August 14, 2010August 4, 2010 sundancecompany Boise Commercial Real Estate, commercial real estate, The Sundance Company

Commercial Real Estate Lease Options in the Boise Valley

When you negotiate your real estate lease there are several options to include. The most common is the option to renew. Since landlords will want to raise the rent at the end of the initial agreed period, this will need to be addressed in advance. If you can get an option to renew at a predetermined fixed price, as opposed to renewing at the fair market price, you will likely save money when the initial term of the lease ends, especially if office rents have escalated.

A short lease with one or more options to renew gives you some flexibility. Typically, you have a certain time period before the end of the initial lease term in which you can notify the landlord in writing that you want to renew the lease at the predetermined amount. There may be an additional fee, also agreed upon in the initial lease for exercising your right to stay. Generally, with the exception of the increase in rent, other terms of the initial lease will carry over into the renewal period.

Another option you might include is the option for additional space. Being able to expand is key for a growing business. A landlord who sees the potential of having an important tenant that may attract other businesses, especially in a mall or similar retail situation, may be more inclined to grant you an option for additional space. You will need to examine and negotiate the terms for renting such extra space and make sure the space is suitable to your business needs.

The option for additional space may state that you will expand at the same per square foot rate that you are currently paying, at a fixed rate of increase or at the fair market rate at the time of the expansion. This will need to be determined when working out the initial option agreement. Such an option can only be included if the landlord can reserve or make such space available. A landlord may counter by offering you a right of first refusal, meaning you have first choice on any empty space at the same rental rate that any other tenant will pay. Again, it is a matter of which one of you is in the stronger position.

Also, becoming more common in commercial leases is the option to terminate the lease early. Landlords may offer such clauses to higher profile businesses to entice them to sign longer-term leases and help draw other established tenants into the facility. The landlord will receive some form of compensation if the tenant exercises the option to leave early. In the case of retail leases, particularly at malls, landlords may guarantee a level of occupancy among surrounding storefronts. If that level, for example 75 percent occupancy, is not met by a certain date, the tenant then has the option to terminate the lease.

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 office and industrial space available in prime Boise and Meridian locations. More information available at www.sundanceco.com or 208.322.7300.

July 25, 2010 sundancecompany Boise Commercial Real Estate, Boise Commercial Real Estate Development, Boise Industrial Space, Boise Office Space, Boise Property Management, Boise Retail Space, commercial real estate, The Sundance Company

Looking For New Office Space? Don’t Make These Mistakes

Following payroll expenses, facilities and related expenses are generally the second highest expenditure for a company. While people are naturally the most important asset to a company, real estate decisions should not be far behind. Too often though, companies fail to see the significance of real estate in the same light.
The impact real estate has goes far beyond the bottom line because it plays an important part in everything from employee retention to the level of productivity and workplace morale. It’s for these reasons that companies should always be cognizant when making real estate decisions.

The top mistakes that companies make when leasing space are:
• Waiting Too Long to Start The Process. The longer a tenant waits to start the process, the fewer the number of options that will be available to them. Waiting too long can mean that a tenant will pay more, receive less favorable lease terms, or that they are forced to leave and take less than desirable space elsewhere.
• Leasing The Wrong Amount of Space. Figuring out how much space to lease is not an exact science. Forecasting involves assumptions, which can often lead to costly mistakes if incorrect. Uncertain events notwithstanding, companies should take the time and effort to work with a space planner or architect to plan and program to determine the right amount of space to lease. With that information in hand, companies should then go one step further and think about the impact certain business scenarios would have on that number, the likelihood of those events happening, and adjusting the number so as to minimize the likelihood of taking down too much or too little space.
• Picking the Wrong Location. What may seem like the right location might in fact not be. Companies should consider things such as access, public transportation, demographics, zoning laws, and other factors to help identify the right location for their business.
• Not Thinking About The Future. Aligning a real estate plan with a corporate business plan is difficult to do when milestone events and setbacks do not always go according to plan. To help deal with the “unknown”, negotiating leases which provide both expansion and contraction rights to the extent possible is therefore instrumental. Companies need to go beyond the simple lease and think about sublease rights, expansion rights, rights to cancel, and options to extend.
• Not Measuring The Space. Companies should strongly consider verifying the landlord’s square footage numbers. In larger transactions, even a small difference can translate into a large savings. If it is not possible to measure the space, tenants should at least try to negotiate a tolerance in the measurement. Generally though, and per BOMA standards, a variance of up to 2% is acceptable.
• Signing Too Long or Too Short of a Lease. Companies often think that by signing a short lease they are buying themselves flexibility. That may be true in many cases, but that flexibility often comes at a price. On the flip side, tenant’s may feel a long term lease provides maximum stability, but there are far too many cases – particularly in Silicon Valley where swings in rent can be large – where long term leases signed at the height of the market have gone so far as to force companies into bankruptcy or caused severe harm to the company. It’s therefore imperative that companies take a long-term approach to real estate, while keeping short term trends and business activities in focus.
• Not Verifying Building Systems and Infrastructure. In today’s environment, data, power, networking, and HVAC capacity and availability are crucial. Tenants should ensure that buildings they intend on occupying are capable of providing the network connectivity and other building systems necessary for a tenant’s operation before signing any lease.
• Not Having Your Insurance Carrier Review the Lease Language. Tenants should always have their insurance carrier review the language within a lease that pertains to insurance and subrogation to verify that the insurance is not only attainable, but attainable at a reasonable cost. It is strongly recommended that the actual lease or lease language be sent to your insurance carrier for review before any lease is signed.
• Not Retaining Legal Counsel. By using an attorney well versed in the documenting of a real estate transaction, companies can help avoid ambiguity and errors which could lead to expensive litigation or legal wrangling down the road.

If you are looking for commercial real estate space and do not want to make one of the preceding mistakes then contact The Sundance Company and we can walk you through the process of procuring a great location for your business. Established in 1976, The Sundance Company has more than 1.5 million square feet of office and industrial space available in prime locations throughout the Treasure Valley including Boise, Meridian, and Nampa so contact us today to see how we can help you find the right office or retail space for your company. More information is available at www.sundanceco.com or 208.322.7300.

July 3, 2010June 27, 2010 sundancecompany boise build to suit, Boise Commercial Real Estate, Boise Commercial Real Estate Development, Boise Industrial Space, Boise Office Space, Boise Retail Space, commercial real estate, The Sundance Company

A Guide to Commercial Real Estate Building Classifications

When considering office space, tenants will find that office buildings are generally classified as being either a Class A, Class B, or a Class C building. The difference between each of these classifications varies by market and class B and C buildings are generally classified relative to Class A buildings. Building classifications are used to differentiate buildings and help the reporting of market data in a manner that differentiates between building types. That said, there is no definitive formula for classifying a building, but in the general characteristics of each are as follows:

Class A. These buildings represent the highest quality buildings in their market. They are generally the best looking buildings with the best construction, and possess high quality building infrastructure. Class A buildings also are well-located, have good access, and are professionally managed. As a result of this, they attract the highest quality tenants and also command the highest rents.
Class B. This is the next notch down. Class B buildings are generally a little older, but still have good quality management and tenants. Often times, value-added investors target these buildings as investments since well-located Class B buildings can be returned to their Class A glory through renovation such as facade and common area improvements. Class B buildings should generally not be functionally obsolete and should be well maintained.
Class C. The lowest classification of office building and space is Class C. These are older buildings (usually more than 20), and are located in less desirable areas and are in need of extensive renovation. Architecturally, these buildings are the least desirable and building infrastructure and technology is out-dated. As a result, Class C buildings have the lowest rental rates, take the longest time to lease, and are often targeted as re-development opportunities.

The above is just a general guideline of building classifications. No formal international standard exists for classifying a building, but one of the most important things to consider about building classifications is that buildings should be viewed in context and relative to other buildings within the sub-market; a Class A building in one market may not be a Class A building in another.

March 15, 2010March 11, 2010 sundancecompany commercial real estate, The Sundance Company

Increase Productivity in Your Commercial Office Space

Many companies can experience an all-time low in productivity and morale due to the state of the economy and the pressure each business is under. That pressure can quickly trickle down through the commercial office space at all levels, adversely affecting companies hard.

So, if your office space is currently suffering from morale and productivity problems, then now is the perfect time to reignite the excitement and enthusiasm in your team and really make them feel as though they are a part of something great! But how do you do that? Here are some simple steps to help turn around staff morale and productivity.

Listen to Staff
One thing many businesses forget to do is listen to their staff. It sounds so simple, but rarely are team members given the luxury of speaking their mind and really sharing their thoughts and concerns. To get started, send out a company-wide survey asking all the hard questions. Be quite specific with your questions, allow staff to fill it out in work hours and keep the surveys anonymous so that you can get complete honesty from your team. Once you have collated the answers and can see which areas need to be fixed comes the next step…

Create a New Workplace Strategy
You’ll now be able to see all the real problems your team are facing, which is a great start. But now you know the issues, what are you going to do to fix them? Develop a strategy to combat the main problem areas and also an implementation plan. Then you’re ready to do the third step …

Communicate in the Office Space
It’s important to remember that staff members will respond to company efforts when you communicate with them and have an open and honest dialogue. When sending out communications, whatever the form, always mention the problem but then focus on the solution. This will give staff a reason to believe that these solutions are important and will be actioned.

Implement the New Workplace Strategy
Now that you have discovered the problems staff are facing in your commercial office space, figured out how to solve them and communicated this to the company, the most important thing to do is actually implement the solutions. If you don’t “walk the walk” you could be faced with even more disgruntled staff and a bigger problem that what you started with.

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

February 24, 2010February 21, 2010 sundancecompany Boise Commercial Real Estate, Boise Commercial Real Estate Development, commercial real estate, Meridian Commercial Real Estate, The Sundance Company

Leasing vs Buying Commercial Office Space?

Many businesses reach a point in which they are curious as to whether it would be beneficial for them to purchase a building rather than continue to lease space. While every business is different there are a few common factors that should be taken into consideration when evaluating whether buying a building space would be better than continuing to lease space. We will take a look at some of the pros and cons to purchasing compared to continuing to lease space.

* Cash Outlay – Typically if you are planning to purchase a building, you can expect to make a down payment of between 10% and 25% of the purchase price, depending on the lender and your credit. When you lease space you won’t need to put down nearly as much. With good credit, the typical outlay is the first and last months rent which is only about 10% to 15% of the cash outlay required when purchasing a building.
* Opportunity Cost – With the large outlay of cash required to purchase a building, the opportunity cost of that money needs to be taken into consideration. What return would you expect to receive on that money compared to the return you would expect to receive if you invested the money back into your business or into other investments?
* Fixed vs. Variable Cost – When you buy a building, you have a good idea what your costs will be over the long term. This is especially true if you have a long term fixed rate mortgage. If you lease space, the market will dictate what you will end up paying for rent over the long run.
* Growth Considerations – The growth phase of your business should be a major consideration in making the lease vs. buy decision. If your company is relatively new and/or in a high growth mode, leasing would allow more flexibility and fewer constraints to that growth. On the other hand, if your company is mature and stable, buying space is great way to meet your future space needs.
* Property Management – You’ve heard the expression, time is money. If you own a building, it needs to be managed. You can either hire out the function or do it yourself. Many businesses with long term growth plans buy a larger building than they need and rent out the expansion space. All the more need for good property management.
* Appreciation – One of the primary goals of buying a building space is to generate long term increase in value through market appreciation. A good idea in a healthy market and usually successful over the long term. It is usually a good way to add to your retirement fund, but keep in mind that recent commercial real estate cycles have come in 10 year periods.
* Tax Factors – Lease payments are usually fully deductible, but many expenses of owning office space must be written off over longer periods of time of up to 39 years. The good news if you buy is that you get to take depreciation on the improvement portion of the property and can usually deduct all of your interest payments. When considering the tax factors it is always very important to consult with your attorney and tax professional about the legal and financial considerations to owning office space.
* Cash Flow Analysis – The devils in the details. In order to really understand the financial aspect of purchasing a building, you need to prepare a detailed comparative net present value cash flow analysis which takes into consideration your predictions on the future including holding period, anticipated appreciation vs. rental increase, interest rates, and cost of expenses increases. It is a good idea to do three different analyses, optimistic, realistic and pessimistic, to help determine your margin of error. It seems like a daunting task, but there some good programs available to help you do this analysis including:

The Next Step

While the evaluation of the leasing vs. buying space decision seems somewhat overwhelming, there is help. Getting advice and assistance from a commercial real estate professional who is involved in the business day in and day out can significantly improve not only the accuracy of any analysis, but in general simplify the process. Many of the lease vs. buy factors can only be decided by you, but having a helping hand in the areas where space expertise is important will assure you of making the best possible decision. Call The Sundance Company today to see how we can help you with your lease or buy decision.

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.

February 22, 2010February 22, 2010 sundancecompany commercial real estate, Commercial real estate news, The Sundance Company

Commercial Real Estate Lease Types

1. The Gross Lease – Though some sources break out the full service lease type from the gross lease in commercial real estate, they are more often the same. The landlord pays for: Taxes, insurance, and maintenance.

The gross commercial lease is used most often in multi-tenant and single tenant office buildings, industrial and some retail properties. The landlord collects fixed rents and pays the expenses out of them.

As costs increase over time, many gross and full service leases will contain escalation clauses that increase rents over time to offset tax increases and higher insurance and maintenance costs. It is important that a tenant shopping for space understand any escalation clauses in order to project rent expense into the future.

2. The Triple Net Lease – The triple net lease is used extensively in commercial real estate. It is popular for multi-tenant industrial and retail properties. With tenants whose expenses vary greatly, such as an industrial user of electricity, the triple net lease is best for the landlord.Tenants are resistant to triple net leases, as they have no control over increases in expenses and budgeting their costs is more difficult. This is especially true when it comes to repairs and maintenance. In a triple net lease, the tenants would be responsible for sharing the cost of roof replacement. This can be a large and many times unexpected expense.

Of course, fixed rent is lower with the triple net lease. If the building is a newer one, tenants may find triple net to be preferable to other choices. If establishing a new business, the triple net tenant in a new building can enjoy lower rent and expenses in their first few years. Once established, they may have grown to the point that larger space is necessary. The move can be to a different type of lease or another newer facility.

3. The Modified Net Lease – The modified net lease is a compromise between the gross lease and the triple net. The landlord and tenant usually set up a split of maintenance expenses, while the tenant agrees to pay taxes and insurance. Utilities would likely also be negotiated in the modified net lease.This type of lease might be used in industrial, retail or multi-tenant office properties. Tenant resistance to triple net leases, especially in older properties, makes the modified net lease more popular. It allows a compromise situation that shares the costs of building operation and maintenance.

The terms of a modified net lease are as varied as are building and tenant business types. The flexibility of this lease type makes for easier agreement between tenant and landlord. Many a lease has been put together because of creative modified net lease terms.

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.

Commercial Real Estate News – Toronto Developer May Bring Aquarium to Times Square

Deal May Bring Aquarium to Times Square

February 8, 2010February 6, 2010 sundancecompany Boise Commercial Real Estate, commercial real estate, Meridian Commercial Real Estate, meridian idaho, The Sundance Company

How to Lease Commercial Real Estate Office, Retail, or Industrial Space

A lease, at its core, is a business relationship – an agreement between a tenant and a landlord. Although leasing commercial real estate may appear simplistic, perhaps even one-dimensional, it is crucial to take 7 essential steps. Otherwise, the process can turn into disarray.

1. Define your requirements: The first questions to tackle are as follow: “What am I looking for?” and “What would suit me best?” From prerequisites such as deciding location to determining the property’s prospective use, evaluating the space is critical.

2. Locate suitable property: After determining space requirements, a hands-on search begins. Locate suitable properties, survey the market, and narrow down the CRE contestants.

3. Tour properties: A property review and physical tour is the next step of commercial leasing. Since an expected lessee engages in numerous visits and tours, it would be beneficial to take notes on each property.

4. Make a proposal to lease: The proposal process consists of five elements: preparing a RFP (request for proposal), issuing the RFP to suitable properties, reviewing the landlords’ responses, evaluating offers, and perhaps preparing a Comparative Lease Analysis.

5. Space planning and architectural evaluation
6. Negotiate the lease contract: Negotiating may be tedious and frustrating. It is important to meticulously examine every aspect of the deal to avoid future problems. A checklist, legal involvement, and realization of tenant’s resources are discussed thoroughly in this category.

7. Close the transaction The mutual execution of a lease.

If you or your company is in need of office, retail, or industrial space in the Treasure Valley then your first call should be to 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. The Sundance Company has more than 1.5 million square feet of office, retail. and industrial space available in prime Boise and Meridian locations.

February 3, 2010January 31, 2010 sundancecompany Boise Commercial Real Estate, commercial real estate, The Sundance Company

10 Commercial Real Estate Terms You Need to Know

Whether you own or rent your office space, property costs are one of the largest business overhead expenses. That’s why it’s important to comprehend the full ramifications of taking over the title to a property or entering into a lease agreement. Before you sign a lease, work with a commercial real estate broker with a proven track record, and consult with an attorney skilled in real estate law. You should also familiarize yourself with some common real estate terms:

Appraisal: a written report by a state-licensed professional that includes an unbiased analysis of the property’s value and the reasoning that led to that opinion. An appraisal report is required for any property sale.
Broker: an agent who brings together a buyer and a seller, or a landlord and a tenant, in a real estate transaction. All brokers must be licensed by the state in which they work. Most work on commission, and the landlord or seller usually pays the fee.
Build-to-suit: a method of leasing property in which the landlord makes improvements to a space based on the tenant’s specifications. The cost of construction is generally factored into the lease terms. Most build-to-suit provisions apply to long-term (10-year) leases.
Concessions: benefits or discounts given by the seller or landlord of a property to help close a sale or lease. Common concessions include absorption of moving expenses, space remodeling, or upgrades (also called “build-outs”), and reduced rent for the initial term of the lease.
Escalation clause: a clause in a lease that allows the landlord to increase rent in the future. Rent increases dictated under an escalation clause may be charged in various ways, including:
• A fixed increase over a definite period
• A cost-of-living increase tied to a government index, such as the tax rate
• An increase directly related to increases in operating the property

HVAC: an acronym for “heating-ventilation-air-conditioning” system. In a commercial building, the landlord generally is responsible for maintaining the HVAC.
Lease: an agreement by which the owner of a property (the “lessor”) grants the right of possession to a tenant (the “lessee”) for a specific period of time (the “term”) for a predetermined amount of money (the “rent”). A “leasehold estate” is the space occupied by the tenant. Common types of leases include
• A straight, or flat, lease, which stipulates that the same periodic payment (usually monthly) be made for the entire term of the lease.
• A percentage lease, which uses a percentage of the net or gross sales to determine the monthly rent. This is most often used in retail properties and with a minimum base rent.
• A net lease, which requires the tenant to pay maintenance, taxes, insurance and so on, along with a fixed rent. This is also called “net-net-net” or “triple net.”
Lien: a legal claim filed against a property for payment of a debt or obligation. If a property owner fails to pay a creditor, for example, the creditor can place a lien on the property. A lien can halt the sale of a property.
Sale-leaseback: a transaction in which an owner sells a property to an investor, who then leases the property back to the original owner under prearranged terms. Sale-leaseback deals offer the original owner freed-up capital and tax breaks and the investor a guaranteed return and appreciation.
Sublease: a lease given by a tenant for some or all of a rented property. For example, if a tenant rents 20,000 square feet but only ends up needing 10,000 square feet, they may want to sublet the extra space for some or all of the remaining term of the lease, providing they continue to occupy and pay rent for the property.

September 2, 2009August 30, 2009 sundancecompany commercial real estate, Commercial real estate news, Economy news, The Sundance Company

NAR: Commercial Real Estate Decline Starts to Moderate

Erika Morphy of GlobeSt.com published this article last week about commercial real estate.
The decline in commercial real estate appears to be slowing, at least according to the latest statistics from the National Association of Realtors (NAR). So suggests its leading economic indicator, which registered only a 1.3 percentage point decline in its Commercial Leading Indicator for Brokerage Activity for Q2. The index reading was 101.5, compared to 102.8 in Q1. The index is at its lowest point since its inception in Q1 1994–as well as a steep drop from Q2 2008, when it was at 117.6.

“The decline is moderating a bit–we can hope that the steep declines may be coming to an end–but we are not nearly back to normal,” Lawrence Yun, NAR chief economist, tells GlobeSt.com.

The slight easing of credit and introduction of liquidity into the sector is largely the reason, he continues. TALF was extended for a few months beyond the December 2009 expiration date, Yun notes. Also, “there has been a nice gain in the REIT stock price index, which implies that credit conditions may be loosening.”

Yun’s best guess for commercial real estate recovery? “We’ll be bouncing along the bottom for some time, but meaningful gains won’t occur until the second half of next year.”

Getting to that point, though, will not be pretty. NAR is forecasting sharp increases in vacancies for the next year. It expects office vacancy rates to increase from 15.5% in the second quarter to 18.8% in the second quarter of 2010.

In the industrial market vacancy rates are likely to rise from 13% now to 15% in Q2 2010. Retail vacancies will edge up from 11.7% in Q2 2009 to 12.9% in the same period of 2010. Multifamily vacancy rates, by contrast, are expected to slip from 7.4% now to 7.1% in the second quarter of next year.

NAR is not the only leading economic indicator to point to an upcoming recovery. The American Institute of Architect’s latest Architecture Billings Index also suggests a rebound may be underway.

August 19, 2009August 16, 2009 sundancecompany commercial real estate, Commercial real estate news, Economy news, The Sundance Company

Strategies for success

To succeed in this real estate market, investors and managers need a new kind of toolbox. While financial implements are still critical, more traditional tools of the trade, a hammer, paintbrush and the number of a good plumber, for example, have joined them.

As the industry experiences one of the worst downturns in decades, real estate investors and managers are reconsidering strategies for success. Many of them have embraced a back-to-basics approach that provides a path for staying strong in a difficult economy. A key part of that approach: actively maintaining their properties.

Gone are the days when making a profit in real estate involved a financial transaction and little else. Now, in an effort to remain viable, real estate professionals are focusing on 1) protecting and enhancing the value
of their assets; 2) adapting to a changed investment climate; and 3) reallocating precious resources.

And despite the rough sledding, there is a good likelihood that these strategies, taken together, will yield success. To be
sure, a meaningful recovery is not imminent. But there is a growing list of companies lining up to take advantage of the recovery when it occurs, giving perhaps the first indication that a slow turnaround may be beginning, at least in some sectors.