While an obvious first step in your lease negotiation process is to stipulate in your lease what you as a tenant will pay for versus what your landlord will pay for, sometimes landlords still find backdoor ways to hold you responsible for unforeseen expenses.
For instance, you might put in a lease that a landlord is responsible for repairing the heating and cooling system if it breaks down, but the cost of these repairs might still be passed on to you through high CAM fees. For this particular example, consider a few tips for avoiding the financial burden of repairs, as suggested in the article “Avoid Common Area Maintenance (CAM) Cost Surprises”:
State specifically in the lease that if the heating and cooling system breaks down, the landlord is solely responsible for the cost of maintenance and repair of the system as necessary.
Analyze the whole lease to make sure there is no other mention of you being responsible for heating and cooling costs. Make sure that all of your other provisions and mentions of CAM charges exclude mention of the heating and cooling system.
Review anything in the lease about damage charges to limit the landlord’s potential to blame you for damages to the heating and cooling system caused by your business. Make sure that they have to undertake some sort of disagreement resolution process before charging you for the damage.
Distinguish clearly between regular CAM charges and the cost of any improvements or other major expenditures which the landlord might have to make for a space.
Make sure you carefully review your lease so you are not burdened with surprise costs!
While negotiating a lease might be a complicated and frustrating process, it is important to be diligent throughout the entirety of negotiations—or your business could suffer the negative effects of leasing mistakes in the long term. Here are a few mistakes tenants often make to be aware of as you conduct negotiations, as suggested in the article “10 Leasing Mistakes Office Tenants Make”:
Entering negotiations at the last minute.
Poor space planning or an inaccurate estimate of your business’s space needs.
Looking at costs above all other concerns.
Losing an opportunity by hesitating before signing.
Failing to define objectives before making decisions.
Not taking into consideration potential growth.
Not considering exit strategies in a lease.
Not working with lawyers or real estate agents who can offer objective legal advice.
These pitfalls can be avoided by giving yourself plenty of time to research commercial lease negotiations and to work your way through the process without the pressure of a looming move-out date from your current space. Before you even enter negotiations, take the time to brainstorm your business needs, goals, and budget for a new office space.
If you have found a commercial space that you have decided to lease, your landlord will probably ask you for a security deposit. Here is some information about security deposits that might be useful to you during this stage of the renting process, as explained in the article “Significant Drafting Issues Specific to Commercial Leases”:
What is the purpose of a security deposit?
Security deposits are the landlord’s way of protecting themselves from tenants who default. If the landlord is at all concerned about a tenant’s ability to pay rent, he or she will ask for a security deposit that will be refunded only at the end of the lease term when the client has met all of the lease requirements.
What is the amount of a security deposit?
The amount a landlord asks for varies based on both the size of the space being rented and the credit history of the potential tenant.
What are some issues surrounding security deposits?
During negotiations you will want to clear up several questions about the security deposit: Will there be interest on the deposit? Will it be credited to rental payments over the course of the term, or will it be refunded all at once at the end of the term? Will it be kept in a separate account if interest will accrue? Address all of these things before you sign the lease.
If your landlord does require you to make a security deposit, make sure that you clarify in negotiations all possible issues that may prevent you from eventually receiving this money back.
Whether you need to move up or downsize, there are several different factors to consider before beginning the search for a new office space and making any final decisions. Here are a few steps that can help you make this process go more smoothly, as seen in the article Planning for a New Office Space in the New Year:
Create a Needs List
The first step to take is creating a list of your business’s needs—not wants or wishes, but the things you truly cannot compromise on. This will help you figure out if the type of space you need is even available in the area where you are looking.
One way of managing this process is creating a move team so it is easy to delegate information gathering tasks. Assign a project leader and set important dates and deadlines with the team.
Here are a few key questions to help you determine your space needs:
Do you need a lot of general office space—room for people, desks or equipment?
Do you need a space with plenty of conference rooms for client meetings, presentations, or private conferences?
Is parking a major concern?
Are you downsizing and need to redesign your office layout?
Do you need both an office space and warehouse in the same location?
Consider these steps and questions to help determine what your business needs before you start searching and negotiating!
Once you have found a promising office space for your business, the next step is to calculate the true rental rate. The rent for a commercial office space is always more complicated than a simple monthly rate; it consists of several different factors, and sometimes there are extra expenses that are technically not part of your rent, but must be paid on a regular basis. Here are a few tips for determining the actual cost of your rent.
Determine how the square feet is measured. Commercial space is usually advertised as a cost-per-square-foot basis, versus a descriptive basis (i.e. “the first floor” is available to rent). However, it is important to be aware that just because a space is advertised as “3,000 Square Feet of Office Space” does not necessarily mean that you will occupy and pay for exactly 3,000 square feet. Sometimes landlords take measurements that begin at the exterior of a wall, so you could end up paying for both usable space and wall thickness.
Determine the cost of common areas. In many office buildings, there are parts of a floor that you will share with other tenants, such as hallways, lobbies, elevator shafts, restrooms, and parking lots. These can add up to quite a lot of space, so do not assume there will be no cost associated with the use of these areas.
It is always prudent to not take prices at face value. Do a little digging to make sure that you are really getting all that you are paying for.
Keeping an office space organized is essential to the success of your business. If you are wasting time hunting for the things you need to do your work, that is productive time lost. Here are a few simple tips for keeping your work space in order:
Rearrange your space: If your current configuration requires you to get up and move across the room every time you need to throw something away or file something, in all likelihood your trash and files are going to start to pile up on the floor. Make things easier for yourself by arranging furniture so that things are easily accessible.
Purge: The reality is that unnecessarily junk tends to accumulate over time. Go through your stuff and dispose of things that you no longer need or use, as well as any duplicates. Once you have only your essential items, you will have a better idea of how much space you actually need to organize these things.
Keep frequently used items within reach: Since you are probably working on a computer, white-out is most likely does not need a place of prominence on your desk, nor does your pen holder need to contain twenty different writing tools. Align items on your desk so that the things you know you will use regularly—computer, phone, stapler, a few pens, etc.—are within arm’s length. Supplies that you use less often can be stored in drawers, eliminating some desk clutter.
Taking the time to periodically determine what is essential to your office and where these items should go will keep your workspace at maximum efficiency!
Summer will be ending soon, which means kids dreading heading back to school and running out of fun summer activities. But if you are looking for some fresh events for the family to end the summer on a high note, check out Superhero Weekend at the Kansas City Zoo! Marvel characters will be on hand all weekend to meet and greet with guests as you explore the zoo. Here are some more details on this exciting weekend:
Dates: Saturday, August 3rd – MARVEL’s Spider-Man and MARVEL’s Iron Man Sunday, August 4th – MARVEL’s Captain America and MARVEL’s Thor
Time: 10 a.m. – 3 p.m.
Location: Kansas City Zoo 6800 Zoo Dr Kansas City, MO 64132
If you are negotiating a lease for a new space, one thing you will have to deal with is standard common area maintenance (CAM) fees, as well as administrative CAM fees. Here is some information about standard CAM fees that might be useful as you begin negotiating about them:
CAM fees are the costs associated with maintenance and repair of common areas that have a direct effect on all tenants, such as hallways, stairwells, elevators, lobbies, and restrooms in common areas. Usually parking lot maintenance costs, which include landscaping and lighting, are included in CAM fees, as well as sidewalks.
You should always try to negotiate your CAM fees. Businesses that rent larger spaces have better chances of getting these fees reduced, but it cannot hurt to try no matter how small the space.
If your CAM fees are not up for negotiation, at least include in your lease a provision permitting you to review your landlord’s bills in order to confirm that you are being fairly charged for CAM fees.
Try to negotiate a cap for the percentage that the CAM fees can be increased each year, and list this cap separately from other increases in rent.
CAM fees can be confusing—even for commercial real estate agents—so make sure you know what they are and how they apply to your rental situation so that you can make sure you are not paying more than you should be.
There are several different types of commercial real estate leases, which are used in different contexts and involve different types of rent. These types of commercial leases can be overlapping. The category distinctions are not as important as paying attention to how the rents and other fees are calculated for each type of lease. Here is a list of different types of leases with a little information about each:
Percentage Lease – base rent + percentage of monthly sales. This type of lease is most often used in retail businesses or malls.
Net Lease – in addition to rent, tenants pay part of or all of the insurance, taxes, or maintenance costs. This is often used in any commercial lease, and it usually favors the landlord’s interests.
Double Net Lease – rent + taxes and insurance. This is also most commonly used in any commercial lease and usually favors the interests of the landlord.
Triple Net Lease – rent + taxes, maintenance, AND insurance. This can be used in any commercial lease and typically favors the landlord’s interests.
Fully Serviced Lease (Gross Lease) – landlord pays most or all of the usual costs, which are often passed on to the tenant in their rent in the form of a “Load Factor.”
Be sure to know what kind of lease you are being offered and what that will mean for your rent!
Is your business aiming to move into a new commercial real estate space, but looking for the funding to finance this move? There are many different financial sources companies can turn to in order to acquire the funds necessary to move their business to a new space, so businesses have some research and comparing to do before choosing a lender. Urban Land Institute and PriceWaterhouseCoopers conducted a 2013 Emerging Trends in Real Estate survey to attempt to rank what funding sources might see the most financial growth in 2013. These are the ranking results as determined by the survey:
These rankings represent the anticipated growth in available funding, versus the ranking of different types of funding by available dollars, and remember that these results are based on a nationwide opinion poll, so it is possible that one of the sources might not see growth this coming year. However, if your business is looking for funding sources for your commercial real estate, you might want to look into further research about funding sources like this survey.