Relocation Strategies was founded in 1994 to provide clients with a one-stop, non-biased source responsible for planning and managing all aspects of their relocation. Their clients range in size from 1,000 SF of space to over 1,000,000 SF. Relocation Strategies has managed an array of projects including corporate office, manufacturing, medical, educational, distribution, banking, and a variety of other industries. Their portfolio includes international clients such as P&G and DHL and local companies such as LPA and Lifetech Resources. For over 25 years, Relocation Strategies has catered to their clients’ best interest, customizing plans and helping them relocate in the most efficient and effective way possible.
- Preliminary pricing for a relocation can often times take as little as 24-48 hours from an initial walkthrough
- A preliminary relocation assessment provides real time qualitative and quantitative data as to why a relocation is or is not feasible
- Move managers can structure their services in many different ways to accommodate client’s needs
- Furniture, fixtures and equipment is one of the largest components outside of construction that can have a material impact on employee experience
- A large part of decommissioning an older building is getting rid of and/or reselling old furniture, equipment, and racking
- Flat fee pricing ensures predictable expenses provided the scope of work stays the same
- There is no luxury in the process greater than having ample time for good solid planning
Justin Smith, Senior Vice President with Lee & Associate’s Irvine office, spoke with Michael Shapiro, a Partner at Relocation Strategies, to get his perspective on relocating. Shapiro discusses the importance of establishing a budget, a timeline, and resources to ensure that tenants leave their building as stated in the original lease and are able to get oriented in their new building for the right price with as little productivity loss as possible.
How you would work with a client to establish the right budget?
That’s a critical question because that’s the start of a client making a commitment driven by the fact that they’re out of space.
We always offer an assessment. As soon as they have identified a place or even just an understanding of what they want to do, we provide them with a budget that they can work with. In terms of order of magnitude, they will know what it’ll cost them. For example, it could be $10,000, $50,000, $150,000 with a plus or minus ten percent, so they can say, “Okay, I can afford that.”
What can really impede progress is if they have an unreasonably high number. We have encountered clients where an employee has told management that a move was going to cost $200,000. The reality is, it might only be $80,000, so it’s all about letting clients leverage off our experience to very early on in the process get a workable number which we can do.
If you can do a ballpark budget for a scale of magnitude in a couple of days, how long does it take to refine?
In a 48-hour period, we can do a gross order of magnitude. What prevents us from getting more refined are the exact specifications of the company and what their requirements will be from things like data and racking. They may say, “We’re going to reuse our racking”, but in the whole logistics of things that may save them $10,000 in racking, but once we drill down and flush out how their business operates we’ll point out to them that they’re going to lose $30,000 in manufacturing productivity. Usually what prevents us from getting more specific is just the scope itself. But we always find it gives them certainly enough information to know whether they should just be looking for space.
We had a client that wanted to move from Irvine to Santa Ana. The Chief Operating Officer, who was in charge of things, knew they could get by on less space, but what he didn’t have was the cost of the move. One of the two co-owners said, “Well, it’s going to be too costly.” We came in 24 hours ahead of their internal meeting to show them how much it was going to cost and how quick the payback would be. After that meeting, they called their broker and started walking buildings.
If they have their budget at something too high, they may never start the process. And if it’s too low, that’s obviously not good either. We are in the information business. It’s not only doing the homework that we can do quickly, it’s having an organization with over 25 years of experience with literally thousands of moves to draw on. We are not creating the wheel as a client will be doing once every 7 to 10 years. You’re never going to do it right the first time, particularly something as nuanced and detailed as a relocation.
What is the timeline process like?
Holdover, the concept that if a tenant stays in their building past the expiration of their lease, that they must pay 125%-200% their monthly rent as a penalty, is a concept we introduce real early in our discussion with the client. Obviously, it can be avoided if the planning has been done properly.
Now, there’s the physical aspect of what we do, but we say that’s sort of the last part. We’re all about planning, good information, and project tools. One of the most critical ones is the timetable where we will go, “Okay, you want to move in May 31st. What are the different things that need to happen?” We’ll line them up and start working backwards. Then there’s certain elements that need to be sequenced between furniture installation, racking and cable installation. As it gets down to the move itself, we’re often getting down to hourly schedules so that we know when servers are coming online and when certain manufacturing lines might be ready.
Sometimes the clients want to move everything at once, but sometimes they say, “No, we need to operate rather than be down 100% for a short period of time.” We will explain to them it’ll cost more, but it’ll be worth it to make the move in five stages where they’re down 20% at a time and they don’t take down 20% until the first 20% is operational at their new location.
How does communicating different changes and adjustments work?
Just like everything, we tailor it to the client. Some clients just kind of want to see the end result so we verbally keep them updated. We actually did the relocation for LPA, the architect, so we moved 300 project managers. They were actually fantastic to work with because they were project managers. They bought into everything we wanted and more. We just had to say, “Here’s the process” and they said, “Oh yeah, that makes sense.” We were bringing plotters and their equipment through windows with a lift. For getting their IT ramped up we developed an hourly schedule because they had about five different parties involved just on getting their IT up and that was a very live, iterative process from our project tool standpoint.
How does risk mitigation fit into the picture?
Our value is, leverage off of us to anticipate what can go wrong. We say, “What can go wrong and what are the associated costs?” We’ll at times even develop a two by two matrix where if it scores high on likelihood and high on costs associated with it then we need to commit a higher level of resources like back-up generators. With racking, you have to ask if it makes sense to put in a new rack even though your current rack is perfectly serviceable. Or if it is better to resell your existing racking so that you don’t have to worry about the cost of handling it. After you decide, however, an inspector might show up and say, “Hey, your fire suppression system doesn’t look quite right relative to the height of your rack.” We’re all about anticipating what could go wrong, what are the appropriate steps to minimize potential hiccups, and how to keep clients productive, particularly on the manufacturing realm.
When it comes to staying in their building versus moving to a new one, what do you find usually makes or breaks this type of analysis?
I’m a numbers and operations guy. I’m an operations guy. I grew up in manufacturing. In terms of cost/benefit, I kind of get hardcore on the quantitative aspect, but there are definitely qualitative aspects such as employee retention and logistics for your inbound and your outbound. I would say if there’s an incorrect issue where they have the wrong information or inertia tends to set in and they say, “No, we don’t have the time to do it. It’ll cost too much” then we’ll step in and explain to them what it would look like.
We feel very strongly about our value proposition which is, a relocation that might take anywhere from 200 to 400 hours of manpower over a 6 to 9 month period. It’s rare these days for a well-performing company to have the luxury of having someone who can do that, let alone have the expertise to do it well. That’s where we come in.
Once someone gets into a new building, how do you help them orient themselves into the new facility?
Most of our effort on that front is done before the client moves into the new facility. We always provide move training that often includes a fair amount of orientation materials with regard to parking, traffic patterns, local amenities and the like.
The physical elements of the new facility are an important factor as well. For an industrial move, that generally means the layout of equipment and racking. And while the equipment generally involves using their existing machinery and is therefore relatively straightforward, racking is a different animal. A new building usually means a new configuration, and often larger. High pile permits and sprinkler issues need to be tackled immediately. And it frequently makes sense to purchase racking (even if used) as a company’s existing racking is often out of code, or the logistics or relocating it is counterproductive to an efficient move.
On the office front, furniture acquisition is huge. It’s the most costly office element, it has the longest lead time, and it has the greatest variables. That’s what we jump on immediately because it’s so personal. Clients have this opportunity to create a culture from between selection of colors and finishes, by adding sit stand desks, or perhaps more collaborative working spaces. The options are endless, but they’re exciting.
We just relocated a restaurant’s North American headquarters. There was a lot of nervousness on the part of their employees, but the facility they were in is where they also have their test kitchen and it’s almost more industrial. They moved their offices to a pure high rise. They took the top two floors of one of the premier buildings in West Covina. To see the reaction of the employees when they came in and saw their new environment, it was priceless. It usually works out that way because there’s so much available and we can use our backgrounds. I can pretty much guarantee a happy customer at each price point because we will identify something that will exceed their expectations.
Do you partner with space planners, architects, and/or vendors?
On the architect or the space planner front we will find them. A big part of what we do is build a team. First we identify what needs to be done, then we build the team. We build three to four teams a month on new projects. You develop a rapport, you understand who’s the right vendor for each project, and then who to bring in for the RFP process. Sometimes we operate where the client, from a cost standpoint, just wants to know the total cost of the move and pays us and lets us take care of whichever vendors we want to use.
Most of the time, we act as a third party consultant where we develop the whole process, run it, build the team, and we’re there actually executing the move with project managers on site and we’ll just charge a fee and contract the vendors on behalf of the client who signs the contract and pays them. We sort of buy wholesale in that the vendors working with us know that they must do a good job for us. They know that they will be hearing from us later that month to maybe bid on the next project, and that there is likely many projects a year that they’ll be working with us. In that situation, we always stress to our clients that we are operating on their behalf. Our fee is being paid by the client. On any vendor we bring in we take no referral fees and we are 1,000% adamant about that.
What parts of construction are you involved in and how does that work?
There’s a lot of terms out there: construction manager, construction representative, owner’s representative. We’re not a GC. We’re there working with the movers, the riggers, and the racking, so that’s why we tend to use owner’s representative.
Even if the tenant has a GC, we will often be retained to help out with the construction management. We just had a client where the landlord was in charge of all the TI’s and they had a construction manager. We weren’t initially retained to this, but we started saying, “We’re involved, we’ve got our eyes and ears open”, conveying to the client that there are some things we thought they should pay attention to. Ultimately they said, “We want you to pay attention to it”, so that was a project we added the construction management element.
What is usually involved in the white box service that you provide? Does that just mean making sure everything is done per the lease or is there more to that?
What are the requirements of the lease? If everything has to be returned to the condition that you got it, then that could include taking walls down, putting walls back up, reinstalling windows, taking windows out and returning to block wall, cutting out the bolts and putting the new epoxy in to get the floor back to a smooth finish.
In addition to looking at the lease, we’ll walk through with the landlord or landlord’s representative ahead of time saying, “Just so we’re in agreement, this is exactly what we’re going to be doing to return it to you and if we achieve the things on this list, there’s not going be any penalties involved.”
We have found it where they’ve got a new tenant and the tenant will say, “Actually that works for me” and then it’s a win-win. Part of what we do on the decommissioning is not only the physical repair of the building, but how are you dealing with the excess racking, the excess equipment, the excess furniture. We have a plethora of connections with resellers and auction houses that we try and capture value from. We try to figure out what we can sell and what we can give away or negotiate. Oftentimes it’s negotiating with the landlord and/or hopefully the new tenant and asking them what they’re willing to buy. Unfortunately, particularly on furniture, it ends up being a liability to people’s shock. More times than not if you don’t have someone who’s willing to use it in its current condition then you have to pay to dispose it.
How do you come up with your fee? Is it based on square footage, hours, project size, or something else?
From our standpoint, it’s about our time. We’ll spend time defining our scope and we’ll come up with – sort of like a law firm or an architecture firm – a blended rate. Partnership time, one element is at one rate, but if it’s at the end of the move where we’ve got junior project managers at each location watching trucks get unloaded, that’s a different hourly rate.
We put that all together and we come up with a flat fee. We tell our clients that as long as our scope doesn’t change, not to worry whether something takes longer than anticipated (e.g. the two mover trucks broke down or the elevator broke down so what was going to be a three day move ended up being a four day move). We’ve done, based on square footage, a small move that cost twice what a large move would have cost because of the nature of the work that was done.
We really, really hate to quote per square foot. We know that’s what the world thinks about. We want them to have some sort of idea, so in the scope of things we do on order of magnitude, but for like an industrial move we say generally, for the relocation management aspect, it’s in the $0.75 to $2 a foot range. That’s an X to 3X range, but at least they know for a 40,000 SF building, if it’s $1.00 a SF, it’s $40,000 not $400,000.
Before we give them that number we ask them to spend an hour with us, about 15-20 minutes to explain what we do, and another 40 minutes to talk about their business and walk their facility. Based on that alone, we’ll be able to come up with a proposal and give them a real number that is a fixed fee. We’ve never had anyone say, “No, charge me per hour based on each of the different people involved for those hours.” They appreciate the fact that we’ve got enough experience that we know how to price our service.
It is critical to start as early as possible. It doesn’t affect our fee because we’re going to do the same amount, so whether we do it over seven months or four months, our time is the same. We know what we need to do. The client should really start now because there’s no substitute for having that luxury of time to do proper planning, allow for hiccups, allow for permitting issues, avoid expediting time on the permitting process, on the ordering process, and overtime on vendors; these are all the right reasons to take advantage of maximum time the day you sign a lease.
For more information regarding this interview, please contact:
Justin Smith, SIOR
Senior Vice President