Office-space landlords willing to bargain in tough economy

by Andrew Johnson – Nov. 20, 2008 12:00 AM – The Arizona Republic

Consumers have cut back discretionary spending. Credit is harder to obtain. Energy costs have been on a roller coaster.

Operating a small business has become something of blood sport in the past year.

But an area of the economy where small-business owners are getting breathing room is commercial real estate.

Fundamental factors that turned the Valley into a commercial-development hot zone – rampant in-migration and job growth – have slowed. Leasing and sales velocity in the commercial market has stalled. Vacancy rates for office, retail and industrial properties are at their highest levels in several years.

The news may sound dour, but the ailing market has opened new and, in some cases, classier doors for small businesses. To fill space, landlords offer a bevy of concession packages: several months of free rent, reduced parking rates, money for improvements and greater move-in flexibility.

The specials enable companies in older buildings or less-than-ideal locations to move into Class A space without necessarily paying Class A prices.



The downturn has taken a toll on businesses in all sectors. Many have scaled back hiring or postponed expansion because of skittish consumer demand. Others have gone belly up.

The result is fewer tenants available to fill the growing pool of commercial space. That has delivered a hefty blow to building owners and property managers, who struggle to attract and retain tenants.


Very shallow’ market


“The market’s very shallow right now in terms of activity,” said Don Mudd, a senior vice president in the Phoenix office of commercial-brokerage firm Grubb and Ellis/BRE Commercial LLC.

In addition to the rising number of businesses that are vacating space altogether, many are trying to sublease. Some want to sublease space they don’t need; others are looking for cheaper space elsewhere and can’t prematurely end the contract for their current location.

Subleasing is one way small-business owners can move to a premier location without paying premier prices.

“On the sublease side, there is a significant reduction of (rental) rate,” said Nicole Cooley, a senior associate with Cushman and Wakefield of Arizona Inc. in Phoenix. Cooley works with office tenants seeking 3,000 to 10,000 square feet.

Many tenants are taking advantage of the slow market by “either stepping into Class A space in a better submarket or into a more ideal location for their employee base,” she said.

Lisa Perez, who co-owns a document-shredding business, is subleasing about 500 square feet from an office-furniture company in east Phoenix. She pays about $1,200 on a month-to-month basis.

Other properties she looked at cost $3,800 to $5,000 per month.

“I thought, ‘Gosh, we’re going to burn through cash pretty quickly,’ ” recalled Perez, CEO of AZ Docushred LLC.



Flexible terms


Many landlords have become more accommodating to potential tenants as the commercial real-estate market has softened.

When Ultimate Shade Alternatives in Tempe was looking to relocate its office and warehouse last fall, price was important – so was space configuration and move-in time.

The company installs outdoor shades on commercial and residential properties.

The shade materials are as long as 50 feet, so the company requires large swaths of unobstructed space. The business also was growing, making it difficult to pinpoint exactly how much space it needed.

The owners decided to stay put in a multitenant office-warehouse building in Tempe. A deciding factor was a change in the building’s ownership. The new landlord’s offer to let the company move into the space during the course of several months instead of at one time helped seal the deal.

“They allowed us to utilize some of the new space before we even had an agreement, so they really were going out of their way to help us as a business manage our growth,” president Joy Whitfield said.

Tenants often focus on lease rates when they should keep an eye out for other factors that can affect the bottom line, too, said Greg Mayer, a senior associate with CB Richard Ellis in Phoenix.

“There are 40-plus points in an office lease,” said Mayer, who brokers lease agreements for office tenants. “Most people focus on rent as being the biggest point in a lease, (but) you have parking, you have operating expenses, you have insurance, you have remedies if something happens in a building.”



Staying put


Despite plentiful deals, other tenants are making do with what they have.

Earlier this year, John Beck was considering moving his office equipment firm, WORKspaces LLC, into a new building because the business could use more space.

The company had moved from a 1,000-square-foot Camelback Corridor office into a 4,000-square-foot multitenant building in northeast Phoenix two years ago.

“We were growing like crazy,” Beck said. “We had too many people stuffed into a small office.”

The company’s office is starting to get crowded again, but the economic downturn has Beck putting potential moving plans on the back burner.

The company could financially afford to take on a couple of thousand more square feet, especially with the some of the deals landlords are offering, he said. Still, the office-furniture business is particularly susceptible to economic downturns, and Beck doesn’t want to risk having to pay for more space than he’s going to need.

In many cases, it’s more difficult for businesses to add locations or relocate headquarters because of financing issues.

“With the tight credit markets, it’s really difficult, if not impossible, for companies to borrow on a business line of credit or (obtain) business loans,” said Thad Seligman, president of the Phoenix office for commercial brokerage firm NAI Horizon.

For some businesses, the only option is to dip into cash reserves.

“The problem is there’s so much unknown about what’s going on in the business environment that no one wants to spend their own cash,” Seligman said.


John Weiss. McClatchy – Tribune Business News. 2008/11/19. Fred Richardson and Bill Burk are already seeing signs of increased deer movement. But they’re not talking about hunting. Richardson owns Richardson Auto Body in Lake City and Burk owns Chatfield Auto Body. They say they are already seeing vehicles come in banged up, dented or wrecked because the drivers hit a deer. Michelle Gappa, on the other hand, is an agency producer for Lynn Broadwater’s Farmers Insurance Co. in Rochester. The big rush of claims is still to come, she said. Deer are in their breeding season, meaning that bucks lose their typical wariness and does are moving to find bucks. Hunters know that and like to be out in the woods when the deer aren’t as wary. What is unusual this year, so far, is that hunters haven’t been seeing or shooting as many deer, though the state Department of Natural Resources said there were plenty around. Conservation officer reports from across the state, however, generally indicate a slower harvest this fall. Richardson said he gets about 50 such deer-damaged vehicles a year, about two-thirds in fall. But it’s more than mating that gives him business, he said. “It seems people are driving more and further and faster,” he said, giving them more chances to hit deer. He’s seen about the same number of damaged vehicles this year. The deer-collision time is one of his busiest, along with the first snow when drivers seem to have to relearn how to drive on slick roads, he said. Burk averages 35 to 40 deer-damaged vehicles a year. “This year it seems to be a little slower,” he said. “I haven’t seen that many deer out … but they are still hitting them.” Maybe deer are staying in corn until it’s picked; the harvest has been generally later this year. Last year he saw more damage, as deer first came out in August and the problem lasted throughout the winter and into spring and summer. “We had people constantly hitting them,” Burk said. Not this year. “(We) haven’t seen it pick up yet this fall. We’re just waiting.” When the corn comes down, however, Gappa expects claims to go up. But maybe worse is first, icy roads. “I’m still dreading that one,” Gappa said. “It’s an education every year.”

Self-Inspection Checklist for Business Offices

A vital part of loss control is the recognition and removal or correction of unsafe activities or conditions before a loss occurs.  This WILL save you money.  The attached Self-Inspection Checklist provides you with a tool to identify some areas that might need attention.  A “NO” response to any question indicates corrective action my be necessary.  This survey form should be completed at least quarterly, and reviewed by management to assure that unsafe acts/conditions are corrected and follow-ups are scheduled to see if the correction(s) accomplishes its purpose.  Additional measures may be required beyond those identified by this checklist.

Business Office Self-Inspection Checklist

Economic Turmoil & Insurance Companies

In light of the recent financial turmoil Farmers Insurance remains in a strong financial position, is profitable and is significantly outgrowing the industry. How are our competitors doing? Here are financial news clips from the October 31, 2008 issue of the New York Times:
New York Times 10-31-08:
Insurance companies were among the day’s biggest losers as shares of the Hartford Financial Group lost more than half their value, closing at $9.62, after the company posted a painful third-quarter loss. The company struggled to reassure investors, a reminder of the troubles that have led several large insurers to open talks with the Treasury Department about investments from the federal bailout package.


An executive at the Hartford said the company was open to selling a stake to the Treasury in exchange for capital. The declines in the company’s stock came just weeks after a German insurance company took a $2.5 billion stake in the Hartford.


American International Group…disclosed Thursday afternoon [10-30-08] that it was borrowing up to $20.9 billion from the Fed’s program…

In a filing with the Securities and Exchange Commission, A.I.G. said four of its affiliates had exchanged commercial paper for cash from the Federal Reserve Bank of New York. It said in the filing that it would use the proceeds to refinance its outstanding commercial paper, as well as pay down its initial credit line of $85 billion.
The Fed said A.I.G. reduced its debt under the two existing credit lines to $83.5 billion, from $90.3 billion a week ago, by using cash from the commercial paper program, Bloomberg News reports. With the latest loans of up to $20.9 billion from the Fed, the insurer’s borrowing now totals as much as $104.4 billion.
An A.I.G. spokesman, Nicholas Ashooh, told Bloomberg that the terms of the commercial paper program were better than those for the original $85 billion credit line, which has a higher interest rate.
“They’re paying off a Fed loan with another kind of government subsidy – it’s like using one credit card to pay off another credit card,” Robert Haines, an analyst at the research firm CreditSights, told Bloomberg. “If they make progress paying off debts over time, I don’t think it’ll be viewed as necessarily a bad thing…”
This enormous need for cash has raised questions about how a company claiming to be solvent in September could have developed such a big hole by October. Some analysts say that at least part of the shortfall must have been there all along, hidden by irregular accounting.

Burglary Prevention Checklist

-Organize a Neighborhood Watch program. Neighbors

working together make one of the best crime-fighting

teams around.

-Keep shrubbery trimmed. Tall, thick shrubbery

provides cover for burglars and lets them work


-Keep the area around your house well lit. This will

discourage burglars.

-Using an engraving pen, write your Driver’s License

number on your personal property.

-Make sure that the locks on your doors and windows

are strong and secure, and use them. Most burglars

won’t attempt to break a secured window for fear of

noise and the attention it would attract.

-Make a home inventory list, complete with photos or

video. Store this list away from your home (Ask your

Farmers agent about the Insurance and Household

Inventory Record brochure offered through Farmers.)

-Never leave a house key in such obvious places as

mailbox or under a doormat.

-Have a security plan for when you are on vacation.

Ask a friend to pick up mail, newspapers, etc.

-Use automatic timers to turn on lights, radios and

televisions. An especially effective method is to have

one timer turn off a bathroom light as one timer turns

on a bedroom light and vice versa, to give an

impression of movement within the house. Also, it’s

important to change the sequence at least every

two months.


Tips to CUT COST on your Commercial Building’s Insurance Policy!

Higher Deductibles, Loss Prevention Among Ways to Save Money

SOURCE: The Insurance Information Institute

NEW YORK, October 7, 2008 — More than 25 million small businesses operate in the United States today, yet many of these business owners did not take advantage of the many ways to save money on their insurance. In lean times like this, it is even more important to evaluate your business and consider ways to reduce spending while boosting profits, according to the Insurance Information Institute (I.I.I.).

The I.I.I. suggests eight ways business owners can save money on their insurance:

  1. Shop around.
    Prices vary from company to company, so it pays to shop around. Get the names of companies or brokers who specialize in your type of business. Call several so that you can compare prices and get a feel for the types of services they would provide. Ask the agent or company that provides your personal insurance whether they offer business insurance. It is also important to pick a company that is financially stable. Check the financial health of your potential insurer with rating companies such as A.M. Best and Standard & Poor’s.
  2. Look at Group Rates.
    Purchasing your insurance through a business or professional organization can save you money. Many different business organizations offer insurance plans and/or discounts on business insurance to their members. The bigger the group, usually the lower the insurance premiums. The savings typically outweigh any member dues. There are professional organizations for almost every business occupation from electricians and plumbers to writers and artists. General business organizations, such as your local Chamber of Commerce and the Better Business Bureau also offer business insurance discounts. Your local home-based business association may offer lower prices on home-based business insurance.
  3. Choose a higher deductible.
    Deductibles represent the amount of money you pay before your insurance policy kicks in. The higher the deductible, the less you will pay in premiums for the policy.
  4. Consider a package policy.
    A Business Owners Policy (BOP) is often significantly less expensive than a self-designed plan. BOPs include: property insurance for buildings and company owned contents; business interruption insurance, which covers the loss of income resulting from an insured event (such as a fire) that disrupts the operations of the business; and liability protection, which covers a company’s legal responsibility for the harm it may cause to others. To determine whether a package policy suits your needs, inventory all of your business property to determine its value and whether it needs to be insured, then compare the property and values to what is available in a particular package.
  5. Set up a risk management/loss reduction program.
    Insurers will often lower your rates if you put a program into place that will minimize losses from fire, theft, and employee and customer injuries. These can include workplace safety training programs, disaster preparation and human resource intervention. Consider installing a security or fire system. If your line of business uses vehicles, install anti-theft devices and hire drivers with good driving records. If possible reassign drivers with bad driving records to non-driving tasks. Ask what you can do to reduce risks such as fire or work-related accidents and review the procedures that should be in place in the event your business suffers a major catastrophe.
  6. Consider relocating your business.
    Deciding whether to relocate depends, to a large extent, on what kind of business you operate and where you move to. Moving from a downtown area to a suburb, for example, may reduce premiums on your property and vehicle insurance, and even your workers compensation insurance.
  7. Work closely with your agent or broker.
    An insurance professional can provide invaluable advice to help protect your business. It is important to keep your insurer informed about any changes in your business operations. This includes major purchases, expansions or changes in hiring or in the nature of your operations.
  8. Have the right amount and type of coverage.
    Part of the decision about what insurance to buy depends on the nature of the business. For example, if your business has a lot of assets, you might consider theft and property damage insurance. You may want life insurance on you and critical personnel in your organization. You also may want to consider various other forms of insurance, for example, Directors and Officers (if you have a Board of Directors) or business interruption. Having the right amount and type of coverage along with a carefully developed business plan that includes disaster preparedness can save you money in the long run. Be sure to keep your agent fully apprised of any changes within your business that might necessitate changes to your insurance coverage. Such changes may include: adding employees, expanding your business, increasing your inventory or materials, purchasing major equipment such as tools or vehicles and adding suppliers.

Ways to Avoid Being a Victim of Phony Insurance

Friday, November 14, 2008

Source: Arizona Department of Insurance

The best protection is prevention! You wouldn’t choose a nursing home or hire a builder without doing some homework…the same applies to insurance!


Verify before you buy! Check the validity

of the insurance company and agent by

contacting the Department of Insurance: or (602) 364-2499 or

(800) 325-2548 outside Phoenix

(Check the exact insurance company name being

used — scam companies often use names similar

to legitimate insurance companies).


Fake insurance comes in all types: health, boat,

medical malpractice, surety, business and

professional liability, long term care. It is marketed

to all types of people and businesses.

• Don’t let slick looking websites, business cards,

“official” forms, and marketing materials persuade

you that an insurance entity is legitimate.


Review documentation carefully—make sure it

looks “original”, not photocopied; look for a seal

and authentic signatures.


If the paperwork looks suspicious, contact the

insurance company listed to verify that a policy

was issued and call the Department of Insurance

to verify licensure.


Research the insurer: contact the BBB, the

Corporation Commission, and the U.S.

Department of Labor; get financial ratings from

AM Best and other financial rating services; ask

the Department of Insurance for complaint figures

and financial information.


Check out websites: Is there a physical address?

Are there names of company officers? Are there

valid phone numbers? Is there a way for you to

contact the company besides email? Don’t settle

for a P.O. Box, voice mail or email.


Ask questions, keep notes about who you spoke to and when, keep copies of documents, and always

pay with a check or credit card.


Research “Discount” health plans and cards carefully. They are not insurance and typically not

government regulated. “Discount” plans have been the subject of many nationwide fraud allegations.








Is your business insured RIGHT?

Source: The Insurance Information Institute



All businesses need property/casualty insurance coverage. The “property” component protects against damage to or loss of the business’s property. The “casualty” or liability component provides protection against legal liability for damages caused to other people or their property. A wide variety of lines of business fall into these broad categories.


Commercial insurers sell coverages separately and/or offer policies that combine protection from most major property and liability risks in one package. Package policies are created for businesses that generally face the same kind and degree of riskBusiness Owners PolicySmaller and mid-size companies often purchase a package policy known as the business owner’s policy or BOP. BOP coverage includes property insurance for buildings and contents owned by the company, and liability protection to cover a company’s legal responsibility for the harm it may cause to others. There are two different forms, standard and special, which provides more comprehensive coverage. A key option is business interruption insurance, a form of property insurance that covers the loss of income resulting from a fire or other catastrophe that disrupts the operation of the business. Business interruption can also include the extra expense of operating out of a temporary location. Costs due to business interruption can exceed the property damage that caused the business to shut down.BOPs do not cover professional liability, auto insurance, workers compensation or health and disability insurance. Businesses need separate insurance policies to cover professional services, vehicles and their employees’ health/disability needs.Home BusinessesMost of America’s 11 million home-based businesses are vulnerable to significant financial losses because they do not have the proper business insurance coverage, according to a survey by the Independent Insurance Agents & Brokers of America. Several insurance companies have developed special package policies to address the special needs of home businesses. Home entrepreneurs have other options for coverage, including BOPs, or “incidental business endorsement”, a special form that attaches to an existing homeowners policy.Commercial Multiple Peril PoliciesLarger companies might purchase a commercial package policy or customize their policies to meet the special risks they face. Commercial multiple peril policies, often purchased by corporations, bundle property, boiler and machinery, crime, and general liability coverage together.










Liability insurance protects the assets of a business when it is sued for something the business did (or failed to do) that caused injury or property damage to someone else. A business’s liability exposure includes not only paying damages and perhaps a penalty as the result of a successful lawsuit against it, but it also includes attorney’s fees and other costs involved in defending a company against a liability claim. Liability coverage may be purchased as part of the package policy, such as the BOP, or the commercial multiple peril policy, or as a separate liability policy known as a commercial general liability insurance policy (CGL). Insurance companies write CGL policies in two ways: as an “occurrence” policy or a “claims made” policy.Most CGL policies are written with what is called an “occurrence trigger.” This means that the CGL policy in effect at the time the alleged injury or property damage occurred is the policy that covers that event, regardless of how far back that event was from the time the claim is filed, or whether the same insurance company is currently insuring the defendant. For example a person might slip in a shoe store, but not experience severe back pain until several months after the fall. By this time, the store might have switched insurers. However, the claim will be handled by the company that was the store’s insurer at the time the fall occurred. CGL policies may also be written on a “claims made” basis. This means the current liability insurer is responsible for claims made during the policy period, even though the event that gave rise to the claim occurred in a prior year. In the above example, the shoe store’s current insurer would be responsible for the claim. The claims made policy is used for only a small percentage of liability insurance, mainly for medical malpractice and other types of professional liability.




Two major forms of insurance approaches used in providing workers’ compensation (see Standard Lines/Workers Compensation )are guaranteed cost plans and loss-sensitive plans. Businesses with guaranteed cost insurance policies pay guaranteed, fixed premiums for the policy period, regardless of the losses that occur during this period. In effect, the business transfers the expenses associated with its losses to the insurance company. With loss sensitive insurance coverage, the company shares the burden of its loss expenses with the insurer. These plans are frequently referred to as retrospective policies, because the amount the company pays for insurance during a set period is based on the losses sustained during that same period. Generally a retrospective policy establishes set minimum and maximum premium levels. If a company is successful in controlling accidents and associated expenses, then its final premium will near the minimum level. If it experiences major losses, its final premium will be closer to the maximum level. Loss sensitive plans give businesses a strong incentive to take steps to reduce claims via loss control efforts (see Company Operations/Loss Control). The plans are also used for general liability coverage.


Large deductible policies are designed to give employers that are willing to retain most of the claims risk an option that reduces their insurance costs. The deductibles are generally in amounts of $100,000 or higher. Large deductible programs, which were first introduced in 1989, are used by many companies for their workers compensation insurance, as a way of making costs more predictable. Like retrospective policies, they give employers a strong financial incentive to control losses.


Most businesses are vulnerable to losses from crime. Typical commercial property insurance policies exclude losses of money and securities due to any peril and often do not insure inventory, equipment and other types of property against theft. These loss exposures are covered by crime insurance. Coverage for crime losses whether by outside or inside thieves (e.g. embezzlers) may be included in a package policy or the insured business owner may purchase any one of a number of separate policy configurations to protect against these losses. As in other areas, the business owner needs to work with the agent or broker to determine the best coverage and the amount of coverage needed for the particular business.



Diane Levick. The Hartford (Conn.) Courant. 2008/11/06. Page N/A. A new report from the National Association of Insurance Commissioners (NAIC) shows that in recent years the cost of auto insurance across the U.S., including Connecticut, where drivers pay the nation’s 11th highest auto insurance premiums, has declined slightly. Experts say that the trend has begun to reverse, although increases have been relatively moderate. Data released by the NAIC on November 5 show that the average premium per vehicle for a policy that includes liability, collision and comprehensive coverage was $1,080 in Connecticut in 2006, compared with $1,097 in 2005. The national average premium in 2006 was $937, with drivers in Washington D.C. paying $1,316, the highest rates, while premiums averaged $644 in Iowa, where rates were lowest. Robert Hartwig, president of the Insurance Information Institute, said that auto insurance costs in 2007 were basically flat, but despite declining accident frequency in 2008, insurers have seen the average cost of claims rise due to increases in medical costs and the price of materials such as steel, aluminum and plastic needed for auto repair parts. “What we saw as we moved through 2008 was some signs of increasing prices for auto insurance, though not dramatically so,” Hartwig said. Hartwig cited federal statistics indicating that auto insurance prices in September were 3.1 percent higher than a year earlier.


No Byline. Insurance Journal. 2008/10/27. Following reports that the U.S Treasury is considering adding life, bond and mortgage insurance companies to its list of beneficiaries for some of the $700 billion federal bailout package, property/casualty insurers are making it clear to they don’t want any rescue dollars. Even if the government decides to make them eligible, the property/casualty insurers say they will refuse any funds. The American Insurance Association said it surveyed its board of directors and learned that “a substantial majority of the insurers represented by AIA do not support the inclusion of property/casualty insurers in Treasury’s Capital Purchase Program. If made available, they will not elect to participate.” The AIA represents 350 insurers that write more than $123 billion in premiums each year. AIA member companies offer all types of property – casualty insurance, including personal and commercial auto insurance, commercial property and liability coverage for small businesses, workers’ compensation, homeowners’ insurance, medical malpractice coverage, and product liability insurance. AIA members include ACE, Chubb, Farmers, The Hartford, Travelers, XL and Zurich among others. Evan Greenberg, chairman and CEO of ACE Group and chairman of the AIA, issued a statement as the U.S. Treasury Department deliberates on if it will include insurance companies under the Capital Purchase Program (CPP) that is part of the $700 billion emergency economic stabilization package approved by Congress.

The CPP was created to inject capital into credit markets and to prevent counterparty failure of such a magnitude as to pose a systemic risk to the financial system. Greenberg said that AIA members “believe that, as property/casualty insurance writers, they are well-capitalized and well-positioned to weather the current financial market crisis without the assistance of the CPP announced by Treasury. “As a result, the property/casualty insurers who are members of AIA strongly prefer to compete in the private market and the substantial majority will elect not to participate in the CPP,” the AIA chairman added.