Cities, developers, and landlords around the country are clamoring to woo the 800 pound gorilla known as Amazon for their second headquarters. New York City, Los Angeles, Washington D.C., Philadelphia, Seattle, Phoenix, and Memphis are some of the 50+ cities that are trying to get a hold of the online giant. Here are four ways this announcement has impacted their office space search, some of which, you can use for your own business.
Current Negotiations
Amazon started negotiating with NYC landlord Brookfield for 360,000 SF of office space in Manhattan’s Far West Side. The timing had been impeccable. Imagine being a landlord that needs to fill a space, and you’re fortunate enough to have the interest of Amazon in your new massive development. Then the prospective tenant announces this nationwide hunt for 8 million square feet, and 100% of your competitors begin reaching out to get a shot at the $5 Billion expansion. Long story short, Amazon and Brookfield announced the lease signing of a much smaller 360,000 SF expansion 2 weeks after Amazon made the big announcement. Amazon could have potentially used this announcement to ensure that Brookfield met their terms on the lease. The announcement and knowledge that the tenant has many suitors probably put a lot of pressure on Brookfield to make sure they strike a deal.
Current Landlords
Knowing that every major landlord in every major city in America is trying to get a hold of your tenant will probably change how you treat them. Whether property level issues, finance related issues, construction or infrastructure issues, if Amazon is your current tenant, I am sure you’d tighten up your tenant-landlord relations. Leaky faucet? On it! Internet issues? No problem. I am sure Amazon’s in-house facilities teams got a boost in the past few weeks from all the coverage. If one of my tenants were in the market for 8 million square feet, they would be my best friend.
Tax Incentives
The State of New Jersey is offering Amazon $7B in tax incentives. The entire budget for headquarters number two is said to be $5B, so through tax incentives, subsidies, and refunds Amazon can potentially net effectively make $2B in value. Your company may not have $5B for a budget, but every major city across the country has brought to the attention of the media their city’s incentive program. In the case of New Jersey, it’s called Grow NJ. In NYC, there’s the NYCEDC which outlines all the incentives for doing business throughout the city. Entrepreneurs should definitely take advantage of these federal, city, and local programs.
Reverse Bids / Reverse Negotiations
Regardless of market conditions, implementing a reverse bid or reverse negotiations strategy is always favorable. Commercial real estate brokers who specialize in representing tenants in negotiating office space use this strategy frequently. The concept is simple. To improve your odds of getting a good deal, entrepreneurs are going to want landlords to know they are in the market for office space and to get a sense of where the lease terms will wind up prior to beginning the negotiations. Once you understand where these leases will wind up, you run a side by side analysis, pick an ideal rent package for each property, and then begin then submitting bids to prospective landlords. Although you may not have a $5B expansion plan, the process of reverse bids, will keep you financially disciplined, keep the emotions out of negotiations, and will keep the process organized.