Q: Can you provide some ball-park costs associated with relocating our company? We’re concerned that these secondary costs may get out of hand.
A: You have a right to be concerned. I am always surprised at the companies that will negotiate the price of their new facility down to the last dollar, without thoroughly analyzing their other relocation costs. It is way beyond the scope of this column to provide estimates, particularly since these costs vary widely from one company to another. However, experts and vendors in each field are usually available to assist you in budgeting.
In addition to the actual real estate itself, the following are the major areas of cost control that should be anticipated in a commercial move:
Soft costs: This refers to all the non-tangible real estate acquisition costs such as title insurance, legal representation, survey, appraisal, architectural and the like. Check with your attorney for an estimated closing budget. If substantial architectural or engineering is contemplated, this needs to be budgeted as well.
Renovation, refurbishment, and repair: This can range from nothing or negligible (if, for example, a landlord is doing the work) to very extensive construction costs. For any substantial work, you need written specifications and multiple bids.
Environmental reports, environmental legal advice, and remediation: In the case of industrial properties, this may be an area where it is advisable to pay for some basic research before you sign a contract or lease. You cannot do enough homework in this area.
Future shipping and travel expenses: How will the new location affect trucking and shipping, as well as employee and customer travel times?
Utility costs: Are you moving to a more or less efficient building? How will different operations in a new building affect utilities, e.g. multiple shifts and new machinery? Are there incentive programs from local utilities to offset costs?
The physical move: Obtain quotes from several reliable commercial movers.
Downtime: Figure the downtime of the actual move itself, and also in the case of complex moves or acquisitions, the cost of the payroll for the employees who are handling the real estate, construction, and the physical move.
Employee impact: After the move is no time to find out that you are losing several key employees because their commute was increased by 30 minutes. What is the labor market in your new location, and how will that impact your payroll?
IT and Telecommunications: This can be huge, depending on your needs and what is already in place in the new facility. Again, you require specifications and multiple bids.
Printing: Stationery, business cards, literature and other similar printing all need to be redone.
This is not meant to be an exhaustive list – rather a quick list to get you thinking and developing your own checklists. Start early, and refine your budgets as real estate alternatives are refined. Anticipating these costs, and sharing them with your broker, will go a long way toward making smart real estate decisions and controlling these costs.