The process of leasing industrial space of business office space in the Boise metropolitan area can be complicated, time consuming and, often, perilous. But, these lease tips for tenants can help. Leasing commercial office space, whether for a relocation, renewal or expansion is an important business decision that creates significant long-term overhead costs. For most companies, the cost of facilities is second only to employees’ salaries and wages. A building needs to work well for your business, and the lease document needs to accurately define, document and apportion the proposed costs.
- Carefully analyze how much office space your business needs.
Leasing too much space can be an expensive mistake, costing thousands of dollars per year. But leasing too little space can also be a serious problem that can impede your business’ future growth. You can get a handle on your space needs by engaging an experienced Interior Architect to prepare a space inventory or “Space Program.” The Space Program will help identify the space needed by various departments and work groups in your business. You may be able to identify future growth needs and structure your lease to accommodate your expansion needs.
- Decide up front on the geographic boundaries for your building search.
Important factors to consider include proximity to current as well as future employees. Is visibility or easy highway access important? For instance, do your employees travel often to customer sites or to the airport? Might you consider avoiding inconvenient major roadway construction? Do you receive lots of client visits, where easy directions are important? Do you need a specific city or county mailing address? Is it critical to maintain your current phone number?
- What type of building or office space do you need?
What kind of image do you want to project to your clients and employees? Do you prefer a traditional multi-story office building with a common lobby entrance and shared restrooms? Or would you prefer a single-story R&D/Flex-type of facility with a separate entrance and perhaps a drive-in door in the back? Traditional office buildings offer space on a Rentable Square Foot (“RSF”) basis while utilizing a Common Area Factor (“CAF”) of approximately 10% to 15%. This CAF is added to the Usable Square Footage (“USF”) of the actual area you occupy and accounts for the square footage of the shared building lobby, hallways and restrooms. In single-story R&D/Flex buildings, since Tenants have their own entrances and typically provide their own restrooms inside their premises, so no CAF is added to the USF.
- Does your company have special needs?
Examples of special needs include heavy parking, fiber optic telecom connections, redundant or back-up power feeds, back-up emergency generators, exterior signage, above standard electrical power or heating, ventilation and air conditioning (called “HVAC”), high ceilings, dock-high or drive-in doors and/or specialized lab or clean room equipment. It is critical to identify your “must have” requirements early, because these issues may be impossible or very expensive to address later. The absence of just one of these highly variable factors may eliminate an otherwise acceptable building. It’s much better to address these issues up front, not months into the process.
- What is included in the Landlord’s rental rate?
It is very important to understand that not all buildings are priced using the same format. Many traditional office buildings offer leases on a “Full Service” or “Gross” basis, meaning that the quoted price of $x.xx per square foot per year includes all “Building Operating Expenses,” i.e. property taxes, insurance, common area maintenance, janitorial services and utilities. These buildings usually offer a “Base Year” for Operating Expenses with the Tenant paying for annual escalations (increases) that exceed the cost of Operating Expenses in the Base Year, which is most often the calendar year when the lease begins.
Other buildings, including most industrial, R&D/Flex buildings and some office buildings, offer Tenants what is called a triple net (“NNN”) lease. In a NNN lease, the Tenant pays a Base Rent, plus all Operating Expenses for property taxes, insurance and common area maintenance. However, in a NNN lease, the Tenant usually contracts for and pays separately for its own janitorial and utilities. It can get confusing though, because some Landlords structure their office leases in a hybrid fashion by using a combination of Gross and NNN methods. The important thing is to understand exactly who is paying for what and to make sure that this is clearly described in the lease document.
- Understand the “real” costs of constructing your improvements.
Because it is rare to find space that perfectly fits your requirements, there is usually some interior construction required to reconfigure the space for your use. Such construction is known as Tenant Improvements (“TIs”), Tenant build-out or Tenant finish-out. These TIs can range from relatively simple new paint and carpet installation, costing $3.00 to $5.00 dollars per square foot, to extensive new construction — especially if you consider leasing “raw” or “shell” space that has never been built-out — which can cost $25.00 to $60.00 per square foot.The key point to understand — before your office lease is signed — is what the proposed build-out will cost, and to be clear on how much responsibility the Tenant will have for these costs. Landlords typically offer a TI Allowance of $X per square foot that is included as part of your quoted lease rate. The TI Allowance is subject to negotiation and typically increases with the length of the lease term. If needed, “extra” TI Allowance can often be supplied by a Landlord, but it will likely be amortized at an above market interest rate, usually 8% to 12%, over the term of your lease. Be sure to understand whom (Tenant or Landlord) will manage the construction and will be responsible for unexpected delays or building code issues that may arise.
About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs in Boise, Meridian, Nampa, and the greater Treasure Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of retail, office, and industrial space available in prime Boise and Meridian locations.
Please check out The Sundance Company website to view property photos, search for office space or learn more about Sundance’s start-to-finish capabilities. If you prefer to talk to someone in person about your commercial real estate needs, then just give us a call at our Boise office, (208) 322-7300