Rofo sits down with Colliers Walnut Creek office & industrial broker Eric Erickson. He explains why he enjoys using Rofo and how it helped his brokerage business.

Eric does a good job tracking where his leads come from and is observing a decline in sign calls while leads coming from online sources like Rofo and craigslist continue to increase. He’s also seen newspaper advertising decline in importance as online listings services continue to proliferate. Obviously, a fundamental shift is occurring in how people search for commercial space. More and more people are using an online resource to find their space and even in a down market leads from the internet are increasing while sign calls are decreasing.

Eric thinks Rofo is a great commercial space listing service and highly recommends it to other brokers with small listings. “Rofo’s been worth the money, and I think if a broker is not using it they’re losing money, and they’re losing leads.”, explains Eric.

Interview
My Name is Eric Erickson. I’m and office industrial broker out of Walnut Creek Colliers.

How long have you used Rofo?
I’ve Been using Rofo about a year and a half, two years now and I market a lot of small spaces for my clients and it’s been a good vehicle to market small spaces.

Has Rofo generated tenant leads?

Yes, Rofo has provided us a way to expose our properties like we haven’t before. Over the last couple of years, I’ve been tracking sign calls and the different ways that the tenant leads come in. Rofo has been on the growth, sign calls are down, but Rofo’s up.

Is Rofo’s craigslist posting feature useful?

Absolutely, before we used to, obviously, advertise in the newspaper, but as craigslist became the classified ads online, newspapers became less important. But craigslist, ads fall off craigslist, and Rofo has an excellent feature to keep your ads on craigslist until you change it. So its an excellent listing service to use if you want to attract tenants through craigslist.

Is the Rofo site easy to use?

Yeah the site’s pretty easy to navigate and load up your information. It works really well going the other way from the tenants perspective, they go through and they either can find us through craigslist or the Rofo site.

Would you recommend Rofo?

Absolutely, Rofo has been worth the money and if a broker’s not using it, they’re losing money, they’re losing leads.

One feature on the Rofo site that is incredibly useful to both prospective tenants and space providers is the Space Needs section. It allows businesses looking for space to post their exact requirements, i.e. space size, what city, preferred move date, company type and other requirements.

For busy small businesses owners, this allows them to save time by posting their need and then accepting or rejecting the offers they receive. It reduces the time a small business owner has to spend searching for space.

For space providers, the system provides an easy way to connect with potential tenants. The process for proposing a space is quick and painless and you will be notified via email when the tenant accepts or rejects the proposal. When proposing a space it is best to be mindful of the tenants needs and not propose a space in a city miles from where they are looking. Space providers also can sign up for “Space Needs Alerts”, which notify them through email when a Rofo user has posted a space need similar to a vacant space they have listed.

Local Oakland building owner Norman Eggen describes his success using Rofo to lease commercial space. After listings his spaces on Rofo, Norm began to receive quality tenant inquiries and was able to fill half his building with Rofo users. Norm specifically like that Rofo helps fill a niche for marketing smalls spaces. The problem that Norm has witnessed is that brokers sometimes avoid working on small deals, so Rofo is a great platform to get small commercial spaces leased.

Interview
I’m Norm Eggen, I’m the owner along with my wife of this building at 4721 Tidewater Ave. in Oakland. The reason I’m doing this for Rofo, they’ve been instrumental in helping me find fifty percent of the last tenants I’ve had for the park. They’ve been providing a good service to me to me at what I figure is relatively cost effective basis. And they have brought tow tenants who are right now in the process of finishing up their tenant improvements.

How does Rofo compare to other online resources

Well, one thing I probably should say, and could say for your benefit is the other servives I’ve gotten zero prospects out of it, and the prospects have come from [Rofo]. Brokers working in this area don’t like to work on smaller tenants like this, so Rofo fills a gap to help bring in tenants in the smaller end of the user spectrum.

Would you recommend Rofo?

Yeah, I can strongly say that I would recommend Rofo to other people that have similar types of space they want to lease, or perhaps sell and in fact I have recommended them to more than one other building owner already, so it’s a good service.

At Rofo we track the number of searches performed on the site.  These graphs represent the number of searches made per month by Rofo users for 126 cities in the 5 major Bay Area regions, East Bay, South Bay, Peninsula, San Francisco and North Bay.  Commercial space search volume helps give an insight into small-business health and formation in the Bay Area.  The majority of these searches are for spaces under 5000 sf and includes office, R&D, industrial, warehouse and retail space searches.

The East Bay is a largest region and receives the most searches on Rofo.  The cities range from Oakland, west to Antioch and south to Fremont and everything in between.  The south bay comes in second in search volume and includes cities like San Jose, Santa Clara and Sunnyvale.  The Peninsula, San Franciso and North Bay regions all have similar search volumes that average around 5000 and under per month.

The first general trend is a slight spike in volume for all regions in March 2009.  It seems that the pent up demand accrued during the worst parts of the financial crisis in the latter parts of 2008 and early 2009.  In March 2009, when businesses realized that the financial system was not going to implode they began to search for space again, leading to a slightly higher search volume.  However after the March spike search volumes declined in each region until August.  Search volumes have remained fairly stable through 2009, but definitely have not increased.

Obviously any kind economic recovery, which depends heavily on the ability for small businesses to grow and establish themselves, hasn’t quite taken root yet, or at least isn’t reflected in Rofo’s search data.  If a recovery does begin, it would be reasonable to see an increase in businesses searching for space, either to expand or start up.  Unfortunately we haven’t seen evidence of that quite yet.

It can be difficult to know exactly what information to include in your available listing, but we thought we would share some tips. Our customer service team spoke to nearly 1,000 small businesses in October who were searching for space and we thought we would provide some real time feedback for the best way to market available space to these businesses. Below are some tips:

• Price: Absolutely, 100%, every time, price your listing every where on line. The small business understands that if they ask for improvements, the price might increase. If you want to get qualified inquiries and more inquiries, price your listing. The theory that you might get a business to tour by un-pricing a listing and then they will fall in love with the space regardless of the price does not work!
• Square Footage: List each square footage that you have vacant separately so businesses with specific needs can find your available space. If you have a space that is 3,000 square feet but is divisible, list each square footage that it is divisible to.
• Pictures: Interior and Exterior and the more the merrier.
• Floor plans: For both office and industrial users, a floor plan is requested very frequently. If you don’t have a floor plan, describe the layout in the description.
• Description: In the description, discuss the positives of the space and the location. Discuss nearby amenities and companies in your building. Call out specific business types that would be a good fit for the space or who have leased the space in the past. If the building is a great fit for therapists of a gym, add that to the description.
• Video: There aren’t that common yet in commercial real estate, but more and more businesses are viewing videos already on Rofo.com. It saves everyone time and makes a space stand out. If the space is run down, show it describe the improvements that you would be willing to do. If the space looks great, show it off and help it lease quicker.
• Reviews: Have your tenants review what its like to be a tenant in your building. Small businesses like to hear from other small businesses and this advice has been consistently asked for by our audience.

Thanks to guest blogger Andrew Bermudez (@finditfillit), of Lee & Associates in Irvine, CA, for submitting this great post describing ways for young companies deal with a personal guaranty.

Companies that have been in business many years have a much easier time getting approved by a landlord for a lease. However, companies that are just starting out with very limited or non-existent business history have a many hurdles to overcome. One major hurdle for business owners is when a landlord asks for a personal guaranty. A personal guaranty is essentially what it sounds like, a guaranty from the person soliciting the loan/credit/contract to fulfill a contract should the entity fail to meet its obligation. However, a business owner doesn’t always have to resort to a personal guaranty when they don’t have business history.

There are actually a few options. One is providing a Letter of Credit to the landlord and the other is providing increased security deposit to secure the office lease. The main concern of the landlord is that he or she wants to feel assured that a tenant with very little rental or business history will pay the rent. That’s why they ask for personal guarantees, so if the company defaults on the rental payment, the person guarantying the lease immediately takes over the payments

Let’s look at our alternatives closer:

Letters of Credit: Plain and simple, a letter of credit is a bank’s promise to pay a certain amount that’s owed by a tenant or a borrower. Banks issue letters of credit as a way to ensure sellers that they will get paid, as long as they do what they’ve agreed to do. This is usually a more common route for small business owners or startups with not a lot of business history or revenue. This also appeases a landlord who is considering a startup business with limited revenues or credit for an office lease.

When a tenant gets a letter of credit from the bank, it basically performs the same thing a personal guarantee. If the tenant defaults on its rental payment, the bank takes over and begins to paying rent to the landlord. It is basically the same thing a personal guarantor would do, with the exception that it is a bank.

Increased Security Deposits: Landlords will forego the personal guaranty if they feel comfortable with the tenant’s business plan, plus an increased security deposit usually makes them feel comfortable that if the tenant goes out of business, they have this additional money to count on while they get the space vacated and re-leased to someone else. Another good thing about increased security deposits is that you can negotiate with the landlord certain things like having a portion of the deposit burn-off as prepaid future rent, provided you don’t miss a payment the first or second year, etc.

Things to keep in mind: Letters of credit diminish an existing line of credit, and are reflected on the contractor’s financial statement as a contingent liability. Having assets tied up are counter-productive to both the owner and contractor. The business owner’s cash flow in funding initial stages of construction and retention amounts throughout a contract term can be adversely affected when liquid assets are pledged to a bank or the bank reduces its borrowing capacity as a result of the issuance of a letter of credit. Also, increased security deposits may tie-up your starting capital and put strain on your cash-flow.

Conclusion: Always keep in mind that everything in life is negotiable, you just have to understand where both parties are coming from, and address their concerns in a way that you are able to come to a mutually beneficial agreement. Increased security deposits and letters of credit are a great thing if you are very concerned with personally guaranteeing an office lease. We hope this helps all of you getting your business off the ground, or those of you with limited credit.

As a young company, you really have a handful of choices for types of spaces to lease and where to host your server infrastructure. Below are some options and things to consider:

Executive Suites: These are usually best for start up companies that are looking for part time Team Rooms (large rooms that can fit 4-5 people) or conference room spaces to work together a few times a week. The facilities offer you an address for mail delivery, staff for answering your phone and other admin functions, faxes, copiers, and every other office convenience you can think of. They typically do not offer shared server rooms or the ability to host your server on site. There are some more tech-savvy Executive Suites popping up that might offer shared server rooms or racks, but at this time hosting elsewhere is your only option.

Shared Spaces: Shared spaces are the ideal space option for a young technology company or small business once you leave the coffee shop. You get the benefit of leveraging existing infrastructure (phone lines, furniture, etc) without spending any money up front. Many of these spaces will rent by the cube or by the office. We have found that the amount of time a start up stays in a shared environment averages about 6-7 months so it should not be viewed as a long-term home. Depending on your relationship with your sublandlord, it can be very difficult for them to allow you access to their server room. In this case, hosting elsewhere is usually favored.

Subleased Spaces: Subleasing can be the way to get the best rent deal for your start up. Most subleases make sense once you have at least 5-10 people working on site every day.  The average rental term is typically 12-18 months. Some subleases include separately cooled server rooms with back up power, but many might just be converted closets. Depending on your infrastructure needs, we have seen most companies continue to host elsewhere.  If they don’t have the existing infrastructure in place, it doesn’t make financial sense to build out the necessary infrastructure for a 12-18 month lease.

Direct spaces: These are spaces that are rented directly from the landlord and typically last for 3-5 years. Necessary server infrastructure should be disclosed or asked to be built as part of the lease negotiation. Back up power and cooling are both reasonable requests you should make of property owners and landlords. These long term lease solutions usually entail bringing your server management in house as long as you have staff willing to maintain the systems and be on call in the case of issues.

If you do decide to host your website elsewhere we can recommend Softlayer who’s pricing and support has been first class.

Map view and radius search are two great search features on Rofo. Occasionally, listing view doesn’t provide quite enough information, especially if you are not familiar with a location. This is where the map view search function can help. It allows you to target your search geographically and see a more dynamic representation of office space search results.

If you want a more focused commercial listing search, use the Rofo Radius Search tool. This allows you to display only the listings within a certain distance from an address. Want your office to be near a certain highway, public transportation or other amenity? Then search for an address near it and Rofo Radius Search will display listings within your specified distance.

To use the map view, just click on the “Map View” tab at the top of any search results page. This will take you to a map of that city and the icons represent all the buildings with listings. The Radius Search Tool is located in the left sidebar search tool. Just click on the Radius search tab at the top of the window and type in the address in an area you want to locate your office. Then those commercial spaces will be displayed in the search results for you to review.

What’s the market doing?

Where do you think we should price this availability?

These are examples of questions the Customer Service team at Rofo hear every day. We thought it might be helpful to put our tips down on paper to help provide a process for pricing your vacant space. Below are some steps and questions to ask yourself:

Step 1: Get some rough comparables: Start by searching Rofo, brokerage websites, Craigslist and any site you run into on the web for rent pricing in your city and better yet your neighborhood. Check out For Lease signs in windows near your office, warehouse, or storefront and figure out where they have priced their space. Try to get at least 5 to 10 data points and figure out roughly where your space fits from a quality perspective (low end, mid, high end).

Step 2: Decide where you want to fit in the market

You’ve got some time: If you have some time and just want to get the best deal possible, price your building towards the expensive side of the market and see what happens. If interest is tepid, try offering some moving concessions such as free rent or discounted move in costs. Wait until your patience is wearing thin and start adjusting the price towards to medium or low end of the price scale to lease it

You’re in a hurry: Look for the best comparable property from your search in Step 1 and price your space at a 10% discount. Market the property across the web and make sure you are as flexible as possible on terms. Offer commissions, free rent, or any other concessions that you commonly see in your online search.

Step 3: Test it!:  Now that you have priced the listing, start to aggressively market the space and see what happens. Network like crazy, test different advertising mediums, and see what drives the most phone calls and appointments. If you are getting a large volume of tours but not getting a lease signed, its time to lower the price.

Step 4: Analyze: If lowering the price is not working, its time to analyze if its the space/price or the market. Rofo can help provide search data for your area if that’s helpful which is a great indicator of small business demand.  If its price issue, lower the price until it leases (and you are still making some money). If its a market issue, think about creative ways to get short term tenants into your space to gather some revenue. Would someone store something in your space for a few months? Is there an event that desperately needs a location and will pay for a few weeks to rent your space? Is there a non profit that can get you a tax refund for renting to them rent free for a few months?

Hopefully some of these tips help you decide where to price your available space.

Most Common Lease Types

Triple Net (NNN)The landlord pushes through all possible expenses to a tenant. The expenses include:

• Property Taxes: If a property sells or is reassessed, a small business can take a drastic hit to their rent expense. Try to negotiate a cap if possible on the potential increase.
• Building insurance: The small business pays for the landlord’s property insurance.
• Common Area Maintenance: Everything from security guards to landscaping to re-paving gets added into the number.
• Utilities: Some spaces are separately metered where you pay for your exact PG&E usage. If not, the landlord will bill you for your prorated share (your square footage/total building square footage).
• Janitorial: A cleaning crew that cleans your space and the common areas of the building.

Industrial Gross (IG)Small Business pays for its own Utilities and Janitorial. Landlord pays for everything elseFull Service (FS)Landlord is responsible for all expenses.