1). Know the Market – This may seem obvious, but over the years some of my new clients were surprised at the amount of data I provided them on the front end of a leasing assignment. It’s very important to know how much inventory is in your particular size and location range so you know how aggressive of an offer you can make and how quickly you need to respond to an offer. Information is out there on spaces for lease and spaces that have leased recently providing you with good comparables.
2). Know what you want/need – Another obvious concept…but I have experienced clients that started the search process and then realized weeks later they needed more space (or less) space, more (or less) open work space, etc. only to have the search go back to square one, losing the team valuable time. I like to talk thru my client’s business model and how the personnel function and interact. That gives the entire team a feel for what is needed in a new space. These days, hard-wall offices are used for primarily executives’ offices, human resources’ offices, conference room, and key managers. More commonly open workspace is being utilized for the middle and lower-level employees, especially if they plan to work in the office only a few days a week.
3). Concessions – When negotiating lease terms, the longer time you can commit to in a lease, the more concessions the landlord will offer. A 5-year lease term will yield at least several months of abated rent, a tenant improvement allowance predicated on the current condition of the space, and a free “test fit”. A test fit is a potential plan of a space drawn up by an architect after about an hour consultation with the tenant. That is then used to get preliminary construction pricing to verify if the build-out allowance negotiated will be sufficient to cover the work needed. At that point, if the cost exceeds the build out allowance, you can go back to the negotiating table. This is also a good time to show your financials if they are strong. This goes a long way in getting additional dollars out of the landlord’s pocket for renovation.
4). Find a good match – Since construction costs have gotten higher and higher due to Central Texas being the continued focus of many companies wanting to set up shop or expand here, try to find a space that already has a lot of build out the way you want it. A good example is if you need an air-conditioned warehouse or showroom. If you find a space you like that is 10,000 sq.ft. but it doesn’t have air-conditioning, that alone will cost you at least $50,000 to add. Landlords typically don’t pitch in for that cost.
5). HVAC warranty – Speaking of air-conditioning, if you are going to lease an existing warehouse or retail space, you will definitely want to negotiate to have the landlord service the HVAC system AND warranty it for a period of time. Additionally, try to negotiate an annual cap on repairs. I don’t like hearing how a new client got burned from a past leasing experience when they had to replace an entire air-conditioning system with only four months left on their lease.
6). Rent Commencement Date – What’s the difference in the rent commencement, occupancy date, lease commencement, etc.? This can be confusing so make sure you understand what the landlord is expecting. Usually the rent commencement, occupancy date and lease commencement are the same date. Even if there is free rent, which should be defined in a rent schedule in the lease, the rent commencement is usually the date the lease commences and when you take occupancy. One thing to watch is when the landlord throws out “rent commencement is the EARLIER of “a date” or substantial completion”. This is ok only if you are sure the space won’t be ready before you need it. Otherwise, you may be still paying on an existing space AND your new space at the same time. I try to get “earlier” changed to “later” but that rarely happens. Best way to avoid the problem of paying double rent is to push the “date” back as far as you can.