FISCHBACH TENANT REPRESENTATION

Five Items to Include in Your Lease to help You Get Out of It

Leases are made to be binding. To get out of one requires planning and forethought. Here are some items you can add to your lease that might make you very happy one day.

1. Make an upfront arrangement with your landlord that you will repay the unamortized portion of any improvements that she may have made to the property on your behalf. The amortization^? schedule must be plainly defined by the lease. This arrangement may also require a few months rent to give the landlord income while she seeks another tenant. Getting out of a lease this way is going to cost you some money, but you will know how much and can weigh your options. And it should get you out for a lot less than paying off the balance or the lease.

2. This item should be a no-brainer. Take more or different space with the same landlord and you are free of the current lease. Spell out the circumstances in the lease.

3. Say your business grows faster than expected and you become desperate for more space. Smart leases specify that if the landlord cannot provide the space, you may leave.

4. If certain competitors move into the property, some leases give you the option to break the lease. This is a fairly common arrangement between attorneys and landlords.

5. The title of the building changes. If your business is AAA Stocks and Bonds and the building is renamed, "Goldman Sachs Towers," you might want to move. Have a clause in your lease that allows you to do it.

These stipulations may seem simple, but can be the source of great joy to forward thinking tenants. Alas, the opposite is usually the case.

We are used to seeing office space rents and availability trend with supply and demand. After a period of decreased demand such as the one that we are now experiencing, we expect to see a renewal of office building to accommodate the economic recovery.

Don't count on it.

Some professionals are estimating that we have all the office space we need for a decade and a half. Why?

Technology

More and more companies are organizing their workforces electronically, letting more workers work from home (or their local Starbucks for that matter). Bank America, for one, estimates that about 40 percent of its non-customer-facing employees work from home.

Additionally, storage requirements aren't nearly what they were a decade ago. Most paper can now be stored electronically and backed up redundantly with dozens of systems that cost a fraction of physical storage. Why do I need that file room? And that ugly filing cabinet?

Furthermore, the trend to remote officing is very popular. Younger people are completely comfortable with technology. They value the flexibility that telecommuting brings. They aspire more to a richer family life than spending time commuting or sporting a corner office.

And teams might want to work at night or over the weekend. Tenants will increasingly need climate control 24/7, placing further demands on buildings designed for 40-hour weeks, and further making rented space more productive. 

Plus data retrieval is a snap. Law offices devote a third of the space to research materials than they did a decade ago, and the trend will continue.

Tenants are doing more with less.

Tips for office tenants

Before you sign any lease, your number one job is comprehensive space planning^? with the goal of doing more with less.

• Consider creating large open common areas where teams can gather for important face-time collaboration. One team meets, disperses and another team fills the space.
• Strive to get your teams 24/7 access, even if you don't need it now.
• Make sure your electronics can be placed safely and properly cooled.
• Learn about online storage and collaboration (cloud) services.
• And I'll say it again: make space planning a priority.

Lawyers and landlords are working hard to make a lease agreement as complicated as the Internal Revenue tax code.

For example two landlords offer commercial space for an annual rate of $20 a square foot. Landlord X bills his new tenant for $1666 per month for rent.^? Landlord Z bills YOU $2000 per month.

All for the same 1000 sq. ft. at $20 per foot

How does Landlord Z get away with this?

Usable space

You think you need 1000 sq ft to effectively manage your business. You want to rent 1000 sq ft. This is usable space. Space that satisfies the needs of your business to operate and grow.

Rentable space

In addition, the landlord has other space that is not primary to your needs, but definitely necessary. This space might include corridors, bathrooms, lobbies, landscaped approaches. However, sometimes landlords take liberties. Some even bill for city sidewalk space. There are lots creative addon space concepts. You get the idea.

So the Landlord Z is billing you for rentable space, which in this case is 25% more than the tenant's usable space. And landlord Z is perfectly within his rights to do that.

You're thinking, "that's just not right." And it's not if you sign a lease containing addons that you are not aware of.

What to do?

The first task in clarifying the usable/rentable maze is to figure out exactly how much usable space you need, now and in the future. Then you have a benchmark base figure to work with when the landlord quotes you his rate and addons. And a way to compare them to the competition.

The best way to be sure about your space needs is to sit down with an expert and discuss in detail the day-to-day flow of your business. Fischbach Tenant Representation provides space evaluation services through Tang Studios, a Tampa Bay architectural firm. Most often this cost is born by the tenant representative^?'s commission, essentially free to the prospective tenant.

Knowing precisely what your space needs are provides a firm base to begin negotiations with the future landlord.

Large class^? A buildings tend to stay firm on their addon costs as spelled out in the rent. These landlords' negotiating concssions will probably be in the form of constructions allowances and free sign-up bonus rent and the like.

The addons will eventually appear in your rent bill. But believe me, it's a lot better if you've thoroughly veted the issue, know it's coming and have done everything you can to mitigate the consequences.

Using a tenant representative^? and office space rep like myself is a win/win. Well not exactly. In a typical game the tenant wins in at least four ways while the landlord wins in one.

Planning
Failure to quantify space needs is the most expensive mistake that tenants make. This is a very important point that a tenant rep can score for you.

What are the prospects for growth? What are storage and circulation^? needs? What sort of arrangement of personnel makes your business culture hum along most productively? Will there be lots of off-hours use of the space?

To implement this important task, I recently added Cornell-educated architect Tang Fang to our team. She is especially good with space utilization and as an integral and free part of our service; we now routinely program a client's current and future space requirements. Then, by planning in each property prospect, Tang and I can accurately verify and recommend which property works best.

Exclusive Representation
Unlike most so-called tenant reps, I provide you with exclusive representation. My firm does not work for landlords. My incentive is to show you situations that benefit you the most. I have no other commitment.

Commercial leasing expertise
When a landlord presents you with a 40+ page lease agreement, believe me, it was not written with your best interests at heart. I've experienced 100s of leases in my career and can come up with many advantageous changes that you and your lawyer should look at and act upon.

Save money
It's still a tenants' market and landlords are offering incentives, what I call "concessions baskets" to attract good tenants. Author Michael DiMasi in a recent article in the Tampa Bay Business Journal said: 

To fill empty space, many landlords are offering incentives that go beyond cutting the lease rate. Free rent^?, whether for one month or more, has become increasingly common.

Another example is a more generous allowance^? for tenant improvements. Landlords pay for improvements to get space ready for tenants up to a certain amount, say $10 per square foot. If the cost exceeds the allowance, the burden falls on the tenant to pay the difference.

By offering a bigger allowance, the landlord is shouldering more of the up-front cost.

I'm in the commercial leasing market day in and day out. I know what space is worth and so does your new landlord. I also know the size and shape of landlords' "concession baskets," those creative bundles of goodies like free-rent months and landlord property improvements that lower your occupancy cost^?. I know where to look and what to ask for. You will save money.

What about the landlord?
So you are wondering what's in it for the landlord? How does the landlord benefit from using a tenant representative? Surely he deserves something. After all, he's paying my tenant representative fee out of the leasing broker's commission.

Like any business person, landlords have a cost of business acquisition. Believe it or not, a tenant representative can lower those costs. How? by bringing the landlord pre-qualified prospects along with the experience to close the deal in the most efficient way.

Hence a typical game: Tenant 4, Landlord 1.