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Entries Tagged as 'Office Space Negotiations'

Negotiating the Best Commercial Office Lease: Financial Analysis

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Business transactions require careful financial analysis and commercial office space leases are no different. Whether your organization is negotiating an office lease for its first facility, relocating into a larger office space, or negotiating a lease renewal for the same facility you’ve rented in the previous lease period, a complete evaluation of the costs should be to reveal exactly how beneficial the current negotiating position is to the future of the company as well as to compare options.

By this point in the commercial office property lease negotiation process, you should have already selected a real estate professional, a tenant rep, to assist you in obtaining the best possible office lease. Property owners, of course, want to realize as much money from their real estate investment as possible while you, as a business owner, want to secure an appropriate venue for your firm at the least possible cost. Experienced OfficeFinders are office space lease negotiators and know exactly how to analyze the cost of occupying the commercial space so that there are no unpleasant surprises in store for you.

You may have found what appears to be the perfect location for your business and, at first look, the lease costs appear to be a fair deal. Comparing the lease cost of the selected office space to the cost of other available properties in the same market area will strengthen your negotiating position and allow you to establish a final lease agreement that is beneficial to your company.

The real estate professional acting as your lease broker will include in the financial analysis each and every cost identified in the lease document as being your responsibility. These will include but may not be limited to:

  • Rent per square foot
  • Useable square feet available
  • Operating expenses charged to the renter
  • Caps on rent or operating expense increases
  • Provisions for reduced rent due to damages or other circumstances
  • Tenant improvement allowances
  • Value of parking
  • Incentives for lease renewal, longer lease term, expanding rented space, or early payment of rent
  • Cost of utilities paid by renter
  • Penalty for early lease termination if necessary
  • Cost of adhering to any applicable county, state and federal regulations
  • Repairs and maintenance required to be paid by renter
  • Common area maintenance, repair, upgrade
  • Charges to renter associated with security and cleaning services defined and selected by the landlord

Computer software applications make accurately calculating and comparing the total cost of rental easy. It does requires trained professionals to understand the complex lease terminology and translate this into accurate dollars and cents to be able to use in making your office space decision. If any areas requiring further negotiation are identified as a result of the financial analysis, you will be prepared with documented reasons for requests in lease changes. The assistance of a commercial office lease broker can save your company thousands of dollars.

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By: James Osgood

Office Relocation , Office Space Negotiations , Tenant Representation

The most Expensive Office Space in the World

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Hong Kong $248.83 per square foot

London - Central (West End): $220.15 per square foot

Tokyo  $186.49 per square foot

Beijing (Jianguomen — central business district): $180.76 per square foot

Moscow: $171.53 per square foot

Beijing (Finance Street): 166.89 per square foot

Hong Kong (West Kowloon district): $158.72 per square foot

São Paulo, Brazil: $144.75 per square foot

New Delhi (Connaught Place — central business district): $140.21 per square foot

London - Central (City): $131.51 per square foot

Midtown Manhattan average only $114.30  per square foot. What a deal!

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London Office Space , Office Rental , Office Space , Office Space Negotiations , Tokyo Office Space

When Disaster Strikes Your Office Space

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When Disaster Hits, You Want to Know What your Commercial Office Lease Outlines

Disasters do happen. Hurricanes, tornadoes, earthquakes, wildfires, mud slides – every building in every location is subject to one or more potential natural disasters. And then there are the disasters that are the fault of man – a truck can drive into your office front, another tenant can cause a fire due to neglect, or faulty workmanship can result in plumbing pipes bursting or any of several other major disasters.

Major disasters are likely to make your commercial office space uninhabitable for a long or short period of time causing major impacts to your cash flow and the lives of your employees. Even a minor disaster can cause your business to be impacted for days at a time. More importantly, who is responsible for fixing what damage in the event of a disaster not caused by you or your employees’ neglect?

The time to learn the answers to these questions is not after the disaster has occurred. You should discuss and review these areas of the lease and negotiate if needed to obtain lease provisions that will protect your business. You’ll also want talk with your insurance agent and go over policy clauses in view of the impacts of disaster on your business.

Rent Abatement:

A common but tricky provision in commercial property leases is rent abatement. This provision states that in the event the property is damaged the landlord will allow the tenant to suspend paying rent until the property is repaired. Some damages covered may include fire, flood, and common natural disasters such as tornado or earthquake, as well as any forced evacuation due to mandate of the city or county government. The landlord’s business liability insurance may provide coverage that will permit the owner to offer rent abatement. Items inside the business are usually covered by the business owner / leasee’s liability or renter insurance.

This all sounds straightforward but problems can arise when landlords include an addendum to the lease’s abatement provision that says if the tenant or tenant’s employee caused the damage, the abatement is nullified and rent must continue to be paid on-time. With this type of addendum, landlords can double-dip by continuing to get rent from you while still collecting from their insurance company.

This portion of a commercial lease requires sitting down with your tenant representative and possibly your attorney. Be sure the lease does not put undue liability on your business.

Insurance Clauses:

Perhaps the least understood points in a commercial lease are the provisions regarding insurance. Often, at least to an extent, the tenant may be self-insured. This fact, when found out the hard way, can be financially bankrupting. The Chairman of the ITRA, Dr. Ronald R. Pollina, explains that corporate tenants should consider these questions when negotiating or reviewing leases:

  • What is your risk exposure in the event of liability or injury?
  • If your leased space can’t be used because of injury, loss of utilities, or casualty, are you still obligated to pay rent?
  • Are you or the landlord responsible for the cost of relocation in the event of a business interruption?

Keep in mind that most leases are designed to protect the landlord from losses. You can expect to carry property damage insurance, liability to third parties, bodily injury, and business interruption insurance.

There are many more insurance considerations and these should be discussed with your tenant representative and insurance agent. Protect your business in as many ways as practical and affordable so you don’t get stuck having to spend money over something that could have been avoided through wise lease negotiations. 

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Office Leasing Tips , Office Space , Office Space Negotiations

Negotiating the Best Commercial Office Lease: The Standard Office Space Lease Agreement

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So you’ve found that perfect commercial office space for your organization, whether a small start-up or huge corporation. You’ve viewed the property and made a clear assessment that all your needs are available at the selected location.

Once you’ve told the commercial office property owner that you want to locate your business in their property, you are likely to be presented with a standard lease package. Do not sign any papers at this point but accept the lease for review. Explain to the landlord that you much go over the lease with care so that you completely understand it.

You specific needs are unique and may require significant lease changes during negations. Here are a few specific points that any tenant should look for in the standard lease package:

·         An accurate description of the commercial office space should be clearly listed in the lease.

·         How much is the rent and exactly when is it due? Are there any late charges if not paid on the correct date?

·         Is there a security deposit and how much is it? Under what conditions is this deposit repaid upon vacating the commercial office space and what conditions permit the landlord to refuse to return the security deposit?

·         What is the lease period and are there provisions to facilitate lease renewal if desired?

·         What are the terms in the lease regarding vacating the premises early? Do you have the right to move into another, larger office space owned by the landlord without penalty? Do you have any rights to rent additional space if your business grows more rapidly than anticipated?

·         Is there a cleaning deposit for preparing the space for the next tenant when you vacate the premises and is this fee returned if you leave the premises in the same condition as upon delivery?

·         Identify verbiage defining how much parking may be used by the tenant and what, if any, number of spaces can be marked as reserved.

·         Review all references to use of common space. You should have the right to enter and egress at any time of day or night and access to all common spaces unless specific restrictions are contained in the lease. Also, watch out for clauses regarding common space upkeep or charges.

·         The lease should clearly state what utilities are the responsibility of the tenant as well as what are paid by the landlord. The same goes for charges for maintenance and repairs for any problems not the result of misuse or neglect on the part of the tenant.

·         Is there are space in the lease or reference to an addendum where notes regarding the condition of the property at delivery may be noted.

·         Is there any defined allowance for tenant improvements?

·         What rights to signage are included in the lease?

·         Does the lease provide for delivery of a punch list after tenant improvements are accomplished?

There are dozens of additional points that will stand out in the lease to you. Some of them may be points you do not understand and you should highlight these for investigation. Other verbiage may not meet your needs. Highlight each portion of the lease that either is unclear, misleading or requires negotiation. These are items that you will need to cover with the help of your leasing team.

In the next article in this series we will determine who the members of your leasing team should be and how to select the best team to ensure the best commercial office lease for your business. 

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By: James Osgood

Office Leasing Tips , Office Rental , Office Space , Office Space Negotiations

Office Lease Checklist - Get it done Right!

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We are pleased to announce that OfficeFinder has just added a new up to date Office Lease Checklist. The checklist was prepared by one of our OfficeFinder tenant representative members who has reviewed hundreds of office leases. The office lease checklist covers the most important items to consider when evaluating a lease agreement. Also available from the office lease checklist page is a professional office lease review service that includes a complete lease review, analysis and recommendations for only $395. The review is intended to provide tenants with the information they need to successfully negotiate with their landlord.

Visit the Office Lease Checklist

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By: James Osgood

Lease Negotiations , Office Leasing Tips , Office Space Design , Office Space Negotiations , Tenant Representation