Utilize our transaction experience, in-depth market knowledge, and professional negotiating expertise, and allow us to secure the best lease terms and conditions for your business. Most business decision-makers do not have the luxury of devoting substantial portions of their time to a successful relocation. This is another way that we, as your tenant representative can help. We can do the majority of information gathering, while you the decision-makers do just that; make decisions.
Serving as a tenant representative, we assist our clients by working with them to define their space requirements or see what they like or dislike about their current location, identify suitable space alternatives, recommending appropriate occupancy solutions and providing skillful lease negotiations. You can rely on Saul Corral to help you procure the best possible location at the most reasonable terms and conditions. We pay close attention to those details that effect overall occupancy costs including planning for maximum flexibility, parking, tenant improvements, subleasing, and rent escalation clauses.
Following payroll expenses, facilities and related expenses are generally the second highest expenditure for a company. While people are naturally the most important asset to a company, real estate decisions should not be far behind. Too often though, companies fail to see the significance of real estate in the same light.
When it comes to negotiating for commercial space,
there is no question that a good tenant rep will
not only save you money,
but will also make sure you don't make any critical
mistakes.
The impact real estate has goes far beyond the bottom line; it plays an important part in everything from employee retention to the level of productivity and workplace morale. It's for these reasons that companies should always be cognizant when making real estate decisions.
The top mistakes that companies make when leasing space are:
Not Using a Commercial Real Estate Tenant Representative. It is imperative that companies not only understand the market, but have an advocate working on their behalf to both maximize savings and help the company meet its goals. A good tenant representative can provide insight into the market, trends, zoning, demographics, and be a skilled negotiator. It is also important that you use a tenant representative who is focused on commercial real estate; residential brokers often try to dabble in commercial and get in over their heads.
Waiting Too Long to Start The Process. The longer a tenant waits to start the process, the fewer the number of options that will be available to them. Waiting too long can mean that a tenant may pay more, and receive less favorable lease terms, or that they are forced to leave and take less than desirable space elsewhere, and at a higher rate.
Leasing The Wrong Amount of Space. Figuring out how much space to lease is not an exact science. Forecasting involves assumptions, which can often lead to costly mistakes if incorrect. Utilizing a space planner can help; a good rule of thumb for space planning: typical President's Office or Chairman of the Board = 250 to 400 sq. ft., typical Vice President's Office = 150 to 250 sq. ft., typical Executive Office (Executive Secretary, Manager or Administrative Assistant) = 100 to 150 sq. ft., Partitioned Open Space (Clerical Manager or Supervisor) = 50 to 100 sq. ft., Open Space (Secretary or Clerk space) = 50 to 100 sq. ft., Conference Rooms = Allow minimum of 15 sq. ft. per person for theater style or classroom seating, allow 30 to 35 sq. ft. per person for conventional conference seating, Workroom = Approximately 8 to 9 ft. in width (then length depends upon the number of people working in the room and the amount of mail activity.), Reception Room = Including Receptionist and seating for 2-4 people, 150-250 sq. ft., Including Receptionist and seating for 6-8 people, 250-350 sq. ft., File Room = Allow for approximately 7 sq. ft. per filing cabinet. Suggested aisle width varies from 3' to 4'. Minimum is 2'8", and electronic storage is also a viable cost and space saving option. With that information in hand, companies should then go one step further and think about the impact certain business scenarios would have on that number, the likelihood of those events happening, and adjusting the number so as to minimize the likelihood of taking too much or too little space.
Picking the Wrong Location. What may seem like the right location might in fact not be. Companies should consider things such as access, public transportation, future construction, demographics, zoning laws, and other factors to help identify the right location for their business.
Not Thinking About The Future. Aligning a real estate plan with a corporate business plan is difficult to do when milestone events and setbacks do not always go according to plan. To help deal with the "unknown", negotiating leases which provide both expansion and contraction rights to the extent possible is therefore instrumental. Companies need to go beyond the simple lease and think about sublease rights, expansion rights, rights to cancel, parking availability, and options to extend.
Not Measuring The Space. Companies should strongly consider verifying the landlord's square footage numbers. In larger transactions, even a small difference can translate into a large savings. If it is not possible to measure the space, tenants should at least try to negotiate a tolerance in the measurement. Generally though, and per BOMA-SIOR Standard Methods for Measuring Floor Area in Industrial Buildings and the BOMA International codes and standards, a variance of up to 2% is acceptable. The BOMA Standard allows for this discrepancy by provision of a 2% variance when comparing site measurements. That is, if 2 sets of calculations are within 2% of each other, they are deemed to be equal according to BOMA. If they differ by more than 2%, BOMA International recommends the opinion of an unbiased third party be sought to assist in resolving the matter. The Standard also makes note of another important fact: it is not uncommon for an area calculated from the building's design plans to differ from the area measured on site. That is, for an accurate representation of a building's area, an as-built plan is required.
Signing Too Long or Too Short of a Lease. Companies often think that by signing a short lease they are buying themselves flexibility. That may be true in many cases, but that flexibility often comes at a price. On the flip side, tenant's may feel a long term lease provides maximum stability, and your current lease rates may be at market, however, if vacancy is on the rise or is forecasted to be 8% or higher the next year or so, rental rates will decrease while you are stuck paying rental rates when vacancy was below 4%. The best rates are where the vacancy is at the highest, however, the market is ever-changing. It's therefore imperative to higher a Tenant Representative to analyze the market for you, and for companies take a long-term approach to real estate, while keeping short term trends and business activities in focus.
Not Verifying Building Systems and Infrastructure. In today's environment, data, power, networking, and HVAC capacity and availability are crucial. Tenants should ensure that buildings they intend on occupying are capable of providing the network connectivity, enough electricity and power, and other building systems necessary for a tenant's operation before signing any lease. Another expense to consider is after-hours HVAC costs. Tenants with small space needs who require HVAC after normal business hours should closely evaluate relocating to an office building offering small HVAC package units or supplementary systems rather than moving to a large office building that needs to operate the building's entire system to accommodate a partial-floor user. The cost of after-hour usage can vary substantially, ranging from $10 per hour in small buildings to $400 per hour or more in large office complexes.
Not Having Your Insurance Carrier Review the Lease Language. Tenants should always have their insurance carrier review the language within a lease that pertains to insurance and subrogation to verify that the insurance is not only attainable, but attainable at a reasonable cost. It is strongly recommended that the actual lease or lease language be sent to your insurance carrier for review before any lease is signed.
Not Retaining Legal Counsel. By using an attorney well versed in the documenting of a real estate transaction, companies can help avoid ambiguity and errors which could lead to expensive litigation or legal wrangling down the road. Although commercial real estate agents and tenant representatives are not lawyers and should not lawyers and should not attempt to carry out legal consultation, they can evaluate the lease document's function in normal and customary market situations. The need for this evaluation may arise when institutional landlords use the same lease throughout the country without taking into account regional differences. Most of these institutional leases are biased in favor of the landlords, but the most unfavorable clauses will often be deleted if brokers challenge them during negotiations.
These are by no means the only top mistakes a tenant can make when leasing space. Instead, it is meant to outline some of the most common mistakes tenants can make, and also what can be done to help avoid them. A good tenant representative can help guide you through the leasing process. The Landlord has already negotiated the commission rate his going to pay with Listing Agent, and it is customary to split that commission with the Tenant Representative, whether you have one representing you or not.
Our tenant services also include lease renewal negotiations, analyzing consolidation, expansion and relocation options, and conducting lease-versus-own analyses.
We have leasing experience with all types of properties.
See our client success stories to read what our clients have to say.
It's usually a good idea to purchase a property when you know you will remain in a location for ten years or more. In most cases, for some areas, it is actually cheaper to own than it is to lease. For instance, if you are paying over $10.00 per sq. ft. for industrial or office space in Chantilly or Prince William County, it is cheaper for you to own. When you do decide to purchase, the invested equity, debt service and tax benefits to you the owner can make owning more advantageous than leasing. It is really a matter of cost. You need to understand the costs associated with buying a facility and compare that to the costs associated with leasing similar space. In most cases, at the end of your lease, you have to return the property in the condition you first leased it, or at the very least, you will lose the monies invested in those improvements, however, with commercial property values rising 4 to 7% per year (looking at the tax record for the last eight years should give you that average if not higher), and in ten years, what would leave you in a better position, owning or renting. If your business does not make it, you will have at least earned some equity in your building, and with the land availability that is always shrinking the DC Metro area, and with commercial property values rising, it may be a good time to sit down and talk with us, so we can discuss some possible options and get you connected with some good commercial loan officers, contact Saul Corral today.
Specialized industries that have heavy and unique infrastructure requirements such as manufacturing are generally better off buying their space. If you have to spend a lot of money to outfit a building to meet your needs, you want to own those improvements. Outside storage and heavy industrial land is also in short supply and is always in demand, although a landlord may offer you a good rental rate, as long as it pays for itself, it's a good long term investment for the Landlord. You could possibly turn those rent payments into mortgage payments.
We are here to help you, we are honest and hardworking commercial real estate professionals with a lot experience, and are well adept at performing lease vs. purchase cost analysis that will help you make an informed decision on your next acquisition and help you build or secure wealth.
For additional information on our Tenant Representation services or to further evaluate the buying vs. leasing advantages and disadvantages, please contact:
Saul Corral
Licenced in Virginia, Maryland, and Washington
DC
703-675-7278
Saul@PotomacCP.com
