In most commercial leases, a tenant will pay a penalty for failure to vacate the premises in a timely fashion at the end of the lease term. Said penalties are often stated as 1.5-2.0 times the rent. Tenants may opt to negotiate this number down to a more acceptable amount if/when reasonable circumstances arise to hinder a prompt departure.
As we are near the end of another year, area companies with leases expiring in 2022, 2023, and some in 2024 will benefit from excellent opportunities in today’s commercial real estate market. Negotiated net rental rates (when free rent is factored in) continue to hover around 15-to-30 percent below the asking rent depending on the town, building, landlord and condition of the space.
Square footage represents the crux of any real estate transaction. It determines the total rent and thus the amount of your payments for the entire term of the lease. As such, a broad familiarity with square footage measurements in general, and specifically your company’s needs, represents a foundational step in the relocation and renewal process. Surprisingly, square footage can become a very fungible number, both due to the way the measurement is calculated, and the variability of your office space needs.
Experienced tenant brokers deliver the most advantageous transactions to their clients including many benefits based on exclusive representation and unavailable to businesses “going it alone.”
First, determine how your proposed layout will differ from a typical layout and whether or not your improvements would be favored by other tenants. The more your proposed changes differ from the norm, the more they will be considered a special-purpose build-out and decrease your negotiating leverage.
When landlords pay for modifications to their existing or new tenants’ space, they will charge a higher rent than if a tenant takes the space in its “as is” condition. Unfortunately, for a tenant trying to assess a fair rent to pay based on certain alterations, the impact on the rent is more complicated than, for instance, the amortization of a loan.
With the volatility of our economy during the past few years, many companies have resorted to a cost-cutting mode, often including downsizing their office space. There are assorted options to explore when looking for smaller space. Before moving forward in any direction, speak to your broker in advance of your lease expiration date: Depending on your size and situation this could be 9-36 months prior to your lease expiration.
Effective project management can save a firm money and design time when considering office space options. Experienced project partners can represent their client’s best interests at every step of the process. One key person orchestrates all members of the project team including the architect and designers, general contractor, engineer, telecommunications specialist and others, from IT and audio-visual technicians to signage and art consultants. Without clear direction and coordination, delays can occur, and that translates to wasted time and money.
A dramatic shift is transforming office space design. Office size based on title and sitting at a desk from 9-to-5 have become obsolete. Some of the latest trends are listed below:Redistribution: Office space was traditionally assigned based on seniority in the company. Today, many companies are providing space based on need: executives are sacrificing
In the large majority of cases, when a tenant pays a flat charge per square foot for “tenant electric,” it serves as a profit center for the landlord. In Fairfield County and Westchester counties, landlords charge from $2.50 to $3.00 per square foot per annum in addition to the base rent. For tenants leasing 4,000 square feet or more, we recommend installing a meter on the premises, as it measures actual consumption, typically from $.90 -$1.50 per square foot. The cost to install a meter, about $3,000 to $5,000, can often be negotiated as part of the tenant improvement allowance provided by a landlord.
When signing a lease, you become remarkably familiar with the contents of the document as you tweak details and negotiate for major and minor concessions. However, once it is signed, filtering through a dense, fifty-page document is cumbersome when making a site-related decision. What you need at this point is a lease abstract.
Whether relocating your office or renewing the lease at your current location, you should be making a well-researched, informed decision. Every aspect of this decision should be analyzed beforehand including the impact of a move on your employees, especially their commute. Companies must attract and retain valuable employees to survive. Consider the positive or negative impact an office move will have from an employee’s perspective.
While a default clause in a lease can address simple topics such as failure to pay rent or maintain the space in a clean manner, more often, it addresses issues such as illegal use, declaring bankruptcy, vacating the premises and more.
It is imperative for tenants to evaluate moving costs when considering office space relocation. Some expenses, such as the cost of the physical move and IT set-up are obvious line items in a budget. However, many less apparent expenses present themselves throughout the transition process. Over the years we have seen items consistently causing companies to underestimate their moving budgets.
While the ongoing COVID-19 Pandemic has proven trying for many retail establishments, many businesses in Westport, CT are finding new opportunities amidst the crisis. With retail vacancies increasing over the course of the pandemic and retail rents decreasing, many new shops, restaurants and bars are taking advantage either with a “flight to quality” by relocating to high traffic, high pedestrian locations or opening brand-new businesses in these desirable destinations. This surge is centered on the city’s historic downtown area, with many of the new establishments cropping up along major thorough-fares like Main Street and Post Road East.
The following describes lease types widely used in office real estate and should be studied by companies looking to renew or relocate.
Architects can play a vital role during commercial real estate searches and renewals. In conjunction with real estate lawyers and brokers, they represent an essential part of any negotiating team.
Markets change; building conditions change; even your landlord may have changed since you last signed your lease. These changes might provide a window of opportunity for you. For example, during lease renewal, you could potentially eliminate archaic requirements such as restoring the space to its original condition upon lease termination, or a large security deposit
4. More dollars at stake - The way you handle your lease renewal is critical. Keep in mind, real estate is your company’s second or third largest expense and its significant impact on your bottom line can’t be overstated.. In this economic climate, landlords are providing free rent, lower base rent and tenant improvement dollars to renewing tenants who know how much to ask for, and how to ask for it, based on market conditions specific to their geographic area.
One of the most common mistakes we see office tenants make is negotiating a lease renewal on their own. In doing so they miss a huge opportunity and lose truckloads of money. While more than 90 percent of companies looking for 5,000 square feet or more rely on the expertise of a real estate professional to find and negotiate a new-space lease, these same companies abandon this tried-and-true approach when renewing.
Landlords and commercial real estate sellers have plenty of competi- tion in today’s retail and office market. The work-from-home move- ment’s impact on office space and the one-two punch of online retailing and COIV-19 impact on retail space have left many owners swapping tenant signage for “For Lease/Sale” signage.
An office space search provides the opportunity to relocate to a new building or complex with an abundance of amenities including large indoor and outdoor common/gathering areas, an on-site conference room, fitness center, child day care, concierge, shuttle to train, covered and reserved parking, storage space, and even boat slips. The current economy, high vacancy rate and abundance of furnished sublease space gives area companies an option to upgrade to a luxury location packed with amenities.
Great credit is widely considered the best way for a prospective tenant to go to the front of the line for competitive spaces. Security deposits can vary widely from three – twelve months and without strong financial credit, a landlord may even require a personal guarantee depending on the cost to modify a space. On the other hand, some landlords simply choose to pass on making a deal with a tenant who has poor credit.
The cost of tenant improvements assumed by the landlord, as well as the level of customization, determine the amount a landlord will amortize over the lease term. Thus, for any lease shorter than five years tenant alterations can inordinately burden the rental rate.
The ability to negotiate with a landlord and substantially discount their asking rent depends on a few key factors. Take away from this blog series what is applicable to you and your company in terms of space and other considerations. Our intention is to provide know-how and strategies to implement when making decisions and negotiating your transaction.
Too often, tenants pay attention to rental rates without considering the total amount of square footage leased. Don’t make this common mistake!
As a reminder, the following information pertains to transactions with a term of at least five years. All standard build-out items should be paid for by the landlord. First, determine how your proposed layout will differ from a typical one and whether your improvements would be utilized by other tenants after you vacate the space in the future. The more they differ from the norm, the more they will be considered a special-purpose build-out and decrease your negotiating leverage for the landlord to pay for them.
First, let us point out that due to the lack of new buildings in the Fairfield and Westchester county office market, almost all available space is second or third generation (meaning one or more tenants previously occupied it).
A tenant’s prerogative to sublease surplus space creates an ongoing opportunity to “right size” its operations and reduce costs. As such, it is surprising how many commercial tenants blithely accept lease clauses restricting their rights in this critical area.
Relocation to another building is one thing, but what about relocation in the same building or complex — when the landlord asserts a unilateral right to relocate you. It happens! Landlords use this process when they need to accommodate a large tenant.
Certain “events” may constitute a default of your lease. As a tenant, you should expect these clauses to cover financial distress and avoid any impact when your company is perfectly healthy. For example, when you move out for a more spacious area next door and are trying to sublease your old office, it should not be defined as abandonment as long as you continue to pay rent.
Despite some flickering signs of growth, today’s Fairfield County office market continues to have a high vacancy rate. Many submarkets such as Norwalk and Stamford have been affected due to decreased demand. As a result, there are a slew of properties available at rental rates 15-30% lower than they were two years ago. This includes direct space as well as subleases at greatly reduced rents, with furniture included!
Tenants just evaluating the rental rate when comparing building A ($22/sf) to building B ($20/sf) may be making an error much more costly than a 10% discount. We recommend determining the size of your office as the first step in a renewal or relocation process.
What is medtail and why are we writing about it? Honestly, when we first saw this word in writing, we had to Google it. This new buzzword refers to a medical or healthcare tenant occupying space in what has traditionally been a retail environment. If you pay close attention, there’s a good chance you’ve seen these new alternative ‘stores’ pop up in your local shopping center. Over the past few years, Healthcare clinics have been opening in strip malls across the country, but the COVID pandemic has kicked things into overdrive, bringing this emergent trend front and center.
If one were looking only at the key commercial real estate metrics in Fairfield, one would not see anything unusual, like the effects of a global pandemic, taking place. Vacancy (5.1%) is at a 5 year high, but still well below the average rate of 6.6% which prevailed for the four years ending in the middle of 2014. Meanwhile, Westport’s vacancy rate is the highest it’s been in almost 15 years.
Important changes and improvements can raise the value of your building/space. The residential market tends to stress the below points in selling homes but many of their positioning/staging ideas are often overlooked by commercial owners/landlords. Below are suggestions to make sure that the building/space you are selling/leasing is going to present in the best way to a potential buyer/tenant.
Will the development of “affordable housing” boost the local economy by bringing more employees and consumers to the local market? Will it increase traffic or overburden infrastructure in other ways?
Does your landlord view you as a gnat or 800-pound gorilla? Knowing the answer to that question can greatly affect your ability to negotiate terms in your new or renewed commercial lease. Of course, a gnat to one landlord may be a gorilla to another
It may be somewhat of a cliché, but you need to consider the end before the beginning. Before you sign on to a new commercial lease, you should establish a viable exit strategy. Office space undergoes significant wear and tear, especially for long-term leases.
Tenants looking for office space will occasionally consider a sublease rather than a direct deal with the landlord. Subleases can be very favorable for tenants, as they often include furniture, and even phone systems, free rent and rental rates lower than a standard lease.
With late October seeing record numbers of daily new cases of COVID-19, it is probably too early to tell how the pandemic will play out and what its impact will be on local economies.
Landlords require security deposits to protect themselves from losing upfront costs and renovation expenses in the event of default by a tenant.
Many owners cringe at the thought of the taxes they will have to pay when selling their property. Fortunately, if you are reinvesting in real estate, you often can delay payment of (and sometimes avoid) those taxes.
Tenants who consider buying out of their existing office lease usually do so for three main reasons:
Events of the last two years are allowing Westport to make decisions about its housing stock independent of existing state and municipal regulations. In March 2019, the state awarded Westport a four-year moratorium on 8-30g applications.
In the final video of our five video series you will be able to see a full market overview along with all of the towns featured. It is a good opportunity to compare and contrast various options in different towns
The fourth of five videos, this one focusing on Norwalk. If you’ve seen the recent Westport, Stamford or Greenwich market video please scroll to 1:53 of this video for the Norwalk portion
Most tenants understand the impact of office rent on the bottom line and try to reduce it, most often by negotiation. However, they frequently neglect free rent, a common concession in the current real estate market.
The third of five videos, this one focusing on Greenwich. If you’ve seen the recent Westport and/or Stamford market video please scroll to 1:53 of this video for the Greenwich portion.
The second of five videos, this one focusing on Stamford. If you’ve seen the recent Westport market video please scroll to 1:53 of this video for the Stamford portion. For more information on Choyce Peterson and what we offer you as a tenant click here: https://lnkd.in/e4uUXqa