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As Published in Michigan Lawyers
Weekly November 11, 2002 CITY vs. SUBURB, 121 LOCATION
100, 2002 Or 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. Rates will vary based on location,
building age, amenities, proximity of parking and market conditions. 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”!
Even the most experienced real estate lawyer is not up to date
on market conditions. A reputable
corporate tenant representative will save you money, aggravation and time to
accomplish your goals. 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. |