Choyce Tips: April 2010: HVAC Solutions/Operating Expenses; A Relocation/Renewal Case Study

(For access to full html version, please click here.) A 10,000+sf client (“client 71”) recently experienced a host of problems with their existing space including an escalation of operating costs, HVAC malfunctions and leaks from the windows and ceiling. Choyce Peterson was brought on board to help them identify and evaluate alternative office locations within a five-mile radius. Relocating seemed virtually certain, but in the end, client 71 renewed. A few aspects of the process we followed were particularly instructive:

Evaluate your space (with the right team): We started with a comprehensive list of questions to jog client 71’s memory and compile every single problem with their current space. 

In order to fully understand what they needed, we identified what they liked and disliked about their current location. In addition to an architect, construction estimator and attorney, who were consulted as necessary to evaluate alternatives, an independent mechanical engineer was retained to address concerns about the existing space.  As we had seen previously, this HVAC consultant, for a relatively small fee shared by the client and the landlord, surpassed his traditional role of identifying corrective action.  He reassured the tenant about the system's future capacity and acted as a trusted voice of authority for both sides. This helped resolve any concerns either party may have had that the other side was exaggerating its perspective to suit a negotiating position.    

Lesson: the right professional makes a difference.

Evaluate Your Lease: The evaluation process included the landlord’s cost management compared to his obligations under the lease. Considerable operating expense increases emerged as well as third-party billings significantly higher than the norm. While the landlord’s right to pass along cost increases was upheld by the language in the lease, a challenge of specific items, on the eve of renewal negotiations, yielded two more benefits.  Client 71 received a 50 percent cash rebate of the prior year’s “additional rent” and, more importantly, he achieved lease language modifications in an extension amendment to simplify the audit process and minimize exposure to additional escalations. 

Lesson: audit the past before you look to the future.

Results:  In addition to the above, problems with the restroom, leaks and reserved parking were all solved during the negotiations process. A staged expansion for future growth was also included in the deal.