Technology Cutting the Need for Office Space - Page 2

Nov 1, 2006

Joe Sciolla

In Greater Boston, slow job growth among technology companies continues to hinder net absorption. Meanwhile, corporate mergers and acquisitions—the latest of which is Proctor & Gamble and Gillette—contribute to job losses and excess space. Further exacerbating job growth is the continued flow of jobs to India and other locations overseas.

Recent reports show that engineers from India perform similar tasks to their counterparts in the States for about one-fourth the salary. In this light, it gives tech companies an efficiency edge when they offshore jobs and operate 24 hours a day.

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How can tenants capitalize on these soft market conditions? Clearly, they can use their leverage in many ways as they negotiate with landlords anxious to limit their liability.

For companies with fewer than two years remaining on their lease, we recommend they look into early lease renewals. Chances are they will be able to negotiate much better terms as well as concessions like free rent and tenant improvement allowances. For companies thinking about relocating, they should, if appropriate, look into trading up into higher quality space.

During contract negotiations, tenants should strive for lease flexibility. This is particularly important for high-tech firms that operate in a volatile market. They should negotiate for expansion as well as contraction and termination options.

Also important during upfront negotiations is space planning and construction management. For example, if a company has downsized, it might consider “restacking” its space to maximize efficiencies. Here, a project manager can be a huge help.

In the final analysis, all of corporate America should be grateful that technology helps us become more productive. But as technology giveth, it also taketh away.

If you’re a landlord, you must deal with our shrinking offices and high vacancies. If you’re a tenant, you should study the market and then crunch some numbers on your laptop. Do your homework—whether at the corporate office or in your home office—and make the numbers work for you.

Joe Sciolla is managing director at CRESA Partners in Boston, a corporate real estate advisory firm specializing in tenant representation and corporate services, including project management. Worldwide, the firm provides services through more than 125 offices in 35 countries, including 44 North American CRESA Partners locations.

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