Tag Archives: lease

Flexibility in Your Office Lease

Post By : admin 9 July 2015 Leave a comment

Don’t want to be tied down with a long-term lease?  What are your options?

There are times when flexibility is critical to an organization – entering a new market, acquiring or merging with other companies, launching a new product or service, or growing dramatically in the short term.

In these cases, you should first find a corporate real estate advisor who can help guide you through the process and then find and analyze the options.  These professionals work for you, but they are paid by the landlord, so they are effectively a free service.  Their expertise and involvement also frees you up to stay focused on your business.

So here are four options that you should consider to solve your need for flexibility.

1.      Executive suites/Coworking

What’s the difference between an executive suite and coworking? Executive suites are the traditional shared office arrangement where you lease one or more private offices and have shared use of conference rooms, restrooms, a kitchen, copiers, and support staff. Coworking is a more open concept which usually provides a menu ranging from daily use of a desk to a dedicated desk to a dedicated private office. There are still shared conference rooms, restrooms and a kitchen, but little or no support staff. Coworking also will often have training opportunities, happy hours in the space and other events to create a sense of community among the people using the facility.

london-thehubExecutive suites are generally more “corporate” while coworking is more creative. Many executive suites are scrambling to compete with coworking. I was recently asked to participate in a survey by Regus, the 800-pound gorilla of the executive suite world, in which most of the questions focused on coworking. It was clear that they are considering ways to operate their suites to compete more directly with coworking. Coworking is usually a lot less expensive than executive suites.

Both options provide great flexibility for office space. Both offer plans from month-to-month to multi-year contracts. They both can also have you set up and working within a day to a few weeks depending on availability. Executive suites are usually the most expensive option offering flexibility, but can arrange for secretarial services, high-speed internet, fax, phones, copier, printer, receptionist, voice mail, and furniture rental, all in the matter of a days. In the case of coworking, most of these services are already in place waiting for you to just walk in and start working. You can even get a day pass to most coworking locations. Some of these services are included in the base rent and others cost extra. What’s included varies widely by location and operator so be sure to look at the “all in” price and not just the base rent.

2.      Sublease

When companies vacate their space prior to the lease expiration they will often offer it for sublease to reduce their remaining lease obligation.  The rent is usually discounted from the landlord’s asking rent depending on the amount of time left on the lease and whether any furniture is available.  For example, a sublease in a building where the landlord is asking $24.00 may go for $18.00 – $20.00.  The shorter the remaining lease term, the lower the price.

If you need a longer term than what is left on the lease, you can often negotiate a wrap lease with the landlord.  That is a direct deal which commences upon the expiration of the sublease.  It allows you to enjoy the lower cost of the sublease with the certainty that you can stay in the space for a longer term.

Subleasing can be risky, however.  If the prime tenant is not financially stable and the landlord doesn’t get the rent, you could be evicted even though you were paying the subrent to the prime tenant.  Subleases usually are leased in an as-is condition so any changes needed to the space may be your cost.  That’s negotiable, of course.  Finally, the landlord must approve the sublease before you move in.  If the business you are in does not mesh with the landlord’s desired tenant mix or another existing tenant would be your direct competitor, you may be denied.

3.      Space sharing

Sharing space with another firm can provide flexibility as well.  It’s a hybrid between an executive suite and a sublease.  Like an executive suite, you may share services like a kitchen, conference room, copier, etc.  This is technically a sublease so it comes with the same risks as mentioned above, but with one additional issue – getting along with and trusting your suite-mates.  You must trust the people in the other company and have compatible business styles.  You wouldn’t want to have a law firm share with a dot com or a credit restoration company share with a high-end financial planning firm.  All these companies are office users, but they use that space very differently.

4.      Direct Lease

Don’t overlook the opportunity to lease space directly from a landlord.  While they typically prefer a 3-5 year lease, I have seen them be very flexible when a prospective tenant explains the business reason behind the request.  For example, one of my clients took over an insurance company in receivership and the company leased space in a building owned by the previous business owner.  That owner was bitter about losing the company and didn’t want the company in his building any longer. So the company had to move quickly.  We negotiated with a few landlords and eventually negotiated a one-year lease which allowed the receiver to stabilize the business and find a buyer.  We even got a 5-year renewal option at a pre-determined rental rate so a buyer of the company had the option to stay and would know exactly what the lease terms would be.

5. Work from Home

Most companies overlook this option because they fear it will look bad to clients, investors and employees. They also fear that they won’t be able to maintain productivity if they aren’t looking over the shoulders of their employees. With all the technology available today, however, those concerns are far less significant than they were even 5 years ago. While it may not be ideal, it just might be the best option for a while especially for start-ups. Leasing space is a usually a large fixed cost and 2nd only to payroll and benefits. So growing companies, start-ups and new non-profits should think long and hard before committing to that expense.

In the final analysis, business owners and managers will always have to evaluate the trade-off between their desire for flexibility and the risks and costs of actually having it.

 

Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.

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Estoppels: What are they? Why should you care?

Post By : admin 21 May 2015 Leave a comment

Lots of buildings are selling right now. It seems like every day there’s another announcement of a building in the Dallas Fort Worth area trading hands. As part of the sale or refinancing of an office or warehouse building, tenants will be asked by the landlord to sign a document known as an estoppel. In fact, most leases require a tenant to sign an Estoppel and failure to do so can result in a tenant being put in default.

What is an Estoppel?  In the simplest terms, an estoppel is a legal document where a tenant confirms the terms of the lease and makes representations to another party (building purchaser or lender) about the lease.  It has two goals. First, verify the terms of the lease (dates, rent, options, security deposit). Second, prevent the tenant from asserting claims related to the lease at a later time which are not consistent with the representations made in the estoppel.  As part of the due diligence process, a buyer or lender wants to know that the lease information the landlord gave them are, in fact, accurate and that there are no outstanding claims or defaults by either landlord or tenant.

The lease will typically specify that the tenant must sign the estoppel within a given number of days. This is necessary because estoppels are usually the last thing to be done before a sale or loan is closed so there isn’t a lot of time to get them done. Furthermore, most leases will state that if the tenant doesn’t sign the estoppel within the required time, the landlord can sign it on behalf of the tenant and the tenant may then be in default as well.

In negotiating the estoppel provision of a lease, the tenant should be sure to allow enough time to review the document and make comments to it, delete language allowing the landlord to sign the estoppel on the tenant’s behalf, negotiate the estoppel itself and attach it as an exhibit to the lease, and add language allowing the tenant to request an estoppel from the landlord and/or lender.

What should you do when you get an estoppel from your landlord? Most importantly, be careful because it could change the terms of your lease.  Estoppels are often not accurate because they are prepared for all tenants in the building at one time and by people usually not familiar with the building or tenants. Here are some things to keep in mind:

1. Note how much time you have for review.

2. Review the lease including amendments taking special note of the estoppel provision.

3. Verify that the names and addresses of all parties.

4. Verify that the original lease, amendments and other documents related to the lease are properly reference in the definition of “Lease” including the dates of those documents.

5. Confirm facts with personnel in the local office to which the lease applies to be sure there are no operational concerns with the building – HVAC, plumbing, electrical, etc.

6. Be sure that all of tenant’s options to renew, expand, terminate, etc. are noted.

7. Check to be sure of the status of the payment of rent and other charges to be sure the amounts in the estoppel are accurate.

8. Delete any language which adds new obligations on tenant that are not shown in the lease.

Remember, the estoppel is supposed to simply record the facts of the existing lease and not renegotiate it.

 

Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.

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What More Customers? 4 Scientifically Proven Ways

Post By : admin 23 October 2014 Leave a comment

What a dumb question, right? Who doesn’t want more customers? But do you really?

I want more customers, but the right ones. As a Real Estate Advisor & Tenant Advocate, the client I want the most is the company which already leases space in a high-rise office building in Dallas or Collin counties with a lease expiring in the next 2 years. So getting the right client is key.

Jeff Hayden at Inc.com presents 4 scientifically proven ways to get more customers. Here they are:

1. Break Through Action Paralysis – suggesting a small action to prospects can have a dramatic increase in their response.

2. Embrace the Power of Labels – tell prospects that they are part of an elite group may make them feel good about themselves and encourage them to take action (i.e. buy your product or service).

3. Highlight Strengths by Admitting Shortcomings – you appear honest and may be surprised that if you raise an objection or weakness first, the prospect will often counter it by minimizing the importance of the issue.

4. Make an Enemy – being on the same side of an issue as a prospect or having a common enemy can bond you to them.

I have often used #3 and have been amazed at how the prospect is so quick to defend me against the objection. A twist on #2 is to make someone think they may not qualify for your services (not part of the group) and they then want to be included. Pushing them away makes them want you more.

For the full article, click here.

Have you used any of these techniques? If so, with what results?

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