MySquareFeet

Understanding Net Effective Rent Helps You Negotiate a Lease

Sometimes when a tenant finds a building they like, they ask for the space to be delivered to suit their specific needs for occupancy, commonly called a “Turn-Key Installation” – meaning the tenant turns the key in the door, places their desk in the space and is in business.

• Recently I worked with a tenant that needed a 1,000 SF and had a wish list for Tenant Work that went something like this:
• Mr. Landlord, I want: Three new walled offices each with a window; New carpeting throughout, A Kitchenette for coffee; New ceilings; A storage closet; New window blinds and Fresh paint throughout

I want to pay $13 per square foot, and I only want a three-year lease.  This sounded perfectly reasonable to the tenant, but when the owner said no, they were amazed and annoyed they could not have the space they wanted.  After all this IS a tenant's market.  But if they understood the concept of Net Effective Rent, they would have better understood the owner’s position and perhaps structured a "makable deal".

Historic Property For Sale in Old Wethersfield

This historic property for sale on Main Street in Old Wethersfield, Connecticut has a rich history.  It was built in 1870 by Silas Webster Robbins, a descendant of Daniel Webster. He was the builder of the magnificentSilas Robbins Bed and Breakfast on Broad Street. 

He built this property, 172-174 Main Street for his three spinster daughters.  Notice the three red doors?  Each was an entrance for one daughter.  It then became the Telephone Exchange for Wethersfield, where switch board operators routed calls to Wethersfield homes for decades.

Currently a four family home, the 4,800 square foot Victorian mansion sits on 1/2 acre of land.  and is located in the Wethersfield Village Business District, which allows a variety of commercial uses.  This property can be kept as a multi-family investment property, or it can accommodate office or retail use or a combination.  It is located in the heart of the business district, surrounded by shops, museums, restaurants and historic attractions. 

There is no parking in the lot! Someone's in my spot!

Parking Lot Blues decoded.

If you're a building owner you've probably heard this complaint from someone at one time or another, especially if you took the bait and "assigned" parking spaces for a tenant in your building.  Here are the best things you can do to avoid parking hassles in your lot.

When a tenant is interested in leasing space in your building, ask about their business. How many employees do they have? What are the hours they typically work? Are there meeting days when there is mandatory attendance by all employees at the same time?  Do they ever host meetings where many non-employees attend? How many visitors do they typically get? This basic information will let know if you have enough space to accommodate the tenant's needs when they are in full operation mode. 

Don't rely on the town imposed ratio of 4 cars per every thousand square feet of office space or 6 cars per thousand for retail use. These ratios are typical for an average user, if your tenant has special needs, then even though the town says you have enough, you probably don't. Here are some tips to help you manage your parking lot blues.

Purchase Your Business Location with Attractive SBA Financing

You only need 10% down to buy your own business location through the CDC/504 loan program!

If you are thinking about purchasing a property for your business, now may be a good time to do it. This is especially true if you have good credit and a history of running your business profitably.  The soft commercial real estate market has created some real opportunities.  Property prices are down, some foreclosure properties are available at rock bottom bargains and interest rates are low.  Plus, the SBA loan program designed to help small businesses own their own property is having a sale for as long as the "Stimulus Funds" last and has eliminated two of their program fees making this sweet deal even more affordable. The CDC 504 Loan program provides 90% financing!

Connecticut Office Space Is On Sale Now!

As Connecticut office space vacancies continue to rise, commercial real estate owners will be decreasing asking rents and making concessions to attract credit- worthy tenants in the market today.  Smart owners will aggressively work to fill their buildings and lock in their cash flow now.  Connecticut office space is going on sale in 2009!  How can your small business benefit from this economic downturn?  If your business is stable, now would be a great time to consider trading up to class A space in that swanky office building you've been longing for.

It’s Hot, It’s Cold! Temperature Control in an office building.

Today I visited a company in a lovely office building in West Hartford, CT. It was a first class, multi-story building around 100,000 square feet, no small property.  After a few minutes, I was taking off my jacket and looking for a glass of water. No kidding, it was hot! When I mentioned it to the person I was meeting, she said it was an ongoing problem for them. She said she had asked the building manager to please not turn the heat on that morning because it always got so hot by noontime. The property manger said he had to turn it up because the tenant next door was so cold they needed the heat.

Clearly, this building has a HVAC problem when the control for one tenant's heat is in another tenant's space. So, if you are a tenant in a building struggling to warm up or cool down, here is some information that may be helpful.

Is now a good time to invest in commercial real estate?

The credit crunch in the residential real estate market has caused panic on Wall Street, a sharp decline in home sales and record foreclosures.  However, a similar total melt down has not occurred in the commercial real estate market.  Having said that, there is a definite credit tightening for commercial loans and heightened underwriting scrutiny for mortgage applications.  So, is now the time to look at investing in commercial real estate or will there be a similar value crisis for commercial properties? 

It's Electrifying! How tenant electric is charged to you.

On our site, MySquareFeet, the premier on-line commercial real estate listing service, we frequently get questions from tenants about bills or notices from landlords that they don't understand.  And, we try to answer all of them or direct tenants to places where they can find answers.  Occasionally, a question leads to a good blog topic, as this one did.  Last week, a visitor to the site linked to our FAQ's and asked about a line item in her most recent CAM (Common Area Maintenance) bill.  She wanted to know why there was an electric charge in the bill when she paid her electric directly to the utility company.

Maybe we can help shed some light on this topic.  Landlords handle electric charges in their buildings in a variety of ways.  Here are the most common ways electric use is charged to tenants.

Help! My retail rent is too high, how can I lower it?

Unless you have been living in a cave for the last year, you could not have missed the news that the economy is stalled, no one is shopping, spending is at a standstill and millions of people have been laid off nationally.  What’s a retailer to do?

 

The lease you signed a few years ago in the economic boom, which seemed good at the time is now a millstone around your neck and threatening to sink your business – what can you do now?

 

In response to these hard times, many retailers are forced to shut their doors, but if rent alone is the make or break issue in keeping your business alive, perhaps there is hope – if – your landlord is willing and able to work with you, and you armed are with the right ammunition.

Operating Expense Escalations Explained

In the early part of every year, tenants in many commercial buildings will get their "operating expense escalation" bills.  In the past, this was a very predictable 2-3% over the previous year, but today, with rising utility costs and insurance, operating escalations are anything but predictable. Tenants need to know what constitutes their operating expenses and how they can minimize the impact on their rent and occupancy costs.

Simply put, operating expenses are the total cost of all the goods and services needed to keep a commercial property running.  Among them are the costs for utilities, heating, air conditioning, water, trash removal, landscaping, snow removal, janitorial expenses, security, insurance, accounting, management fees, repairs and maintenance or other costs associated directly with the operation of the property.  Real Estate taxes are generally calculated separately, but methods for "passing through" escalations are similar.

Security Deposits Explained

Landlords require security deposits when they lease commercial real estate to tenants. The basic logic behind the security deposit is to protect the owner from physical damage to the property when a tenant leaves and/or to give the owner a financial cushion in the event of a monetary default under the lease.

In my experience, the "Security Deposit" clause in a lease is heavily negotiated and the inability to agree on the terms can sometimes cause the negotiations to break down. It is such a "deal killer" issue that it is a good idea to make sure that the monetary terms of the security deposit are laid out in the offer or the "Letter of Intent" along with other financial terms before lawyers are engaged to begin drafting leases.