

the landlord and usually ranges between 3-7 percent of the cost of the lease. This prac-tice can lead to situations where your bro-ker is not working in your best interest.

With that in mind, make sure you geta disclosure statement upfront, whichdetails whether the broker is representingthe landlord or the tenant or both. TheCommercial Investment Real EstateInstitute (CIREI) mandates that all mem-bers adhere to their Code of Ethics andStandards of Practice. It’s best to look forbrokers who are affiliated with the Societyof Industrial and Office Realtors (SIOR)and are Certified Commercial InvestmentMembers (CCIM). These designations willensure that you’re dealing with an educat-ed and recognized professional.

Once you have found your broker anda site you like, you are ready to start thehard part —negotiating. But tips on get-ting the best deal will have to wait for afuture column.

Luke Albarn is a freelance writer based inTarzana.

Business Expansion and Commercial Real Estate


QUICK TIPS

Think long-term. Consider your long-term

growth plans when deciding on a new

space. You don’t want to find yourself

needing to move when you’ve got a year

or so left in your lease.

Interview brokers. Some things to consid-

er: SIOR and CCIM designation and

whether the broker is representing the

tenant or landlord.

Consider a sub-lease. If your company is

growing quickly, you won’t want to lock

into a long lease. The rub is that land-

lords prefer long lease terms; one way to

get around that is to try subletting space

from another business.

To be truly

considered adaptive

reuse a project

must not only be

transformed,

but must be

transformative

for the area or

neighborhood in

which it’s located.


Finding and Inspecting Your Space

JULY 23, 2012 AN ADVERTISING SUPPLEMENT TO THE SAN FERNANDO VALLEY BUSINESS JOURNAL 31

21600 Oxnard St., Ste. 250 • Woodland Hills, CA • 818.676.1750 • www.sfvbj.com

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Professionally marketing available buildings andland inventory. Providing sales, leasing, investment, and management services with concentration on San Fernando, Santa Clarita, Simi and Conejo Valleys, to Oxnard and Ventura.

Leadership inspired by a team of true professionalsin industrial Real Estate who represent a rare blend of outstanding performance and pacesetting indus-try achievement. That’s what sets Delphi apart.

The Difference is Dynamic.

(818) 780-78787100 Hayvenhurst Ave. Suite 211 Van Nuys, CA 91406www.go2delphi.com

By TIM RUSSELL

Finding the right property in residen-tial real estate is a little easier than incommercial real estate. For one

thing, many commercial properties arenot listed in the multiple listing service.This makes it difficult to actually seeeverything out there without talking witha lot of realtors. It makes sense for mostto enlist the services of a buyer’s agent tohelp you find everything that is available.Agent commissions in commercial realestate are much more negotiable than inresidential real estate. They’ll also be ableto help you determine the properties thatare zoned for the type of business you’rein, parking space requirements, advertis-ing regulations, etc.

Classes of Office Space

Office space is divided into three class-es – Class A, Class B, and Class C. Theclasses are just what they imply, that ishigher quality at the A end and lowerquality at the C end. The classes arebased on the age of the building, the typeof construction, the location, the amountof renovation, and the amenities that thebuilding provides. You may also runacross what is now being referred to asClass E Office Space in some cities. Theseare old buildings class B buildings thatare being considerably renovated tobecome spaces with a totally differentlook. They usually have very high ceil-ings, lots of large windows, and lots ofwood. They seem to appeal to the hightech and dot-com groups. (Hence the “E”

designation.) The dollars per square foot will vary

quite a bit from one class to the next, soconsider the amenities, location, as wellas the “look” you need before startingyour search.

See as many spaces as you can, andpull out the list you created earlier in theplanning process. Make sure you haveprioritized the features that are mostimportant to you and your business, andgive them the most consideration whenlooking over the properties. Don’t letyourself be blinded by one spectacularfeature in a property when some of theother equally important features are lessspectacular than what you need. You caneven create a scoring system to help youcompare each property equally.

Regardless of the system you use, takenotes about the plusses and minuses ofeach site, and take photos to help keepthem straight in your head. Visit the siteson your short list often and at differenttimes of the day to observe the changes intraffic, noise, and other potential problems.Don’t let your emotions rule your decision!

Don’t forget to also investigate “build-

to-lease” options also called “build-to-suitleases.” If you find the right developeryou can tailor the space to your needsand then lease it. This option will requirea lot of work on your part to make sureyou’re getting the quality and structurethat will suit your needs. Keep in mindtoo, that the developer you work withwill probably not own the building forthe length of your lease.

Inspect the property

So you’ve found a good spot — youthink. You like the location. It’s passed allof the tests so far. So what else do youhave to look at before you sign on thedotted line? Here are some things tomake sure are on your list of questions. • First of all, how old is the building? Withage can come problems and difficulties inincorporating new technologies. • Are there structural problems? Talk withother tenants and see if they’ve had anyproblems either with the building itself,or even with the landlord. • Does the roof leak? • How old are the HVAC systems? Willyou be dealing with periods of no air inthe summer and no heat in the winter? • Is it wired for computer networks, inter-net access, or other electronic items? If not,will you have difficulty wiring it because ofthe types of wall materials or ceiling? • Is there adequate security? Security fea-tures can include: - steel security doors - security gates that fold out of the wayduring office hours - alarm systems that can be monitored by a

security firm or the local police department - video cameras to watch entrances and exits - bullet-proof glass - fenced parking - external lighting all around the buildingsecurity guards.

If you’re buying the property you needto dig even deeper. Sometimes literally!For instance, you may need to do a Phase1, 2, or 3 site assessment to make surethere is no environmental contaminationthat you will be dealing with. Sometimesthe lending institute you are getting yourloan from will require it.

So what do these assessments entail? APhase 1 assessment involves reviewingthe past uses of the land, and govern-ment environment records concerningthe property, and a simple observation ofthe property. If this first assessmentshows up any potential contaminationsor problems then a Phase 2 assessment isneeded. Phase 2 involves air, water, andsoil samples. The third type of assess-ment, sometimes referred to as aTransaction Assessment, only takes intoaccount the use you are proposing for thesite. It does not take into account anypast uses or problems. This is the assess-ment you would need if the site has pre-viously passed a Phase 1 assessment andhad no problems.

It is also recommended by most in thereal estate profession that any property,whether it is being leased or purchased, beinspected by a professional inspection firm.

Tim Russell is a freelance writer.


It makes sense for most

to enlist the services of

a buyer’s agent to help

you find everything

that is available.


Documents

July 23, 2012 • An Advertising Supplement to the San