MySquareFeet Blog

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.

Office Suites, A Sweet Alternative

For Valentine's Day, I thought I would examine a "suite" alternative to leasing conventional office space for small businesses.  They go by many names, Office Suites, Executive Centers, Business Centers, Virtual Offices, or Executive Offices, and offer many different service packages and levels, from basic to gold plated opulence, but they all do one basic thing - provide an immediate plug-and-play office for your business.

I had never actually visited one of these services, so I called upon Tom Jamison of Connecticut Business Centers to give me a personal tour and behind the scenes look at his operation.  It was an interesting visit and I now think about the benefits these services can offer a small tenant in a different light.  To quote Tom, "If you tell me you want an office today, you can be in business with a T-1 connection here tomorrow." 

On Rentable Square Feet, Usable Square Feet and Measuring Office Space

In response to my post “How a bad lease can bankrupt your small business.” I got an email from Jewell in Orange County, CA. She asked:

“What do you do to verify the difference between rentable and usable square feet?  We have had many answers about how it was arrived at…the usable sq ft is 841 and the rentable sq ft is 1067.  I would love to have some tips on how to verify the difference.”

In my twenty plus years in commercial real estate, I have had as many explanations from owners for arriving at building measurements as there are buildings, it seems.  Miraculously, when some buildings were sold, they were one size with Owner A, and the next day, Owner B would re-measure the building and it was significantly larger!  We jokingly called this “rubber ruler” measurements.  However, there are some conventional standards for building measurement which will point you in the right direction.

For Lease Signs or Goldilocks and the Three Bears

A friend of mine was telling me the story of how she was looking for space for her office the other day.  She only needed a couple of offices, which is clearly not the type of requirement that sets a commercial broker's heart on fire, so she decided to try to find it herself.

She had checked on line at my site MySquareFeet but there was nothing suitable posted, then she checked the newspaper but nothing was there either.  So, she took to the road, because "for-lease" signs are commonly found in front of buildings with space available, in fact there were about 50 signs on a two-mile stretch of the Post Road where she was looking.  She told me that it was quite possibly the most frustrating thing she had to do and she went on and on about how the signs were impossible to read, she almost crashed her car trying to pick up phone numbers while going 40 MPH and most of the signs didn't help much.

Her adventure reminded me of the story of Goldilocks and the Three Bears, some signs were too big, some were too small, but in this case hardly any were just right.