Are you an SMB about to move into a new office space? You need a comprehensive plan prior to negotiating that lease and your TI Allowance. Here’s some office space leasing advice to take with you as you look for a new space or enter into lease and TI Allowance negotiations.
Don’t Look for the Lowest Rate Per Square Foot
It’s completely understandable that a tenant wants to shop for the best deal. But the best deal isn’t always the lowest cost per square foot. You must always factor in the functionality of the space. Particularly what kind of buildouts will be needed to customize it to your needs. For instance, an 8,000 square-foot-space with an effective layout might be more economical than an 11,000 square-foot-space with a lower cost per square foot that needs more buildouts.
Work With a Specialist When Possible
This may be the absolute best office space leasing advice one could give. Whenever at all possible, work with a commercial broker. A broker that’s knowledgeable of your market can save you thousands over the term of your lease. Brokers know what spaces are coming and going in the market. They know what leases are expiring and when. This will give you an advantage over someone not working with a broker to find a space.
A specialist will also collaborate with you to produce a Comprehensive Request for Proposal (RFP). They will also negotiate to secure you the best possible leasing rate. Brokers understand the various nuances within leasing language and they’re familiar with all legalities, local codes and taxes. It’s good to have one in your corner.
Most of all, hiring a specialist moves the entire process along faster. Landlords appreciate a tenant that’s prepared right the gate. Wasted time kills deals. If you don’t have your act together coming in, don’t be surprised if the space is leased right out from under you.
If Moving, Start Talking to a Broker 6-9 Months Before Lease Expiration
Smaller companies considering a move at the end of their lease should consult a broker about 6 months before their lease expires. Larger companies should start talking to a broker about 9 months prior. This extra time gives them a chance to potentially land a space in a newly constructed building.
Here’s why the above timelines are recommended. Generally speaking, you’ll need at least 30 days to find a space. Another 30 days to negotiate a deal and write-up the lease’s first draft. And then another 30 days for all parties to review and revise where necessary before signing to seal the deal. That’s already 90 days and this is assuming all goes well and there are no delays. If permits and tenant buildouts are needed, you can easily tack on another 30 to 90 days. This is why 6 to 9 months is a good timeline to go with.
Know Who is Paying for What
Tenant Improvements can be covered by either the tenant or landlord. Some landlords prefer handling the improvements themselves. It’s their way of maintaining control over what’s done to their building. That said, there are two things a tenant needs to keep in mind if the landlord is taking care of tenant improvements.
First, most landlords usually tack on oversight fees in the range of 4 to 6 percent. It would be wise for the tenant to ask the landlord to clearly define what’s included in the buildouts with a breakdown of fees.
Second, many landlords or property management companies either have their own construction firm or a favored local contractor they always use. Even if the landlord says they’ll take care of hiring a tenant improvement contractor, always get a quote from another contractor for comparison. This way you’ll know whether or not the quote is in line with other tenant improvement contractors in the area.
Tenants can also review bids themselves and hire their own general contractor. Sometimes a landlord will even give a discount to a tenant that goes this route.
Take as much of this office space leasing advice as you want. No matter what you end up doing, always remember to go into lease negotiations having done your homework. The better prepared you are, the more control you’ll have negotiations.