Tag Archives: Office Space

7 Questions to ask your future landlord

February 3, 2014 By in Archives Tags: , , , , ,

There are 7 questions that a tenant can ask to get a feel for the success of their next real estate deal, yet rarely are any of them asked! The tenant and landlord’s dance through the proposal process is one that is contained to RFP (Request for Proposal) responses and the agents negotiating terms on behalf of the principals. Often, once the lease is signed, it is the first time that a tenant actually meets his landlord. That is one hell of an arranged marriage!

During the great recession, the world for landlords was turned upside down. As a result, form leases that had not been rewritten in 20 years had now been completely overhauled. Leases are much longer now than they used to be and the time and cost to negotiate and approve the documents has increased considerably. In”25 Years of Commercial Leasing: What a Long Strange, Cyclical Trip it has been,” a group of commercial lease transaction lawyers in California point out this new complication.

Page 12 of the article states, “The 10 years preceding the birth of the Real Property Law Section, the State Bar of California saw commercial leases expand from a typical six-page office lease, manually typed with carbon paper, to a 30-page lease with a dramatically increased focus on detail and an attempt to alleviate the unknowns and “what ifs.”  After further review, the article goes on to detail how landlords have shifted to having an attorney on retainer draft leases that are more and more complex as a form of protection from certain issues that may arise with the tenant long after the lease has been signed.

After examining the above text, it would appear that the best landlord tenant relationship is one where the lease is negotiated, then put away, and never pulled-out again. But to have such a relationship with your landlord, you must have a great amount of trust. In Dr. Stephen Covey’s book, Speed of Trust, he addresses this type of trust:

“When trust goes up, speed will also go up and cost will go down.”

The inverse is also true.

“When trust goes down, speed will go down and costs will go up.”

In an industry that is primarily concerned about being faster, bigger, and cheaper, trust is a critical component to any landlord/tenant relationship. But when decisions are made based upon responses to RFPs, how does a tenant know if they are entering into a relationship with a good guy? We suggest that you preface all of your RFPs to your future landlord with the following statement and ask these 7 questions.

First, clarify your expectations by making this statement. “Smoots, Tannerbottom and Felderhosen PLLC envisions a “collaborative/partnership” during the negotiation, upfit, and occupancy of its new office. Please provide the following information with that in mind.

1. Assume that it is three years from now, the tenant chose your building, negotiated a lease, performed tenant improvements and has been a tenant for over two years, and you are looking back over the last three years, what would have to happen for the landlord to feel good about your progress? This is the greatest of all open-ended questions. You will know if the respondent is serious about having you as a tenant as well as their plan for you as their tenant.

2. Please describe the ownership structure of “respondent” and the key personnel who would be involved in the negotiation of agreements and the completion of the project. This question addresses the issue of how they will deliver results and keep commitments.

3. Provide examples of comparable projects completed by “respondent”. This question will give you insight into not only their capability, but also their humility.

4. Confirm that “respondent” be willing to work on an “open book” basis with agreed return criteria at the outset. This gets right to the issue of landlord transparency.

5. Please indicate how respondent expects to access and utilize capital to complete the project (including expansion). Anyone in the debt market knows the value of understanding a landlord’s access to capital.

6. Demonstrate financial capability to complete this project. All landlords had a tough time during the great recession, therefore the respondent should have a very clear idea of how they are going to answer this question.

7. Please share your vision for the neighborhood in which your site is located. I like this question because a landlord who knows and cares about the neighborhood in which it is located, is socially conscious and cares about the relationships with its tenants. Also, this is a great question to raise awareness on soft issues such as transportation, proposed access improvements, crime statistics, and the availability of nearby workforce housing.

 

What is the difference between Usable SF, Rentable SF and Sneaky SF? A lot! And something stinks in NY.

May 20, 2013 By in Archives Tags: , , , , , ,

Recently a landlord’s usable space calculations caused a great deal of agitation with a deal we were completing. How did I know if landlord’s erroneous floor plans were are mistake, or a sneaky profit center? It turned-out to be both, and a bit of negotiation posturing. This particular landlord thought he had a lot of leverage. Our architect discovered that the plan was about 12.2% smaller than the landlord represented. When we pointed it out to the landlord’s agent, she quickly retorted: “it is what it is – don’t waste your breath and you architect’s time. We will not allow tenants remeasure the space.” Negotiations with stonewalls like this can be handled easily and we eventually got the deal closed.

However, comparing SF in proposals can be a tricky business. It points to the reason why business owners and corporate decision makers alike have come to rely so heavily on architects and space planners to ensure their office space needs make sense. If you’re in the market to lease space, it behooves you to outsource the planning process to a professional architect, planner or agent-advocate who understands the substantial differences that exist between things like “usable square feet” and “rentable square feet”. If you’re going it alone, here are a few tips to help guide your way.

The usable square footage of a commercial space, while not always straightforward, is the most simplistic in terms of understandability. Usable square footage relates to the exact* number of square feet that you’ll have sole access to. If the usable square footage of a commercial property that you lease is 2,000 usable square feet, this means that your office space will be precisely that – 2,000 usable square feet. Confusion sometimes comes into play, however, when a landlord markets the exact same space claiming it to be 2,500 “rentable” square feet. In this case, the owner has included in the description of the commercial space those common areas of a building that you’ll have shared access to – or the “rentable square footage.”

You’re probably thinking: Hang on a second – why do I need to concern myself with the definition of “rentable” square footage? Here’s why: That definition comes heavily into play if you’re leasing a block of space in a building occupied by other tenants. Ultimately, the amount of money you’ll pay for the commercial space won’t be determined solely by the square footage of the offices you inherit, but also your pro-rata share of any common areas such as lobbies, hallways, stairways, and elevators. Landlords might also add other items such as overhangs and exercise rooms that you want to negotiate carefully.

If you’re thinking that you might be better off having your interests served by hiring an attorney or agent/broker, there’s reason to believe your mental processing tools (your brain) are in good order. Choose your attorney and brokers carefully. Make sure that they are well trained and have your best interest at heart.

*There’s nothing “exact” about the methods employed by landlords to measure office space in major markets like New York City, Los Angeles, or Chicago. Interested parties will likely be told to leave their measuring tape at home and send their architects to their rooms with no dinner. In other words, in such major markets, the space “is what it is.”