Sometimes you get involved in a deal and everything is right about the deal, except the one thing that you absolutely cannot change, no matter what: the location of the building. After all, you can’t pick it up and move it.
Ten years ago, we represented a building in Somerset and were one of three buildings being considered for a regional headquarters of approximately 100,000 square feet. The building had recently been renovated with new amenities and a new lobby, and we knew we were the least expensive alternative. I called the broker representing the tenant and asked if there was anything else we could do to win the deal. He explained that we were already $8.00 per square foot cheaper than our competition, and we’d win the deal if the building wasn’t in Somerset. This group simply didn’t want to be in Somerset.
More recently, we represented a tenant who chose to pay a higher rent at a comparable building due to the location. You might assume that it was a shorter commute for him, but it was actually the opposite. The building represented a longer commute for him, but it was more centrally located for his employees and customers.
Finally, in the coming weeks, a large relocation will be announced within New Jersey, and, according to their broker, the tenant chose the building they are moving to mostly because of the location. The building that came in second was less expensive and similar to the deal above, had recently been renovated. However, the tenant was seeking a more traditional office park with abundant area amenities. While the building that came in second was in an office park, it lacked the amenity base that the tenant was looking for.
Is it typical that tenants will pay more to get what they want? In many cases, they don’t have to as landlords will reach for deals, especially those of size. However, above are three examples where the tenant paid more to be in their first choice location.
In an upcoming post, I will compare submarkets in New Jersey with access to train stations versus those that don’t. But in the meantime, sometimes the old adage is true. It’s all about location, location, location.