Aftermath of a Building Sale

Have you ever been a tenant in an office building that was sold? The aftermath of the sale is a tenuous time. Oftentimes a new property management and leasing team are brought on board, so there is a ramp up time as they get a handle on the building, the accounting and the tenants. This new team has made commitments to the new owner to increase the value of the property by perhaps lowering expenses and raising rents. The landlord typically makes improvements to the common areas of the building and the infrastructure (i.e. elevators, air-conditioning, etc.). Why should you care?

The most important reason is the chance that your rent could increase in the next year. There are two possibilities for this increase: 1) the real estate taxes could increase due to the increase of the assessed value of the property and 2) operating expenses could potentially increase due to changes made by the new ownership and property management. I must add the caveat that operating expenses don’t always increase. I recently came across a property that significantly decreased costs because the new ownership had determined ways to lower expenses without cutting services. They were the exception to the norm.

If your lease is up for renewal in the first 12-18 months of a new owner, you could get the brunt of the new leasing guidelines. New leasing guidelines = increased rent usually. The new owner bought your office building on the assumption that they could increase rents and they know that usually over 75% of office tenants renew their leases. If your lease is large enough, your transaction might need lender approval which adds another approval layer and takes up more valuable transaction time.

Navigating a lease renewal in the aftermath of a building sale is a tricky process. You need the expertise of a seasoned tenant rep broker to guide you through these turbulent waters. If your building is for sale or has just sold, give us a call or shoot us an email so we can discuss your unique situation. We can create a strategic process for your office lease renewal.

Sizing Up a Tenant Rep Broker

Most people don’t realize that a commercial broker specializing in office leasing is a highly specialized expert in a unique niche of commercial real estate. Residential realtors and even many commercial brokers rarely have any expertise in commercial leases. While I would not recommend using me to buy a house, I can tell you that utilizing my expertise for your office renewal or relocation will inevitably save you time and money.

Finding the right office space is only about 20% of the process. To begin the process, a tenant rep broker must understand the market; know where deals are being signed; what concessions are available plus leverage relationships with the small niche of office leasing brokers in order to find off-market deals and to gather all that market information. The real work a competent tenant rep broker provides includes negotiating the business terms, financial analysis, overseeing the design of the space, construction pricing and lease review.

The next time you are meeting a real estate professional who wants to represent you on your office lease negotiation, ask a couple of questions:

• How many commercial leases have you handled in the past year?
• When would they recommend that you start on your renewal?
• Can you provide case studies and/or references for some recent lease transactions?

The first question just lets you know if this person has any expertise in commercial leasing. The second question is a trick question. If the answer is to start your renewal process about 90 days (or less) from your lease expiration, run away rapidly. They have already surrendered your best leverage – time. The third question just keeps the tenant rep broker on their toes and allows you to gauge their follow up.

When you work with me, I provide a wealth of knowledge from my years of working in this unique niche of commercial real estate. The bonus to you, the business owner, is that the landlord pays my commission as a concession to the deal, so there is no cost to you. Why not leverage my expertise to level the playing field with your landlord and save yourself time and money at the same time? Call me today for your free lease analysis.

50 Shades of Gray

The headline caught your eye didn’t it? Actually I’m not talking about the book (or movie) but today’s current design trends – gray, white and lots of it. South Florida Business Journal has a slideshow of the 2016 Coolest Offices in South Florida. As I scrolled through some of it, I saw a montage of current design trends which include:

• Gray with pops of color, but gray, lots of gray
• Areas of collaboration or gathering such as kitchens with bar seating, living room type areas for informal meetings, small meeting areas in open work space. These are wonderful new additions to today’s office design.
• Contemporary modern design for both office layout and furniture – -even the huge law firms of Akerman and Greenberg Traurig have traded their shelves of law books, tons of file cabinets and heavy furniture for light, airy, modern design and furniture.
• Exposed ceilings and/or ceilings that aren’t your typical standard dropped ceiling with ceiling tiles. Sometimes these upgraded ceilings are only in a portion of the space, but they make a difference.
• Natural light and glass to move the light deeper into the office space
• Eclectic personal touches like surfboards, a storm trooper helmet, funky pillow on a sofa

I love seeing the creativity that goes into the design of these office spaces. Design and color selection are not my talents, but if asked, I offer this advice when planning a new office space:

• Go with carpet tiles. Even if there is a cost difference, get the carpet tiles. It makes re-carpeting much easier (particularly with work stations); single stained tiles can be easily replaced and it makes the floor more visually interesting.
• When buying work stations, buy from a big manufacturer (i.e. Herman Miller, Steelcase, Teknion to name a few) so you can reconfigure and/or add pieces easily in years to come.
• Remember that office furniture depreciates faster than you can possibly imagine, so be mindful that you will never be able to sell it for a fraction of what you paid for it. You can purchase refurbished office furniture which looks brand new for a fraction of the cost if you are so inclined.

When considering a re-design of your office, I strongly suggest seeking the advice of an interior designer with a focus on commercial interiors. I have found that their advice and solutions can be invaluable.

Is Your Office a Pain in Your Neck?

At a recent Toastmaster meeting, my dear friend, Paula Hesch, office interior designer extraordinaire, gave a speech on “Office Ergonomics”, the applied science of people’s efficiency in their working environment. Paula had some great information on how to make your work space more comfortable that I wanted to share with you.

Paula has a similar situation as many of us office workers. She sits at a desk for long periods, does repetitive tasks (i.e. computer work, drawing) and she was even suffering from neck and shoulder pain. After trying massage, yoga and stretching classes, she realized that her work space was the source of her pain. She followed her own ergonomic findings and alleviated her physical discomfort by simply adjusting her work space using the following principals:

• How is your work area set up, how do you sit and how long do you stay in one position?
• Do you have a repetitive task movement and what is it (i.e. typing, phone)?
• Define your work area lighting (is it enough), noise level (too much or too quiet) and temperature
• What tools do you need to do your job and are they set up correctly?

Paula knows that most of us don’t know how to properly set up our work stations. She also recognizes that the office of today is constantly evolving because sometimes we are working at a standard desk in an office, or at home, a client’s conference room or even at a Starbucks. Paula noted that many people don’t realize that when your workspace is set up correctly, you can prevent injuries as well as physical and mental stress. Your chair needs to support you in certain ways, the desk needs to be a comfortable height, computer monitors need to be less than an arm’s length away with the top of the screen at eye level and the list goes on. Paula provided a great resource guide to help you on this.

Paula also recommends that everyone get out of their chair every 30-40 minutes to stretch and take a break. This helps both physically and mentally. I am a huge proponent of this. She talked about considering an adjustable desk so you can stand for some tasks and sit for others. The possibilities with today’s office furniture are limitless. I have made adjustments to my computer monitors and the results were immediate.

Take a look around your office and if you need help, give Paula a call for remodeling and give me a call when you need to renew or relocate your office.

Contact today’s contributor at:
Paula Hesch Designs
7430 S.W. 48th Street
Miami, Florida 33155
Phone: 305.740.4411
paula.hesch.designs@gmail.com

Successful Subleasing

I am wrapping up a sublease in Doral and am in the midst of marketing a beautiful one on Brickell, and I have realized many folks don’t understand the benefits of a sublease and the steps necessary to execute a successful sublease.

The majority of commercial office leases in South Florida provide tenants with the right to sublease their space.  Oftentimes companies are acquired or there are changes to their business model that result in an office space no longer being needed, but there is still a lease in place.  In many cases, the best way to mitigate that rent liability is to sublease the space.  Here are my  5 tips to a successful sublease:

1. Determine if furniture stays or goes; when will the space be available; and dig out your lease and a recent rent invoice. You will need these items when you meet with me.
2. Call me. No, seriously, you will usually need a real estate broker with an expertise in office leasing to help you market the space and then guide you through the sublease process. An experienced broker will understand the current market, know your landlord and be able to provide some guidance about how long it will take and how much rent you may be able to recover.
3. Once I find a prospect, you will need to move quickly because subtenants usually want to occupy immediately. Terms need to be agreed upon so a sublease document can be drafted and signed by both parties.
4. Once the sublease document is signed by both parties, the Landlord reviews the document and then determines if it will consent. Usually you will have to pay for the Landlord’s attorney’s fees for this review and preparation of their consent.
5. Your subtenant can move in only when ALL of the following have occurred: signed sublease, signed Landlord’s consent, subtenant has provided insurance certificates for themselves and their movers, subtenant has paid its security deposit and first month’s rent.

A sublease can have quite a few moving parts since so many parties are involved.  I have handled more than my fair share of subleases.  In fact, landlord leasing agents refer subleases to me frequently because they know that they can trust me to do the job efficiently and correctly.  Tenants are happy because I save them a lot of money.  If you have an office you no longer need, give me a call.  I can provide you with a free analysis of your situation.

Top 10 Office Tour Tips

I show office space every week and have done so for years. I have literally walked through hundreds if not thousands of office spaces and a myriad of buildings, so here are my top 10 tips for touring office space. Since you will be living in this space for years, you need to leave no stone unturned when selecting a new office.

1. Wear comfortable shoes when you go out to tour. There is no sense being miserable, so be comfortable and ready to walk – a lot.
2. Take notes, lots of notes, so you can remember what you see. Usually on a tour, I will limit it to about 4-5 buildings and maybe 8 spaces at the most. Most folks lose track of what they have seen after about 4-5 buildings. If you like a space, take pictures or a video to help jog your memory.
3. Begin your analysis from the moment you arrive at the building. How is the parking? Is the parking lot (or garage) clean? Is it easy to maneuver? Do you feel safe here?
4. How is the lobby and building common areas? Are they clean? Do you feel at home here? Is it appropriate for your business?
5. If you like the building, take a peek at the bathrooms. You will be using them every day if you move into the building, so check them out. Are they clean? Are they well maintained?
6. If you are looking at a space that was occupied a long time, it probably will not show very well. Ask to see a recently re-modeled space so you can see the quality of the landlord’s construction. Make sure you ask what is upgraded in the space and what is building standard.
7. What kind of amenities does the building have? Would you use them or are they just frills that you don’t need? What type of amenities do you require (on-site café, conference rooms)?
8. What type of improvements have been made to the building in the past 2 years? What is scheduled for the coming year? You don’t want a building with an old, leaky roof or a scary elevator, not to mention air-conditioning problems.
9. How is the building staff? Do they seem friendly and approachable? Is there an on-site manager? How many building engineers service the building? Do they have a day porter/matron to tidy up throughout the day?
10. If you really like the building and it has made the cut to one of your top choices, try commuting to the building both in the AM and PM. How is it to get in and out?

I help my clients find new office space, but I also help them negotiate a fair deal when renewing. Give me a call to discuss your unique situation. I am always happy to help.

Your Name In Lights

The term “signage” is just commercial real estate jargon for signs. Signs have the potential of being a key component in an office lease negotiation. I have negotiated all types during my career and here are some ways to get your name in lights.

Typically all landlords grant their tenants to have their company name in the building directory and a building standard sign at the suite entry. Sometimes you may want directional signs if your suite is down a hallway or if it is a large firm of professionals (I.e. attorneys, accountants or physicians), you need to insure you can get separate entries for each professional if needed. This is all routine, but needs to be addressed in the lease to insure you get what you want. But what about your name in shining lights?

The first point to understand is that building signs are a privilege granted at the sole discretion of the landlord and THEN it is subject to governmental approvals and permits. Second, if you get your building sign be prepared to pay for it. You will pay for the sign, its installation, maintenance and electrical consumption plus you may have to pay additional rent for the privilege of this building sign.

If you want a building sign, there are several types that may be an option for you. The jackpot is Exclusive Building Signage. This is usually a tenant who occupies a substantial portion of a building. They are the only name on the building. Oftentimes tenants pay a high price for this right, particularly by expressways or roads with high traffic counts.

The second runner up is simply Building Signage. These signs can be on the side of the building, but may not always be at the top. Sometimes you have one tenant name at the top of the building, but another tenant may have it’s name on the building so it’s seen at street-level or perhaps on the parking garage.

When building signage isn’t an option, a tenant can sometimes negotiate a monument sign which is a free-standing sign on the building’s property. There are two types. The best is Exclusive Monument Signage. This gives a tenant a stand alone monument sign just for themselves. No sharing. Another good option is sharing a monument sign with other tenants. The number of tenants vary, so you will want to lock that down in the lease negotiations.

Signage is just another component of my lease negotiations. If you want to see your name up in lights, give me a call so we can discuss a winning strategy for you

If You Build It, Will They Come?

I have been up to my eyeballs in construction issues lately, so I wanted to share some trends I am seeing:

1. Construction costs continue to escalate sharply. Workers and materials continue to demand a premium which is driving costs upwards. Traffic, demand and logistics headaches have caused top interior contractors to charge extra for jobs in Brickell or Downtown. This affects not only rental rates, but also lease terms because landlords need more time to recoup those expenses.
2. Because the construction industry is so busy, everything is taking longer. Architects and engineers are so busy that it takes longer to get plans. The various building departments are busy so processing takes a bit longer. Add in the contractors who are stretched thin, and delays are inevitable. If you are thinking about moving, you need to give yourself plenty of time.
3. Due to the two factors above, more and more landlords are proactively building “spec” spaces. These are smaller (1,400 to 3,000 SF) offices that incorporate a basic design with neutral finishes. I am a huge fan of spec suites because you can tweak them a little if necessary, but usually they are so well-designed that a tenant can move in immediately. The landlord is able to gain economies of scale by constructing several suites at one time and oftentimes these suites begin to lease up before they are completed.

If you are thinking about moving, contact me so we can plan a timeline and solution for your specific situation.

What’s Next for Miami Real Estate?

Last week was the CREW Miami’s 19th Economic Forecast by NYU economist Hugh Kelley. I have written frequently about Hugh and his predictions. I always find his presentation insightful and this year was right on the mark. This year he spoke about the five basic forms of economic change and how they would impact Miami in 2016. Here are my key takeaways:

• Across the United States, commercial real estate is still in a favorable position of the cycle. Nationally, it is at Position 5 of a 16 position cycle, which means that it is solidly in the Expansion cycle.
• However, Miami has already had two segments boom — hotels and multi-family. Overall he thought Miami was at an 11, so he believes it is time for Miami investors to begin thinking defensively and not looking for future upside.
• Fortunately for Miami, we are now considered a 24-hour city and 24-hour cities outperform 18-hour and 9-5 cities in both office building investment returns and multi-family investment returns. This is important to note as we move to the peak of the cycle.

For more about the event, click here for a great article by Real Deal. This morning I am at the CCIM Real Estate Outlook which is a half day seminar on commercial real estate. It will be interesting to see what they have to say.

Remember, as things begin to shift, you may need expert guidance to determine how your office space will either work for you or against you. Call me so I can help you plan for the future.

What’s In Your Office Lease?

It’s the start of a new year, so I would suggest that it’s time to pull out your lease file and run a quick lease audit.  Here are a few suggestions of things you should know about your lease:

• When does it expire?  You
  should begin your renewal process at least 12 months prior to your lease expiration.  Call me and I can explain all the reasons why you need to allow much more time than you think for the renewal process.
• When does your rent increase annually?  For your budget purposes, it’s important to realize when these increases occur.
• How does your landlord handle operating expenses?  I can write a whole article on this, but the key points for this are:  when can they increase and do you pay the increase monthly or lump sum?  You need this for your budget.
• What are your penalties for paying rent late?  Sometimes mistakes occur, so do you get a grace period and what are your late fees?
• How much parking is your landlord obligated to provide to you?  Sometimes you could be surprised….

One of my new services this year for my clients is to provide you with a free lease abstract that provides you with a quick rundown of these key points and more.  Since most office leases are over 40 pages long, we can help you with an easy-to-read summary.  I have negotiated over 700 leases, so I know the impact of not understanding your lease.  Let me help you in 2016.
Call me today for your free lease analysis and I can show you ways to save time and money.