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New technology companies are starting up as fast as you can say T-1 line. Technology changes by the minute and young entrepreneurs, ready to be the next AOL, aren't wasting any time setting up shop. Though their business plan projections has them replacing Bill Gates on the Fortune 500 list, the reality is that their businesses change from month-to-month, week-to-week, even day-to-day.
Most of these start-ups would like to lease space on the basis of their prospects, move in within the week, and sign only a six-month lease. Welcome to the world of high-tech. Typically that clashes with the world of real estate-that is unless you're willing to change your philosophy. In this era of dot.com companies, taking a risk on a less than conventional tenant could become the high-speed connection to premium dollars.
Forget Traditional
High-tech tenants want less term and greater flexibility, says Mike Lipsey, CPM"', president of the Lipsey Company, a consultant group for commercial real estate owners. "They don't want a 10-year lease because they don't know if their company will be around in 24 months," Lipsey explains. "They want to try to find landlords that will provide them the flexibility to contract, relocate, and expand-and they will pay a premium to have that luxury.
But, landlords are used to the traditional tenant who will sign a five-to-ten year lease, take six months to negotiate the lease, and sign a 50-page document that covers everything under the sun.
"That's not the world of the high-tech tenant, says Lipsey. "The high-tech tenant wants to rent on Friday and be in the space on Monday. They don't have six months to negotiate, sometimes they don't have six days. So the one mind set the landlord needs to have is speed."
Being creative and thinking outside of the box carries with it a certain risk. "It's a high-risk, high-reward situation,"says Mez Birdie, CPM, of Commercial Net Lease. "Because a lot of business is done the traditional way, not everyone has jumped on board, but the companies that have are reaping the benefits. I think as this phenomenon grows and as people get more comfortable, this concept is only going to increase."
Taking the Risk
Luis Belmonte, managing director of AMB Property Corporation, San...