FAQs

Touring Selected Space and Negotiating the Lease

What are some things that tenants typically overlook when looking for new space that they should be paying attention to?
Commercial leasing is a complex process, fraught with significant potential risks and liabilities, and should be only handled by a representative that has both the necessary experience and your best interests in place. We have found tenants tend to overlook the importance of their creditworthiness and the time required to bring a commercial lease transaction to close.

Leasing commercial space is very comparable to getting a loan from a bank. Tenants should be prepared to share financial statements and to appropriately collateralize the lease transaction. Commercial real estate transactions, even for a seemingly “simple” deal, may take a considerable amount of time to successfully complete.

Having adequate time to identify, tour, design, price, negotiate terms on, construct or improve, and move into suitable commercial space helps shift negotiating leverage to the tenant’s behalf. Start the process 4 – 12 months before you need to occupy your new space.

What are the best practices to selecting the best space?
The best space is the space which meets unique criteria that vary by industry, property type, the nature of the user’s business and their business plan, and location. We ensure a successful process by taking the time to understand the intricacies of our clients and their businesses up-front so the real estate supports these needs and requirements.
Why are the upper floors more expensive?
Upper floors of a building are more expensive because they may have better views than lower floors. Upper floors can also be quieter with less street noise. Of course, this may not apply to very old buildings that do not have elevators, since the upper floors are not ADA accessible.
How many SF do I need per person and what kind of space should I plan for?
Many questions have an asterisk* and a “it depends” response. This is one of those. Depending on the size of the space, office intensity or open area changes this dramatically. Use our space calculator to dial in a closer number. An open office environment will be in the 120 – 180 SF/person range and an office intensive environment will be 200 – 275 SF/person.
How much per SF should I plan for regarding tenant improvement costs?
We get this on a lot. What does the space need? Carpet and paint? Walls demo’d and built? Kitchen added? New ceiling grid and lights? This is often a key component of a negotiation.

Leases

What are the best practices for negotiating my lease?
The best practices in negotiating a lease are summarized into four critical path items as follows:

  1. Start your needs analysis and discussion well before the need is estimated to commence.
  2. Engage and expert commercial real estate broker with proven experience and leverage their knowledge; we are here to help you starting with the needs analysis and continuing from occupancy throughout your lease term.
  3. Always have a solid back-up option at hand, especially in an improving real estate market. Being prepared to walk away is a very powerful aspect of successful negotiation.
  4. Engage a real estate attorney to provide counsel and revise the lease document.
What are the hidden costs in a lease?
Your real estate broker should be well versed and provide assistance in mitigating latent/hidden costs within the lease agreement. The primary area of hidden costs arise from Operating Expenses or Common Area Maintenance (CAM) charges and maintenance obligations. Other potential pitfalls include Tenant Restoration requirements, Tenant Alteration processes, landlord administrative markups, and property management fees. Benchmark Commercial’s experience negotiating thousands of lease agreements is invaluable to our clients in these areas.
What's the best way to compare offers?
The best way to compare offers is on a Net Present Value (NPV) basis and $/RSF basis with a matrix for a side by side comparison. This analysis should also take into account intangibles such as building image, proximity to employees and clients, ease of ingress/egress, and the true cost of occupancy including any tenant contributions to build-out and relocation costs.
When is the best time to move in?
There really is no ‘best time to move in’ for commercial space like there is for residential. Most tenants want to consider their workflow and schedule a move when it would be least disruptive for their clients or business. A title company, for example, may want to move in the first half of the month instead of the last half and definitely not close to the end of a quarter or end of the year. An accounting firm would likely avoid moving during busy season.
Do you help with renewals?
Approximately 40% of the companies we represent with their leases end up renewing or staying in their existing building. Part of what we do is educate and view the market and look for alternatives that improve the current situation. Often times the existing situation is the best. But by looking at other options we have legitimate backups if something doesn’t work out and we build the leverage for the renewal.

Terminology

What does turnkey mean?
Turnkey tenant improvements mean that the landlord is responsible for costs (known and unknown) associated with providing specific improvements identified in a Work Letter or other attachment to a lease. The upside to the smaller tenant is that they probably won’t be faced with unknown or unplanned increases in costs and they don’t need to take the time to manage the work on the improvements. The downside is that the architect selected by the landlord may not be as creative as the tenant may want and there is less involvement with the general contractor to discuss possible options. Finally, changes to the Work Letter may be more expensive if they are requested after both sides have agreed to the scope of work.
What does core and shell mean?
Core and shell space is usually newly constructed and will require substantially more work to finish since very little, if any, of the basic infrastructure is completed; i.e., plumbing, electrical wiring, lighting, HVAC, finished floor, finished walls, finished ceiling, or insulation. The basic structure is provided by the builder or landlord and the buyer or tenant has an almost blank canvas to work with to match their needs. Depending on what the tenant may want to have built, this additional cost could be substantial.
What is price per SF vs. overall price?
Price per SF is the way most landlords quote their rates, but the prospective tenant will want to know what their cost will be for the space on a monthly or annual basis – the overall price.
What is all-in cost?
All-in cost is a way to compare the relative cost of Full Service Gross space to Triple Net (NNN) space. All-in cost considers the other costs that are not included in NNN lease rates such as electricity, natural gas, water, sewer, Common Area Maintenance (CAM’s), insurance, and property taxes – just to name the most common.
What is a common area factor (CAF)?
A building that has a common element, such as a lobby, corridors, shared restrooms, and elevator have a common area factor, also called a loss factor or add-on factor. Generally, office buildings have a CAF, and industrial buildings do not, as nothing is shared with other tenants.
What is usable SF vs. rentable SF?
Related to the common area factor, the actual space the company occupies in a building is the useable SF number (5,000 USF). The common area factor might be 12% of a building and therefore the rentable SF number would be higher (5,600 RSF)
What does full service, modified gross, and triple net mean?
These are different ways to quote rental rates. Full Service (FS) ($30/FS) means all expenses are included in the FS rate. Triple Net (NNN) ($22/NNN) means the expenses, such as taxes, insurance, common area maintenance, snow removal, etc. are broken out separately and the quoted rate is the base rent only. Modified Gross (MG) ($24/MG) means a portion of the expenses are included in the lease rate. The specifics need to be clarified to confirm which expenses are/are not included.
What does whitebox mean?
This is a space that has been cleaned up after a previous tenant has moved out. Usually the carpet and walls have been removed and only the ceiling grid and lights remain in place, leaving a clean whitebox to start a new buildout.