Swap or Rent™ July 7, 2019 no responses

 

The term of the lease is often a complicated and contentious issue. You want a very short initial term and a huge number of renewal options. An outrageous extreme of this would be a one-day lease with 3649 one-day renewal options.

Needless to say, this is not going to happen. Some landlords have a minimum term of three or five years. Depending upon their level of motivation, they’re often flexible with regard to this issue.

Reflect upon your preferences for your lease term and address it early in the discussion with the office building leasing brokers. For example, if you are seeking a six-month lease or a 20-year lease (at a fixed rental rate with no rental rate increases during the term), broach this issue sooner rather than later in the discussion with the office building’s leasing agent.

Addressing the issue of lease term early in the communication leasing broker is appropriate. However, in most cases, do not automatically eliminate a building because the quoted lease term is shorter or longer than your objective. Lease term is often a negotiated issue.

Next start identifying the office space prospects which generally fit your criteria. These are office buildings that are in the general location or submarket you have identified and which generally fit the criteria described earlier in this article.

After compiling a list of office space prospects, you may need to limit it further or before going to see each building. For example, if there are 36 options which fit the above described criteria, you probably would not want to visit each building. An online office space search service is invaluable in gradually narrowing your criteria.

This allows you to “what if” scenarios regarding your criteria. Prior to using such an online service, to confirm that it has a comprehensive inventory of buildings in the area you are considering.

When you have limited the number of options to perhaps three to seven buildings, discuss the building options with your office rep broker to narrow the options. If you are seeking a short-term lease, is the broker are virtually certain that some of the building owners will not provide the desired lease term? Has he broker expressed reservations regarding the quality of management, maintenance or service at some of the buildings?

The next step is to visit the office space in buildings that appear to be a good fit. Reflect upon the criteria you initially establish and any issues that may have since surfaced. Take detailed notes while visiting each of the buildings. (The details of the buildings will fade quickly if you visit 3 or 4 office buildings a day.)

 

Ask questions regarding fundamental deal points to see if the information verbally provided by the building-rep broker provides further inside into the landlord’s negotiating position. Also ask questions regarding security, crime, maintenance and any other issues which concern you.

Once you have identified office space that appears to be a good prospect, research relevant issues prior to committing too many resources to negotiating a lease, and obtaining construction estimates.

If you plan to put 25 people in 5,000 square feet of space, have the space planner for the building work with you to see if the space works? Doing due diligence and negotiating a lease are time consuming. Cull options that do not work prior to spending much time on due diligence and lease negotiations.

When office space meets the minimally acceptable standard for the previously discussed criteria, it is time to review the costs to prepare the office space for your business. In broad terms, the costs include signage (if relevant) and the cost of renovating or redoing the improvements within your space.

At this point, you need to know the landlord’s policy regarding tenant improvements. (Tenant improvements are construction performed to make space suitable for a business.

It can include adding restrooms, demolishing and adding walls, floor coverings, window coverings, signage and virtually anything else related to physically preparing the office for your business.

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