The best CRE lease decisions are completely independent of lease costs.

A lot of times we can get caught up in financially engineering a lease to save an extra 5 or 10%. This is why we bring in quality brokers that know their markets, landlords, and customs. It is also just good business to negotiate the best lease costs possible and structure it around the best terms possible. But this part of the process is the tail end and happens because it needs to and not because it is actually business critical.

The best real estate decisions shouldn’t need to consider the real estate costs at all. Real estate is a force multiplier. Without it, you can’t do the other business functions that you need in order to grow, thrive, and succeed. If the difference between a good and bad decision is a slight change in NPV then you have lost sight of the strategic objectives.

Is cost an important factor? Of course, once you have decided on the generally correct area and have a full business case put together. But at that point, you know the five or ten buildings that are acceptable to support the case and we just need to optimize cost and design to ensure the most optimal outcome. It’s now trivial because even at the non-lowest cost the decision makes sense.

After the very first decision to locate in a market, then cost becomes the critical factor every decision point after unless there is a reason to reassess the strategic basis of the location. The financial negotiation is important but really a few percent of additional cost against the benefits that real estate allows is almost inconsequential.

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