Law Firm Saves $5.86 Million in Relocation to Space in New Construction
Butler Snow's main office in downtown Jackson, Mississippi was located within an inefficient building at rental rates below the market average. Over the term of the previous lease, the downtown office market significantly changed; with some of the firm's clients and many professional services firms locating in newer office markets out of downtown. However, the firm also needed to consider the many clients that remained committed to downtown, and the firm's own long-term and continuing commitment to downtown and the City of Jackson. The firm was faced with an evaluation of the merits between renewing its existing lease and radically renovating its existing space or being an anchor tenant in one of several proposed buildings in downtown or suburban Jackson.
An earnest evaluation of options did not begin until after the destruction of Hurricane Katrina, which soon precipitated a host of state and federal incentives for construction and investment in South Mississippi. Understanding and quantifying this potential benefit was a critical component in both 1) selecting the most capable of the potential developers to maintain eligibility under the required structures and 2) in valuing its overall reduction to the firm's cost over the full course of the lease.
The ultimate decision to relocate to the Ridgeland suburb was to put Butler Snow in "the center of commerce" and highlight the firm's position as a leading law firm in the state and region. The new facility has several unique attributes including exclusive exterior signage for Butler Snow and a "hurricane proof" server room constructed at the landlord's expense.
It is rare that the cost of space in new construction is lower than that in an existing building, but in this case, the occupancy cost of the new building was $5.86 million less than the cost of a renewal. Beyond sheer economic terms, Savills was successful in securing extraordinary flexibility (relative to most anchor tenants) through ongoing rights to adjust space upwards or downwards in accordance with the firm's business needs. Furthermore, liability was limited only to the firm's assets, despite a large capital investment on the part of the developer.