Help: Renting corporate office space for first time

Parent Cafe
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<p>Hi Gang,</p>

<p>Coming to CC to ask for advice on how to go about this. We have found the right space at the what looks like the right price and we now need to get the contract together.</p>

<p>Our realtor states that the owner usually will pay for changes ($1 sq foot) depending on how much sq footage we have (about 3000 sq feet). We will pay the rest.</p>

<p>We need to move a few walls, add some jacks and computer wiring and have some carpeting replaced with vinyl flooring.
I know I need to ask about garbage pick up, common bathroom cleaning, pest control. I also know I am going to forget a number of things so was hoping my friends at CC could throw a few additional ideas my way. </p>

<p>Everything is a bit rushed and I don’t want to make too many errors.</p>

<p>Thanks to anyone who can take the time to respond.</p>

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<p>“We need to move a few walls”</p>

<p>Make sure that does not involve changing fire zones or moving weight bearing walls or this can get really $$$$$. I would also ask about utilities charges - will you have separate meters for gas, electricity and water, or will you be charged a percentage of the total based on your square footage.</p>

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<p>Question #1 - Gross lease or NNN lease?</p>

<p>Gross Lease - you pay rent and all other charges, taxes, insurance, common are maintenance are paid by Landlord.</p>

<p>NNN Lease - you pay base rent and a pro rata share of all other charges.</p>

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<p>Security system?</p>

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<p>Might have an atty take a quick look at that lease–just to make sure you are on the same page as the landlord!</p>

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<p>Thanks folks.
We will pay rent and utilities. There are individual meters for everything.</p>

<p>We are good on the walls we need to move. I have to double check on a few doors I wanted to add.</p>

<p>I forgot about the security system. So that’s now on the list.</p>

<p>Do I need a specialized attorney? Should I have brought an attorney in already?</p>

<p>ugh…I’m such a newbie :)</p>

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<p>$1 psf sounds low but it depends on many factors. In our market (Seattle) the new tenant will get $10 psf and up for a 5 year lease. $20-$30 psf is not that rare. Also some “free rent”. Most leases here are NNN exept downtown which has a base year stop. Your broker should be able to advise you on this if they know the office market. What town are you in?</p>

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<p>Barrons: we are in chester heights, pa.(25 miles out of Phila.)</p>

<p>We are using a realtor that is trying to rent the property so we really have no one with our best interest involved.</p>

<p>Wow, Barrons. That is a big difference in $$ per sq. foot. Hmmm.
I wonder how I find out the going rate?</p>

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<p>How large is the building overall? Small ma & pa owned buildings will not spend as much but rent may be less. To me a large building is over 50,000 SF. Are the paint and carpet fresh? Sometimes they will freshen the suite before renting it so they spent the $10 PSF in advance getting it nice. If not you should at least get fresh paint and new or very clean carpets. It’s usually good to have your own broker working for you and finding spaces. 3000 SF is small but not too small to have your own broker. The landlord should pay his fee too. What happens is the lisitng agent has to split his fee with your broker. You need to be signing at least a 3 year lease to get a broker or it’s really not worth his time as the fee is based on say 6% of the total rent over the lease term. So if you are paying $20 PSF rent over 3 years on 3000 SF the commission would be around $10,000 gross so your guy gets $5,000. That’s enough to get somebody interested.</p>

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<p>This is what I do for 40-60 hours a week, so let’s see if I can cut through to some of the basics.</p>

<p>If you have not seen and had a chance to review the written lease, please start there. It will not matter what the “going rate” is for anything; only what this particular landlord is willing to offer.</p>

<p>That said, barrons is correct in that for class A and B office space, the landlord will often offer to pay for some portion of the leasehold/tenant improvements, or may offer a period of free rent to compensate for the money the tenant spends to improve the space. But it’s not a “given” especially in smaller markets and smaller buildings.</p>

<p>You do, however, want to examine the lease or Letter of Intent to see what the landlord is responsible for. This will include common spaces improvements, common spaces maintenance, building security, upkeep of parking areas, maintenance of HVAC systems, and more. Will the landlord have the right to approve your interior renovations? Is there a base-building standard for materials that you want to utilize? Are you required to use a landlord-approved or landlord-recommended contractor.</p>

<p>There may also be significant building code considerations in regards to the renovations planned, especially if you are moving doors and changing emergency exit access. I always recommend retaining an architect (duh), but with an exceptional contractor and minor improvements, you may be able to get away without one.</p>

<p>Be sure to use experienced and highly recommended electrical/data/telephone installers. In some cities this will also involve extensive code and permitting requirements. Some electricians can do it all; but much cabling today really requires specialized installers. Are there common electrical or telephone closets on the floor or will that use be accessible within your space. Ask about internet service: DSL, cable, T-1 lines?</p>

<p>What about your neighbors? Are there restrictions on the type of businesses that also lease at the same locations? What hours do they operate? Is the building secure outside of your normal business hours? Will you want to add signage to the building or common spaces?</p>

<p>More later, as I recall other similar projects.</p>

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<p>$1/sf for 3000 sf office for TI really does not do anything in a commerical lease, especially there is a need to modification and code updating. what exactly is agreed on the TI’s (Tenant Improvements). What are the improvements you have to do to bring the office to the code for your use? Do you have an estimate? Does it require a conditional use permit where you need to apply in front of a planning commission? You really need some one as YOUR broker to work on the project. I assume you called the listing broker yourself by a drive by sign or some thing.</p>

<p>When you talk about the garbages, do you have to pay for it? If so, perhaps you have a NNN lease where you have to pay for the commom area cost as well as property tax? Its not clear who is responsible what in the first posting, so make sure it is clearly stated.</p>

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<p>“Ask about internet service: DSL, cable, T-1 lines?”</p>

<p>Good point. If you rely heavily on fast internet in your line of business, you absolutely have to look into that. In my town, there are certain areas monopolized by some providers (e.g., Quest), and you get stuck with what they offer in that particular area. Does your line of business require uninterrupted power? If so, are there any backup generators in the building? I also second others who said get your own broker and an architect (or at least someone with commercial facilities maintenance background).</p>

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<p>Are there common area maintance fees (CAMS)? If so, how are they determined? Are they capped? </p>

<p>This became a huge issue for a couple of Dh and some other business owners we know…be sure you understand how much money you can be responsible for in CAMS.</p>

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<p>Thank you so much to everyone who has posted I typed out a long response early this morning/late last night only to have it vanish when I went to post. I hate getting timed out by the cc server.</p>

<p>I will cut and paste all the above and go iinto this much more educated on what I should be looking for. </p>

<p>I really can’t thank you all enough.</p>

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<p>Sax - you need representaton. Find a commercial realtor that works in the area and is familiar with leases. In general the commercial market is softening and landlords are making concessions you may not be familiar with and they will not tell you about - unless you ask. Do not sign anything until you feel comfortable with the terms. Do not rush. Good luck!</p>

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<p>I know nothing about Chester PA, but the commercial market is NOT softening, it is SOFT, period, in all markets in USA except a few spotted areas. Unless Chester PA is a boomtown, you probably is holding short end of the stick with $1/sf for TI…</p>