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As Published in Michigan Lawyers
Weekly November 11, 2002 CITY vs. SUBURB:
WHERE TO LOCATE YOUR LAW OFFICE By Levi F. Smith, Esq. Location,
location, location applies to a law firm as much as a retail store or
a restaurant. But what is the right location, downtown or the suburbs
and in which building? A large firm
can "cut the baby in half" by having a branch office in one
or the other. But where should the headquarters be? What if a firm only
has one office? A site location
study will provide pertinent information that is helpful to avoid a
"seat of the pants" subjective solution which is often outcome
determinative based on the closest option to the decision maker's home
or club. This article considers some of the major factors in a site
location study to be weighted; factors are not listed necessarily in
order of importance. Clients
- Some clients do not care where you are located or how prestigious
the building is. You are the specialist that they want. Others may be
sensitive to the hassle factor of travel time, ease and cost of parking.
Then there are your rates. If you are more affordable because
of your class C building in a class C location, the hassle factor is
less important. Ease of giving directions to new clients may be more
important for some practices i.e. immigration, criminal, workers compensation,
social security and legal aid. Other clients will judge you based
on image; high rent equals success. Political
Consideration - Many firms need to be near clients for the benefit/perception
of the clients. Governments may give business only to locally located
firms. Clients may demand that you be in a building that they own. Large
company owners may want to be able to walk a block or a few flights
of stairs to see you. If this is the case, a small branch office might
satisfy the requirement. Although geography may be less necessary in
the age of technology, sometimes you must do whatever it takes to keep
the client happy or to get new clients. Employee
Availability - In recent years, there has been a tight labor supply
for quality support staff. Will you be able to recruit the staff you
want at a salary you can afford to work in location A? Is the rush hour
traffic or perceived area crime after dark such that you will
not be able to staff up to your needs? Parking
- In law school we heard the phase, "the tail wagging the dog".
Parking in many cases is the dog's tail. Paid parking is common in downtowns
and it may be a long walk to and from the office. When selecting a building,
decision makers have been known to rank convenient or reserved parking
over image, rental rate, and other factors. Where will clients and staff
park? What will the cost be? Will this affect hiring and retention of
attorneys and staff for the firm? It is risky and short sighted to think
only about where the decision makers will park when only a limited number
of on site spaces are offered as part of the lease. Handicapped parking
and access is also important. Where and how many spaces are located
nearby? Some firms
will pay for staff parking. Cost of firm subsidized parking downtown
should be added to rent for true occupancy costs. Downtown monthly parking
permits, when available, are $20 in Bay City, $105 in Ann Arbor, and
over $200 in Detroit. Do the math: $1200 per year per employee at 200
square feet of office space per employee equals an additional $6 per
square foot to the lease costs if the employer is paying.
Security
- In many cities, security may be an issue. Will your staff have to
walk past the intersection of "scary and dangerous" to get
to their car or to catch the bus? Is there 24/7 security in the building?
Is the parking lot well lighted and secure? Will this make it harder
to hire and retain staff? Will people be willing to work after dark?
Quality
of Life - Firms should weigh all factors involving quality of life
to determine the best location. These factors are not able to be quantitatively
determined. Downtowns
are known for the option of walking to different restaurants for lunch
and going out for refreshments after work with a client or staff member.
Is this preferred to the necessity of getting in the car to go anywhere
in the suburbs? Only the management committee can weigh this. Historically,
downtown was a city center with small merchants, government offices,
office buildings, paid parking and sidewalks. Suburbs sprawl with shopping
malls, office buildings, free parking and shorter commutes. For the
most part, everyone is reliant on the automobile.
Networking
- Lawyers meet prospective clients by attorney referrals, client word
of mouth, lecturing, public relations and advertising (watch afternoon
TV). Lawyers also meet clients through community involvement and joining
health and golf clubs.
City
Income Tax - Some cities (Detroit and Pontiac) have instituted a city income
tax that applies to resident and non-resident workers. Rates for residents
vary from 1% to 3%; non-residents may pay half as much. If the firm
is picking up this cost by paying higher wages because the tax does
not exist in most suburbs, this amount should be added to the rent for
the true cost of occupancy.
Office
Market Rates - Typically, rates and available space will vary greatly
between downtown and the suburbs. Markets have been so tight that 10,000
square feet of class A (high rent, image, amenities) space has not been
available in recent years in some areas. When you need occupancy, start
the search early; this will make your decision easier and negotiations
more in your favor. With your lease in hand, a developer might start
a new building that caters to your firm's specific needs.
Own or
Lease? - This can be the topic of an entire article. Considerations
include cost of purchase and improvements, ability to expand, time to
manage the building, risk of leasing vacant space, availability of property,
opportunity, cost of money used for the down payment and improvements,
etc.
Future
Area Growth (SEMCOG) - The Southeast Michigan Council of Governments
has done a projection for 30 years out for population and employment
growth by city and township in the six county metro Detroit area. If
you plan to be at your location (new or current) in 7 years, you need
to know the population and economic trends. Where are your clients and
prospective clients now? Where will they be in 7 years? A client doesn't
care if you can walk to the courthouse. Will you be easily accessible
to clients and staff in 5 years? While clients do not necessarily select
you because you are close by, convenience is definitely a factor that
they will consider. Most lawyers in metro Detroit today are located
in Southfield because it is centrally located to business and the general
population by virtue of the freeway system and the abundance of all
types of office space. Future growth trends in all directions from Detroit
insure that Southfield
is well located for the foreseeable future.
The Building
- After determining the general location, you must consider the buildings
and available space. Is it the place that you want to spend most of
your working hours? Does the HVAC (heating, ventilating, and air conditioning)
work? Talk to other tenants to see if they are satisfied. Are the elevators
well maintained? Is there theft from janitorial crews or outsiders due
to lax security? What particular space is available for you? What are
the views? Is there value in the current buildout? Total demolition
and rebuilding is expensive and the tenant will usually pay for it one
way or another. Will you be able to grow or do all your neighbors have
long-term leases with options and no relocation clauses? Does the building have adequate loading facilities to make it convenient
for attorneys to take file boxes home or is the building surrounded
by no parking, no standing signs and eager meter maids with ticket books
in hand? The cheapest building is not necessarily the best building, all
the other factors being considered. You need to do a space plan with
your architect so that landlords give you proposals that reflect your
buildout requirements, not squeeze into a landlord's vacancy. What is the vacancy rate? If it is too low, there might be a foreclosure,
which means that necessary maintenance and capital improvements may
not get done. Defective elevators may not be replaced. Heat and air
conditioning may not be comfortable. Janitorial service may be reduced.
You do not want to think about constructive eviction for the first time
since you took the bar exam. Remember the courts always favor the commercial
landlord! Older buildings may be functionally obsolete because they do not
have enough electrical power for your computer system to work efficiently.
It is expensive to add power to a building. Will the landlord and its
electrician guarantee that you will have the watts per square foot that
you require to operate effectively? High-speed Internet access is essential for most firms today. Rapid
data transfer is an everyday need. Before falling in love with a building,
make sure that fiber optic T-I lines or at a minimum, DSL lines are
in the building. Leasing agents and building managers are often uninformed
on these issues. Providers keep information about access a secret! Call
the providers to insure that their lines are in your building and have
the capacity for your operation. As a back-up plan, you should maintain
modem lines and a dial-up ISP in case the high-speed provider's system
is "temporarily down" or they go bankrupt. Dress
Rehearsal - Visit your prospective buildings during rush hour. How is traffic,
timing, accessibility, etc. Go after hours unannounced to check the
level of security and ease of access. Real
Estate Brokers - It is advised that you retain an experienced real estate broker
who has local market knowledge to be part of your site relocation study.
She/he will have building and market information and negotiate the economic
terms of the lease. Be careful about conflicts of interest. Will you
be steered to buildings where the broker or their firm has an exclusive
listing with the landlord? Will the broker be approaching the landlord
the day after your lease is signed to get his "for lease"
sign in front of the building? Ask the broker whom they represent and
get it in writing. Even though the landlord may pay their commission,
he/she can represent you with full disclosure to all parties. Representing
Yourself - Remember in law school when you learned "The lawyer who represents
himself has a fool for a client"? Conclusion -
The purpose of this article is not to overwhelm you in terms of factors
to consider in a site location study, but they are numerous and must
be considered when opening or relocating an office. It is recommended
that you use a tenant representative or corporate real estate advocate,
to bring objective thinking and research abilities to help you make
an informed, reasonable decision. Sophisticated real estate software
like Paradyne, ProCal and PlanEase exist and are used for "apple
to apple" comparisons on the financial aspects of competing sites
including all costs and present value of money. But no software exists
to ultimately answer where is the best location for your firm for today
and five years from now. This article gives you the checklist you need
to weigh the most important factors. ___________________________________ The Author:
Levi F. Smith, 53, a native Michigander, lives in West Bloomfield with
his wife Barbara and their 3 children.
After passing the bar in Michigan and California and practicing
law for 6 years, he entered the commercial real estate field. In 1988 he founded the first corporate real
estate firm in Michigan to exclusively represent tenants and buyers.
Located in Southfield, Michigan, Levi F. Smith Real Estate, Inc.
is the exclusive Michigan member of Alliance of Tenant Representatives.
An organization of like-minded companies, this association provides
the ability to handle client real estate needs throughout North America. Mr. Smith welcomes all feedback on this article
and can be e-mailed at lsmith@levismith.com. Levi F. Smith Real Estate, Inc. can be visited
on the web at www.levismith.com. |