There is an old adage in real estate that says ‘if you can agree on price and possession’ then the rest of the contract will fall into place. Possession is a synonym for timing, and when purchasing commercial real estate for U.S. business expansion the timeline is often underestimated. Heated market conditions have changed the way the due diligence process occurs from ‘sequential’ to ‘simultaneous’ and this requires firms to front some soft costs such as appraisal, environmental etc. while they pursue the economic incentives. Plus, access to incentives, low-cost utilities and other types of support can be different from what is available in other countries and may impact the process.
Here is a guide to what international companies can expect:
Step one: Connect with Experts
Companies interested in an US expansion should connect with economic development agencies such as Invest Buffalo Niagara or a professional Site Selector. It is important for companies to develop an upfront, detailed relationship with these professionals when entering the real estate market so that a clear and concise game plan that can be readily executed.
Step two: Define Your Needs
Economic development experts such as Invest Buffalo Niagara will meet with you to understand your business plan and project scope. They will look to understand your facility requirements and other factors that will impact your site location decision.
Step three: View the Landscape
Once you define your site criteria, Invest Buffalo Niagara can conduct a preliminary search to understand availability in the local market as it relates to your real estate needs and connect you with the local real estate community.
Step four: Understand Competitive Tools
There is potential to qualify for incentives, financial assistance, infrastructure development, customized training and technical support programs when locating a new business and creating new jobs in Buffalo Niagara. Many of those incentives are site specific. A company must purchase or lease a property ‘contingent’ upon securing the incentive package, otherwise; they will jeopardize receiving them.
Step five: Apply for Competitive Tools
The process to obtain the incentive package can take time depending on which program(s) are targeted. Applicants must provide company and financial information – not being prepared with this information can prolong the process. Organizations like Invest Buffalo Niagara will help you navigate the applications and incentive process but companies must be prepared with the necessary information and paperwork.
Step six: Conduct Due Diligence
The due diligence phase of the commercial real estate process now becomes sequential versus simultaneous. Most purchase contracts include a contingency time period for due diligence to be undertaken. It’s possible that activities such as mortgage application, environmental reports, building inspections and legal reviews may not be completed in the original contingency time period. This does not have to be a significant issue, as extensions to the due diligence period are commonly negotiated. However, with the existing industrial vacancy rate shrinking the in metropolitan Buffalo market, prolonged due diligence periods make the timing component in the ‘price and possession’ equation increasingly difficult to accommodate.
Step seven: Take Possession
Start your business! Keep in mind there will be a transition period as you get your new facility up and running. Some facilities will need modification and new equipment; most new facilities will need time and training to implement a new U.S. team.
While the process can seem somewhat daunting, working closely with economic development professionals such as Invest Buffalo Niagara and a good commercial real estate broker can make the process orderly and profitable.
Guest blog: Steve Blake, CCIM, Partner, CBRE|Buffalo 716-362-8707 / firstname.lastname@example.org