Part 2 of Office Terms to Understand: Rent and build out issues

1. Escalations: This is the amount of your rent increases year to year. 
2. Tenant Improvements (TI’s): These are the interior improvements within the space that are made before you move in.
3. Amortization: When a landlord pays for the building to be modified to fit your needs he may roll what it costs him into your lease. When this happens it is called amortization. 
4. Plug and Play: This means the space will be wired and have furniture when you move in. 
5. Turnkey: This refers to an owner making a property ready for a tenant to begin business by having the tenant furnish only furniture, phone and inventory, if any. Turnkey tenant improvements are provided at the landlord’s expense according to plans and specifications previously agreed upon by the parties.
6. Work Letter: Specifications for tenant improvements. The work letter provides the basis for working drawings and contractor pricing and may allocate costs between the parties.

Smooth Moves

Moving is stressful. Not just on the owners of a company but on employees, partners, and customers as well. To help you de-stress your move and to help things go as smoothly as possible, here are a few tips.

8 Points to Negotiate

1.When to move If a space has been vacant for a while the landlord will be more willing to be flexible on rent. So if you can’t meet the landlord’s rent needs but are willing to immediately move into the space, you might have yourself a deal.

2.Lower the rent The general practice is to negotiate the rent down 5-10% so this is something to keep in mind and work towards.

3.Tenant improvements If the space you have found is lacking some things that you have been looking for try to negotiate with the landlord so that he is responsible for the changes you would like to make. Make sure these changes are reasonable. If you are signing a longer lease the landlord should be more willing to make these changes for you.

4.Nothing in life is free Free rent/the amount of it depends on current market conditions, your financial statements, and the term of the lease. If you have a short lease it will be harder to negotiate free rent because the landlord only has a short amount of time to make money off of you. In a longer lease (around 5 years) a common practice is to give 3-5 months free rent. If you need to justify free rent to your landlord explain that the free rent is covering moving costs.

5.Term On average a space will sit vacant for 5 months in between leases. For this reason it’s better for a landlord to have tenants with leases that last around 3-5 years. This means that it is to your benefit to sign a longer lease since this will give you more weight when pushing for free rent, more improvements, or cheaper rent.

6.Furniture It is important to know whether or not the furniture is going to be left after your lease expires and if you will be responsible for purchasing the furniture. since buying new furniture is expensive and moving it is time consuming. The best plan is to ask for free use of the furniture and the ability to purchase it once the lease is up in the case that you want to take it to your next location.

7. No commission When looking for space without the help of a broker or agent you can try to reduce the proposed fee amount for a broker from your total rent obligation.

8. You have options Make sure that you negotiate renewal options, termination options, and expansion obligations. These will allow you to have the most control over your lease.

The Price is Right

When listing your space there are several factors to consider when it comes to pricing. Here are our helpful tips to give you some guidelines.

Look through listings on real estate sites and find a listing that is comparable to yours. Try to find a listing that is either in your city or neighborhood. The closer the better. Try to gather quite a few options so that you can see what the low, medium and high price caps are for the type of listing you have.

2. Patience is a virtue 

After you compare you have two options depending on how whether or not you have time to wait for a tenant. If you do have time and want to get a great deal, list your building on the more expensive side and wait to see what comes of it. If you are looking for a fast lease it is better to price your space in the low to medium range. Look at properties you compared yours to and make sure you are offering the same, or better, deals. 

Now that you have your price it’s time to see how possible tenants feel about it. Make sure that along with having a good price you are working to market your space. If you’re getting a lot of calls and doing a lot of showings but no one is biting, that means its probably time to lower the price.

If you lower the price and still aren’t getting any leads you have to analyze whether it’s because of the space itself (might be time for some improvements) or the market. If it’s a market issue try to get a tenant in (even if it’s for a very short time because some money is better than no money). Think of creative ways to make money off of your space…is your space good for storage? Could you rent your space to an event company to use certain days/weekends? The more creative you are the more likely you are to get your space leased!

Things to Include in Your Listing

When first getting into the game of putting a listing up online it can be difficult to know exactly what to include in your listing. Here’s a few tips to help start you off. 

Price: This is a non-negotiable. It is 100% necessary to include a price on every listing in every post. When you list the price you will get more inquiries as well as more serious possibilities. 

Square Footage: It is important to give an accurate description of how much space you have available. If you have a space that can be divided up into smaller offices or a conference room, then include those possibilities in your listing. Small businesses want to know their options and it is your job to show them that your space can give them options that work for their business. 

Pictures: A picture is worth a thousand words so include lots. Make sure that the quality and accuracy of your pictures is up to date. Blurry pictures or ones with weird angles won’t do your space any favors. 

Floor plans: A floor plan is often a requested item so it makes sense to upload it to your listing. If you don’t have a floor plan you may want to include a description of the layout of your space. However be wary on the length of something like this. 

Description: Positives of the space and location, nearby amenities and companies in your building are a few things to include. LIst any specific business types that would be a good fit for the space or business who have leased the space in the past. 

Video: Videos are still picking up speed in commercial real estate but they’re becoming more popular. Videos can save you from extra writing and they help make your listing stand out. If you’re hesitant to do a video because of the condition of your space then describe the improvements that you would be willing to do. 

Reviews: Potential tenants like to hear from current tenants. Ask your tenants to write reviews about what it’s like to rent from you and what their favorite amenities are. 

10 Things to Consider when Looking for Office Space

1. Think Ahead

Where do you see your business in 6 months…1 year… 5 years. If you see your business needing room to expand it’s important to take that into consideration when looking at a space that can only hold the amount of employees you currently have.

2. Hit the Road

 What is the transportation like where you are looking to move? When answering this question don’t only consider yourself but any possible or current employees as well. Make sure you choose a location that is central and convenient. 

3. Light

Be aware of the lighting in spaces you tour. Dark spaces that lack natural light stump creativity and can make work a drag. Spaces that are brighter with high ceilings boost energy in the work place. However, too much light can create glares on computer screens so make sure that blinds or shades available. 

In many older buildings an internet connection hasn’t been established or could have poor reception. Make sure you check with your landlord to see what internet options are available. 

Developing relationships with the businesses around you can revitalize your business and employees. It’s valuable to have someone close by to go to with a technical challenge or to head to an office party with. And when it’s crunch time you can always just shut your office door. 

6. Lock Your Doors

Evaluating the security at a potential building is crucial to avoiding future awkward situations, tension, and snafus. Be aware of the type of neighborhood the building is located in, who you might be sharing the space with, and ask the landlord if the building has an alarm system or has experienced any issues with theft.  

7. Image

What kind of image does the building have? Consider how people locally perceive the building as well as how clients who will come to your office will see things. Does the building have the same aesthetic as your business and how can this detract or enhance your business?

8. Amenities 

Make a list of things that are important to you and see how these line up with your budget and potential space. Make sure you include these things in your search so that you are disappointed when you tour a building only to find out it is lacking certain factors that are important to you.

 9. Set Up

Will your office require much work before moving in? If you have to wait to do any form of construction will this put you over budget or set your business behind. Have a vision for what you want and what is best for you company so that you are able to express this to any potential landlords. 

What does your space offer your clients? It is important to understand who your clients are and where they live so that you can better service them. If you have clients coming to your office it’s important to consider if they will be greeted by a receptionist, have a waiting area, or be offered a refreshment. 

A few things to know about security deposits and letters of credit…

Letters of credit: This is a bank’s promise to pay a specific amount that’s owed by a tenant. A bank will issue a letter of credit so that sellers know they will get paid. (assuming they do what they’re supposed to do). In the case that a tenant (presumably a small business) defaults on its rental payment the bank is able to take over and begin paying rent to the landlord. 

Security Deposits: If a landlord feels comfortable with a tenant’s business plan they might forego the personal guarantee. If the landlord increases the security deposit it gives them the peace of mind that if the company leasing from them goes out of business, the extra money they have from the security deposit will give them a little extra time to find a new tenant.  

Common Leases

Triple Net (NNN) This is where the landlord pushes all possible expenses to a tenant. These expenses would include…

—Property Taxes

—Building insurance

—Common 

—Utilities

—Janitorial

Industrial Gross (IG) A small business will pay for its own utilities and janitorial. With this lease a landlord pays for everything else

Full Service (FS) Plain and simple a landlord is responsible for all expenses

Part 1 of Office Terms to Understand: Rent

NNN: Tenant is responsible for property tax, Insurance, common area, maintenance, utilities, and janitorial

Industrial Gross: Tenant pays utilities and janitorial

 Modified Gross: Tenant pays for janitorial

Full Service: Tenant is only responsible for increases over the base year expenses

Proof of Income and Assets: This is used to determine if the tenant is eligible for rental subsidy

Usable Square Footage: Does not include hallways, elevators, lobbies, bathrooms, or other common areas

To Renew Or Not To Renew

In general, most landlords are going to want tenants to sign long term leases. This benefits them for obvious reasons including the fact that they will have financial security for a longer period of time. The downside of a long term lease for small businesses (or businesses that are just starting out) is that if your company is growing you don’t want to get stuck in a space that’s too small for you or not the right fit for your company. So the better option when looking or office space is to sign a 2 year lease (roughly) that provides you with the option to renew.

When a lease has a renewal clause it provides the tenant with the option of either extending that lease or moving elsewhere once the initial lease period is up.

If your lease has a renewal clause, you should talk to your landlord about rent increases. Most landlords will try to up the rent every time your lease is renewed and so it’s important to have predetermined rent increases for each renewal term. 

Close to signing a lease? Now is the time to talk about business insurance!

There’s not too many ways to make a blog post on business insurance very fun… so bare with me and keep in mind that these tips might save you some hassle!

When discussing a lease with a landlord it is important to ask about what types of insurance coverage are required. It is best to do this early in your conversations with him/her. The reason it is important to do this early is because 1) there could be a specific requirement for the landlord to be directly named on the insurance policy and 2) the landlord may ask to see a certificate of Workmen’s Compensation Insurance.

The first step is to know the requirements of your lease. After you do this you will need to contact an insurance provider. Here are some things you might want to know before you get on the phone…

-Have a description of your company ready and make sure it includes how many years you have been in business.

-You will need some basic information about the building you are planning to occupy. This information should include: address, the number of floors in the building, and the year it was built.

-The reason for your insurance. This information is found in the provisions of your lease.

-A compilation of business equipment and how much it costs (approximately). This list should also include any inventory and furnishings. 

How To Strengthen Your Real Estate Listing

If you want people to bite you need a good hook. Write an interesting listing title to get people interested. Some things you might want to include are the area, special pricing, lease terms, and any special uses that are unique to your building.

One of the most important factors to people searching for space is pricing. Include the price of your listing so that you don’t waste their time or yours. Not listing a price as a way to get inquiries on your space is not effective.  

The more detailed your listing is the better. People want to know exactly what they’re looking at and you don’t want to waste time showing a space that isn’t the perfect fit for someone either. Aside from word descriptions include lots of pictures and videos. This will help to make your listing more visually appealing as well!

Choosing the right size office

The quest for office space is all about efficiency and getting a good deal. In order to to fulfill both of these requirements you have to be able to answer the question “What size office are you looking for?”

Too much office space will leave you paying for space you aren’t using and can make employees feel disconnected. On the other hand space that is too small (the greater of two evils in my opinion) can decrease productivity, increase noise levels, and make employees feel cramped and not taken care of. Here are a few things to consider to help you avoid making a office size mistake. 

Do you need a reception area? Consider how many people would generally be visiting you and make sure you take into account how much space you need for seating and decor to welcome these people in. Your reception area is going to be the first impression people get of your office so don’t skimp on appearance. Make sure you create plenty of space for people waiting as well as for office workers that might be passing through or using any equipment (copy machine etc.) that could be placed in that space. 

The point of an executive office is to create privacy that is generally needed by management. First, determine how many people will need this type of privacy and then consider that these offices are usually allotted 150-300 Sq. Ft.  

The size of your business and how often you hold office meetings will help determine how much meeting space you need. If you mostly hold small meetings (or are a small business) then consider meeting at a rented facility or coffee shop. If your business is often having large office meetings it is probably wise to invest in a space with a conference room or large meeting area. If your business has multiple meetings occurring during a day or specific time try to develop a schedule so that you don’t waste money on extra conference rooms that are only being used a few times per week. 

Think about the best way to “organize” employee space. Will there be partitions to divide personal space or will the room be open with space to separate between employees. The first option is a closed plan and generally requires 125-200 sq. ft. per person versus the second option which is an open plan and runs smaller with about 90-125 sq. ft. per person. Keep in mind there also must be room for traffic areas and walkways. 

Community space is a key component to any office. This kind of space is used as a break/lunch room and typically will have kitchen appliances. Another type of community space might be more dedicated to office equipment such as copiers, paper shredders, and fax machines. Think of what type of community space will best suit your office and then begin thinking of the type/size of furniture/appliances you will be wanting to fill the space with. 

A small but important factor to consider is bathroom space. Depending on the type of building you are looking to occupy and how large your company is, you may or may not want to invest in a space that has a bathroom for your office specifically. 

Some companies remain small for the duration of their existence and others grow at a rapid rate. Look at your business plan for the future and think about what kind of space your company will need a few years down the road. Moving is expensive and it’s a hassle to break out of a lease before it’s up so really evaluate how long you will want to stay at a given office and consider if this office will allow your company the room it needs to expand. 

3 reasons why setting a budget will make your search for office space more effective

1) Knowing your budget will help you to refine your search and therefore cut down on the amount of sifting you have to do when looking through all of the possible spaces that a search will generate. Check out www.smallofficesearch.com to get a look at some spaces that could work for you.

2) Acccepting your financial limitations allows for you to narrow down the areas you can look for space in. This increases effienciency as you can jump start your search by having fewer areas to look for space in. 

3) Having a firm budget will push you past rent negotiations that aren’t going anywhere. When making your budget, allow for some flexibility but define clears caps so that you don’t waste time trying to make a building work for a budget you don’t have.