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Important Questions to Ask before You Lease Office Space

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Choosing to lease office space for lease is a big decision. The entire process can be quite confusing and it is easy to get a less-than-perfect office space deal if you don’t know what questions to ask and what certain terms mean to your bottom line.

What does $XX.XX/SF mean when stated in a lease or advertisement for office space? The cost stated usually refers to the yearly lease cost per square foot. An example would be 1,000SF of office space quoted at $10.00/SF would mean a rate of $10,000 per year or $833.33 per month. Although, in some markets it is based ont eh monthly cost. Make sure you know!

What does Rentable Square Feet mean to me? The term rentable square feet refers to the total square feet of office space used to calculate the rental rate. It may include an apportionment for the lobby, halls, and other common areas in the building that are available to you to use along with all the other building tenants.

What does Useable Square Feet mean? This is the total square footage inside the walls of the specific office space you are considering leasing; the acutula square footage you get to use. It refers to that area that is for the sole use of the tenant and does not include any sort of common area. Basically, this is the amount of office space, expressed in square feet, that you will be leasing as private office space in which you can conduct your business.

I was presented a lease that has the term “CAM charges” in it. What does this mean? The acronym CAM stands for Common Area Maintenance and CAM charges refer to the cost of services and charges to maintain common areas, including any parking areas owned by the building owner. This can include landscape services, common area lighting, parking lot maintenance, cleaning service for common areas, or even snowplowing if that is needed. The actual expenses are shared by all tenants and are quoted as CAM charges. This is calculated as $XX.XX/SF with the SF being equal to the rentable square footage of the leased area.  These charges are usually paid monthly based on the estimated yearly cost. At year end, the actual CAM charges are calculated and any refund or additional payment is settled with the tenants.

What is NNN when appearing in a lease rate? The term “NNN” refers to any additional actual expense items incurred by the building that are split between all tenants. This may include insurance, property taxes, or CAM if CAM is not included separately. It may be called “Additional Rent” rather than NNN. Be sure to ask exactly what is included in the NNN because it can differ from landlord to landlord. It probably will not include any utility costs except that used by the common areas.

How utility costs are calculated and are they included in the rent? In some smaller office spaces, the cost of utilities may not be calculated separately but in larger spaces, the tenant often has to establish their own separately metered utilities. In some cases, the landlord has all unities metered and the tenant is billed for a share of the total utilities based on the size of their office space.  Be sure to inquire about how utilities are billed and exactly what you are responsible for paying.

What does Gross Rent mean? The term Gross Rent means the landlord is paying all expenses outlined as NNN expenses and the tenant only pays the Gross Rental amount stated in the lease. The utilities may or may not be included in Gross Rent, so be sure to ask.

Can I get a short lease to try out the office space? Most landlords offering leases on commercial office space will not consider less than a one year lease. Some require two or three year leases as a minimum. In general, the longer the lease, the more valuable it is to the landlord and the easier it will be to negotiate what you want.  Don’t plan on less than a one year lease.

I love the office space I found but there are a few things in the layout that need to be changed. How does this work?  The layout of an office space varies from building to building and seldom do you find the perfect lay out. The landlord is likely to be reluctant to spend money on a tenant requested change. It is traditional that new paint, carpet cleaning, and general area maintenance be performed by the landlord. In some cases tenant improvements can be negotiated at the landlord’s expense, often on the longer term leases. In other cases the tenant may negotiate the right to alter the layout at the tenant’s expenses. 

Your best bet is to use ther services of an Office Space Tenant Represenative who will help you through the maze at NO Cost to you, making sure you avoid costly mistakes.

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By: James Osgood

Lease Negotiations , Office Rental , Office Space , Office Space Negotiations

Video: 3 Biggest Mistakes Office Tenants Make When Looking for Office Space

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Check out our newest video presentation of the 3 biggest mistakes tenants make when looking for office space.

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Miami Office Space , Office Leasing Tips , Office Space Negotiations , Tenant Representation , Video

Keep Your Office Space Healthy

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One of the normal New Year's resolution everyone makes has to do with their health; lose weight, stop smoking, exercise more and a whole slew of others. How about one for making sure your office environment is healthy?

Making certain your office space is healthy is important to productivity and well being of everyone working in the space. If you are planning to move into a new office space, check for health hazards when selecting a location. Check your present office space to be certain it is a healthy work place.

If you notice a reduction in productivity and increased sickness without any clear explanation, this is a sure sign that you need to carefully check you office workspace for hazards that can be corrected, preventing continuing problems. Perhaps you notice that you seem to be getting “bug” more often than in the past. These are signals which require action to correct.

Here are a few of things to check to be sure your office space is healthy:

Lighting: An office space needs the correct lighting. If employees work in poor lighting, the eyestrain can cause chronic headaches as well as mistakes in work due to inability to read clearly. Lighting that causes eye stress can make you feel tired more quickly and reduce production.

Ergonomic Office Furnishings and Training: You and your colleagues may spend many hours sitting in desk chairs and working at desks. Choosing desk chairs and computer workstations that are ergonomically designed can prevent back problems, repetitive motion problems such as carpal tunnel syndrome. Working at a computer keyboard that is either too high or too low stresses the shoulder and upper back muscles which can, over a long period of time, cause damage to the body which can result in lifelong chronic pain or require surgery. Employees should attend a class or presentation that presents the best use of ergonomics such as sitting up straight, taking breaks periodically, adjusting chairs to best fit the body.

Clean Environment: Old buildings that have had poor maintenance have proven to develop sick building syndrome that causes frequent illness in humans. Air vents and ductwork should be professionally cleaned every few years to ensure there is no mold. Break rooms or kitchen areas should be kept clean to present illness transfer. Employees should be provided with antibacterial soap and hand wipes in the bathrooms and encourages the use of these items.

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Office Space , Office Space Design , Office Space Negotiations

What does a Tenant Rep do?

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The following is from our OfficeFinder LinkedIn group discussion on the most importnat activities Tenant Reps provide their clients on addition to just finding space:

boston tenant repI believe the top Time & Money saving services that we provide to clients all revolve around the Transfer of Specialized Knowledge to the client, so that they may make the most informed decision. Up to date market information, understanding the players involved, defining and executing the process required for a successful outcome and most importantly, proactive advocacy, each individually represents significant savings for a client.
Mike in Boston

 

Tenant RepAvoiding mistakes is another important aspect of why tenant representation is so important for office tenants. We do this every day, just like the landlords and listing agents. Tenants only search and negotiate for office space every few years. Landlords and listing agents love to see tenants coming unrepresented. It makes their business much more profitable than when a tenant is represented by experienced and knowledgeable tenant reps...like the ones we have at OfficeFinder!
Jim - OfficeFinder Founder

 

St louis Tenant Rep We provide lease digests and early reminders of important dates i.e. rights and renewal options. We also place these dates on an earlier call up internally so that we remind the tenant that they need to be addressing their real estate needs, even if their intent is to renew. We also assist with renewals. In today’s market the lease signed five years ago is most likely far above today’s market rates.

A 10% discount off of today's asking rate may sound good however, the market may be giving a 25% discount. Only through the use of their own broker can a tenant gain an accurate opinion of today’s market.

Any business who leases office, retail or industrial space expiring within the next 6 to 18 months should be talking with a broker to represent their interests. This not only pertains to renewals subject to negotiation but also pre-stated rent renewals. This is also a good time to negotiate terms and conditions not included in the original lease.

We have a good system in place and when started at the right time in the renewal process, we have been successful in leveraging our position, procuring rent reductions and changes in other terms beneficial to the tenant. We've also been able to facilitate early renewals where the tenant benefits from the negotiated terms and conditions sooner than later.

Lynn in St Louis

Orange county Office Tenant repThere is no question as a tenant representative we can all save our clients real money in the transaction and "time" money by not only doing things they would have to do but also the fact we know what to look for in the first place.

We might want to consider the money we can save clients by handling non-transactional issues after the lease is signed. Two examples: 1) client is a 501C-3 teaching museum- eligible for property tax relief. Worked with county and LL-client received over $100K in refunds over 12 years. 2)Client located in Enterprise Zone. Another client/accounting firm specializes in that area of tax. Put them together...anticipate over $500K in saving over next 6 years. There's a lot more we can do than just focus on the transaction. Just my $.02 :)
Jerry in Orange County, Ca

Office Leasing Tips , Office Space Negotiations , Tenant Representation

Third Biggest Mistake Made By Tenants

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Failure to understand all the office leasing costs

There are more costs involved in leasing office space than just the rent.  Many of these costs are quoted in different fashions so it can all get quite complicated when comparing alternatives. It becomes difficult to compare proposals on an apple-to-apples basis. In fact, it can even become difficult for an inexperienced tenant representative to decipher the various costs involved in comparing different office space alternatives.

First of all, there are different lease types including full service, gross, semi-gross, net, triple net and other variations which specify which, if any, expenses the tenant pays.

How about the base year for operating expense pass throughs? This is the base year amount of operating expenses that your additional costs are based on. If you don’t pay attention or don’t know you could find yourself liable to pay for increases over a base year that could be 5 year old and cost you several dollars per square foot right off the bat. What if the building is only 25% occupied? Who will pay for the operating expenses on the vacant space? What is the norm for your market?

If your lease is a triple net lease are the expenses in line with what could be considered normal in your market or are they somehow higher due to extra landlord fees?

There are also different levels of tenant improvements which can be included in the lease. Landlords will very often offer a per square foot allowance for tenant improvements. Is this on the net rentable space or usable area or is it from shell condition or below the ceiling?

Another big one could be the load factor in calculating useable vs. rentable space measurement. It is the percentage of space on a floor that is not usable plus a pro-rata share of the building common area, expressed as a percent of Usable Area. It is also known as the Common Area Factor or the Loss Factor. A Typical load factor range is 10% to 18%. Some inefficient buildings can have load factors as high as 25% or more. Once again, what is the norm in your market?

The answers to these questions can make a significant difference in the overall cost of renting office space. Which is why making mistake number one in this series can be so damaging. Understanding all of the leasing costs and being able to communicate that information to you is an important part of what a tenant representative does. It can save you thousands of dollars in avoiding mistakes. Tenant representatives provide many more services to their clients and there is no cost to you in engaging their services. It costs you nothing, but can save you thousands.

Biggest Mistake Made By Tenants
Second Biggest Mistake Made By Tenants

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