Lease Rate Is Only Part of A Tenants Occupancy Costs

Office tenants may be wrapped up in lease rates when it comes time to renewing or relocating their offices. It may sound ridiculous to overemphasize the fiscal impact of square footage rates over a three or five year lease period, but tenants routinely do. They perceive the rental rate as the end-all without considering what other elements might be involved in the cost to occupy space, and there are always other elements. Here are six elements of occupancy costs to look out for when reviewing a lease.

Building Operating Expenses

The cost to landlords is big dollars to operate and maintain their buildings. There are scores of recurring costs that factor into their profit models other than rent. Any of these costs can be handed down in some part to tenants. These are called “pass through” expenses, and these can include taxes, insurance, landscaping, snow removal, security and utilities, among many others. Landlords limit their monetary liability by employing “expense stops.” This is when the landlord agrees to pay an operating cost up to a specified threshold where it then “passes through” all additional costs on to the tenant.

Space Measurement

Tenants may not be familiar with how their space is defined and measured. The term, “Usable square footage,” is the amount of space on which the tenant can set its furniture and equipment, and where people work each day. “Rentable square footage” is the usable square footage plus the tenant’s pro rate share of common elements of the building, like lobbies, hallways and restrooms. Rentable square footage is specifically what tenants pay for each month. Tenants should always know who is doing the measuring and what standard they are using. In fact, tenants would be wise to hire their own interior architect or another qualified expert to verify the landlord’s documented square footage.

Subleasing Provisions

Tenant’s space requirements and needs  can change dramatically during a lease period. Sometimes subleasing becomes a financially attractive option, if the landlord will allow it. Can the tenant move out altogether and sublet its entire space, or will it be in default of the lease? Can it sublease just some of the space to another tenant? What would the rates be? All these questions can be reviewed and resolved by our team.

Right of Relocation

Any lease may stipulate that the landlord can relocate a tenant to another space within the same building. On the surface this may not seem like an major inconvenience on the surface but consider all of the annoyances even a small tenant must endure during a relocation process. The disruption of an unintended move to another space, even within the same building, could be crippling to a tenant, this is not considering any of the associated expenses.

Holdover Provisions

What happens to the tenant if they stays in their space after the lease period expires? In some cases, the landlord will allow for a month-to-month lease period to commence, but at inflated rates. This provision will also state how much notice the landlord will offer the tenant before eviction.

Tenant Finish Allowance

This is usually a dollar per square foot amount used to improve the tenant’s lease space.  Tenant improvements can include construction, design and engineering costs, carpet, paint, and hardware.  The landlord may already have an allowance built into its budget, regardless of whether the tenant asks for any of it.  So, for the tenant, it is a “use it or lose it” proposition.  Every tenant should take full advantage of what the current market will bear when it comes to improvement dollars.This also  includes renewing tenants.

 

Benchmark Commercial finds Trips For Kids a new Home

Last Quarter, Tanner Mason and Joe Lengyel had the opportunity to work with Trips for Kids.  We were able to save them money on their new lease, by looking at their space needs and navigating through negotiations with the landlord on their behalf.   Joe Lengyel was able to help this non-profit find 2,150 SF of space in Arapahoe County.  We are honored to have had the pleasure to work with such a great non-profit.

Trips for Kids Denver Metro is dedicated to giving under served and at-risk youth the opportunity to experience and learn more about the natural beauty of Colorado, from the seat of a mountain bike. Trips for Kids strives to give children the chance to see a different side of Colorado.  They also work to expand their understanding of what each child can achieve, and to make personal connections with the natural world.  Trips for Kids Denver Metro is a member of Trips for Kids, a 501(c)(3) nonprofit organization based in Marin County, California. Founded in 1988 and now operating in over 75 locations throughout the United States, Canada and Israel (information pulled from Trips for Kids Denver Metro website).  Trips for Kids Denver Metro strives for excellence and quality in all facets of its programs starting with their values of safety, compassion, integrity, respect, and fun!

According to Joe Lengyel, “cost control and anticipating future expenses was paramount to getting a deal done. Being a non-profit, Trips for Kids has to have every dime spent approved by a board”. The starting ask was $12.00/sf/MG, including the NNN’s at 3.90, with $0.50 cent hikes scheduled every year. The Landlord was also asking for a personal guarantee and a Credit Check application to be filled out by a member of the board for security.  Joe Lengyel, with the guidance of Tanner Mason, was able to negotiate the terms to bypass the personal guarantee by explaining the purpose of the non-profit and showing them their exemplary track record and contribution to the community.

 The cost per square feet and $0.50 cent rate hikes were the next major negotiating points. Benchmark Commercial negotiated only $0.25 cent hikes, but the $12/sf price was cost prohibitive for the non-profit.  Ultimately Benchmark Commercial Real Estate was able to lower the rate to $11.50, and to ensure that the rate remained unchanged for the duration of the lease. Though the net effect of this is the same overall cost for the entire lease, we were able to give Trips for Kids the gift of seeing the future, which has allowed them to anticipate the upfront cost for the duration of the lease.

6 Benefits of Working with Benchmark Commercial Real Estate

We are Denver’s firm of choice for tenant and buyer office and industrial representation. As a local firm, Benchmark understands the Denver market and the key audiences involved. We are your experts in the industry, Benchmark’s team has over 50 years of experience in the Denver market. Leveraging this local market knowledge and strong industry relationships, we’re able to give our clients peace of mind while saving them time and money. Who doesn’t want to save more money and time?

  1. Our Market Knowledge and Expertise
    We select and tour the best spaces to fit your needs: Once we understand your company’s needs and goals, we analyze what is available in the market and match your needs to a handful of well-suited options.
  2. We Save You On Time
    We look at how your space will grow with your needs, what kinds of build-out and features your company may need, and what your budget looks like for real estate. All this information must be gathered, thoughtfully planned out and incorporated into your bottom line.
  3. We Save You Money
    We understand the current market landscape and rates, as well as how and what landlords are willing to negotiate, given the current market. We are here to protect your bottom line and fulfill your needs while securing the best possible lease terms for your company.
  4. We Have Industry Connection
    It’s likely that your broker has done a deal at the property or with the landlord. Industry connections, knowing the landlord, and knowing comparable deals at that location can be vital during negotiation.
  5. Our Help Doesn’t Stop With A Signed Lease
    From scheduling meetings with architects, general contractors, or other service providers, to creating a lease abstract for quick references of major lease terms, or providing sublease marketing if the space has become too small or too large – we’re your advocate and we’re here for you. Our involvement doesn’t end when the lease is signed. We’re happy to continue to provide you with industry expertise and knowledge!
  6. We Have Global Reach
    As a partner of Exis, our firm has access to and contributes to their depth of international real estate knowledge. With their worldwide team of industry experts, Exis is setting the global standard for tenant representation, delivering strategic consulting, and pragmatic solutions to our clients.

Call us today at 303-395-0111.   See how we can help you on all your commercial real estate endeavors.

Benchmark Commercial Joins Exis Global Tenant Representation

Benchmark Commercial announces its partnership with Exis Global Tenant Representation.  Exis, which was founded in 2013, is a global commercial real estate organization committed exclusively to representing commercial tenants and end users.  As part of Exis, Benchmark will have access to, and contribute to, their depth of international real estate knowledge.

Exis partners include some of the most trusted names in tenant representation around the world. As a proven Colorado commercial real estate company, with proven international capability, Benchmark has been invited to be shareholders of Exis.

As a previous board member of Exis, Glenn Blumenfeld of Tactix in Philadelphia has discussed that importance of quality over quantity, “We want to maintain the quality of the firms we are working with; we could have doubled the number of firms if we wanted dots on a map. We would rather have fewer dots on the map but the right dots on the map,” Blumenfeld said in an interview with Philadelphia Business Journal.

Benchmark has a depth in commercial real estate expertise that is second to none.  As a member of the Exis global platform, Benchmark will have access to use these global resources to better serve the Denver community.  With their worldwide team of industry experts, Exis is setting the global standard for tenant representation, delivering strategic consulting, and pragmatic solutions to Benchmark’s Colorado clients.  Tanner Mason, Managing Partner at Benchmark sums it up best, “This is a focused move to bring our local capabilities to a national and international platform which will allow the Benchmark team to provide consistent and measurable results now and into the future.  We look forward to be a part of the Exis global platform.”

The Exis organization is led by a worldwide team of professionals, who are bound by a shared commitment to providing conflict-free representation to tenants and end users of commercial real estate space. Their process makes the difference.  They know the needs of the markets by analyzing the competition and implementing plans to better service their clients. They do this by understanding client objectives, budgetary constraints, and space needs to define the desired outcome.  Benchmark will continue to identify real estate solutions to meet our Colorado clients’ needs and financial requirements while also ensuring that each landlord can deliver now and in the future.

Benchmark knows with Exis we’ll be able to help our clients globally as well as locally.  “We have selected other brokers outside our market in the past to solve client needs.  Now we can offer clients proven options in the US and around the world.”- Jeff Mason, Partner

Exis partners use strategic tools to facilitate the best process for the tenant representation side, similar to the services Benchmark provides in the Colorado market.  For more information contact us at: 303-395-0111 or visit our website at Benchmark Commercial Real Estate.

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BENCHMARK COMMERCIAL IS ON THE MOVE

Benchmark Commercial, one of Colorado’s most successful boutique commercial real estate firms, will move into a new Larimer Square location next month.

The relocation from The Granite Building in Larimer Square to the Hope Building at 1404 Larimer St. on May 4, highlights the firm’s growth, success and Colorado- proud heritage.

The new location is nearly twice the size of Benchmark Commercial’s current space. Though Benchmark Commercial is growing, the company’s hands-on, client-first philosophy will never change.

Benchmark Commercial’s founder, Tanner Mason, an experienced craftsman on all matters involving commercial tenants, buyers, negotiating, acquiring leases, and purchasing properties, called the upcoming move a great sign for Denver’s market.

“We are excited for the growth at Benchmark, though we never forgot that the customer always comes first,” said the firm’s co-founder” Jeff Mason  “We are enthusiastic to see our staff and presence in  Denver continue to grow.”

Benchmark Commercial Partner Jason Bollhoefner — an expert in property acquisition and office and industrial leasing — said the move gives his company a solid presence in one of Denver’s most recognized commercial locations.

“The entire team is excited for the move,” Bollhoefner said. “We’ll have more space, more resources and staff on hand to do everything we can to deliver excellence to our clients.”

Our staff has over 40 years of experience. We provide straightforward and honest counsel to all our clients negotiating the commercial real estate landscape.

Benchmark Commercial is an internationally capable, Colorado proud, boutique commercial real estate firm that provides solutions for mid-size tenants and buyers of office, industrial and retail locations.

For more information about our new location, or for questions about commercial real estate needs, please contact us at: 303-395-0111 or visit our website at Benchmark Commercial Real Estate.