Monday, September 17, 2018

How to Do a Change of Use When Leasing Commercial Space

change of use in Austin TexasWhen buying or leasing commercial real estate you sometimes will come across a commercial property that was previously used as something different than your intended use.

For example say you find an industrial space for rent Austin that was previously used by a wine distributor. According to the City of Austin zoning chart their use was considered Limited Warehousing and Distribution. Your a food and beverage company that wants to use this industrial space for food preparation. Before you will be able to open for business you will have to apply and be approved for Light Manufacturing which would take about 15 to 20 days.

Change of Use Process

The change of use process will vary from jurisdiction to jurisdiction. In most counties and cities you will have to visit your city planning department or development assistant center. Anytime there is a proposed change in the use of a space or building you must obtain a permit. The change of use permit is required because they want to make sure you comply with the applicable codes for a new use before issuing a certificate of occupancy.

Change of Use in Austin Texas

In Austin, Tx however a change of use is a two step process.

1. First you need a site plan exemption application or a site plan correction application if they have a current site plan on file for the property. Either application must be submitted to the Austin Tx Development Assistance Center located at One Texas Center, 505 Barton Springs Road, Austin, Tx 78704. They are open from Monday to Friday 9 am to 12 pm. The review time is 7-10 days.

2. Next you need to submit a building permit application with Commercial Plan Review which is located at the same address on the 2nd floor Monday – Friday, 8:00 to 12 pm. Once you have approval of the building permit you will be issued a Certificate of Occupancy and you can open for business.

If you have any questions about whether you are required to do a change of use on your commercial space in Austin or how to do it feel free to give us a call to discuss at 512-861-0525

What is a Certificate Of Occupancy?

certificate of occupancyA certificate of occupancy (C.O.) is a document given by a building department or local government agency that certifies that your commercial building and/or space complies with the plans you submitted to and that were approved by the city, the city’s / county’s applicable building codes and laws, and that it’s in a suitable condition to occupy. 

Who Needs a Certificate of Occupancy?

The procedure and requirements for a certificate of occupancy vary from jurisdiction to jurisdiction and on the type of commercial property. In general however it’s required when

  • A new building is built
  • When a property is changing from one use to another(e.g. an industrial building changed to residential use)
  • Change of ownership
  • Occupancy of a commercial building changes
  • When doing tenant finish outs and a permit is required

Temporary Certificate of Occupancy

A Temporary certificate of occupancy gives the occupants the same rights as a CO however only for a temporary time period.

Certificate of Occupancy in Austin TX

If you are buying or leasing commercial real estate Austin Tx and doing any construction or improvements you more than likely will need to get a permit and then ultimately approval for a certificate of occupancy. When you complete and pass the inspection phase after tenant finish out and construction you will receive a certificate of occupancy. The C.O. proves that your building and space is safe for your particular use. If you are trying to get a C.O. in Austin and not sure where to start the following steps will help.

  1. Start with the City of Austin Development Assessment center . Here you will verify the intended use that is allowed under current zoning, submit plans for construction, determine if a site plan is needed.
  2. Next is Commercial Plan Review. Anytime a structure is erected, altered, improved, repaired, etc the review staff has to approve.
  3. Permitting – After the commercial plan review has approved your building plans and application you can pick up permits and pay.
  4. Inspections – Your project will be inspected to ensure that it’s compliant with mechanical, electrical, plumbing, and zoning, as well as other structural and engineering inspections. Once everything passes you will be issued a certificate of occupancy.

Saturday, September 15, 2018

How to Choose a Reliable Commercial Contractor

how to choose a contractorWhen buying or leasing commercial real estate in most cases you will end up having to build, renovate, construct, or do some sort of tenant improvements whether you want to occupy office, retail, or warehouse space. Choosing the right contractor however can be a difficult process especially if you have not been through the process before.

Picking the wrong contractor can lead to your tenant improvement project being way over budget and not on time which can create a lot of stress especially if you have a hard deadline or existing lease expiration date. Going through a commercial real estate renovation is not ideal or fun however choosing the right commercial contractor can make the different between a successful move in and a stressful one. Below are a few tips on how to select the right contractor that will keep your project on time and within your budget.

Know What Your Needs Are First

Have some plans and ideas. Contractors can’t guess your needs and while verbally telling them what you want is possible on a small job in most cases you want to have things in writing. If the scope is really small (e.g. just building a couple of walls or having new flooring installed) then you really won’t need plans but do have what you want done in writing. If the scope is larger you need to hire an architect or space planner to draw up an office layout that meets your current and future needs. Once you have a good plan that you are at least 90% sure will work then you are ready to get preliminary bids.

Find Out Commercial Contractor Recommendations

There are a few ways to go about choosing the best contractor. If using a commercial real estate company Austin you can start with them. They have been through the process a ton and can share a complete list. You can also ask the landlord for a few references on who they have used for tenant finish outs. Ask neighboring tenants who they used and how their experience was. As you do your research you will find that there will be a handful of commercial contractors that do most of the tenant build out work in your city. 

Ask Contractors Lot’s of Questions Before Asking For Construction Bids

Before asking for contractor bids you want to interview at least 5-6 contractors and ask them a lot of questions about their experience.

  • Find out how busy they are right now and if they have the bandwidth to do your job. 
  • How they communicate during construction regarding timelines, challenges, issues, etc
  • What do they do to keep costs down and within budget?
  • What do they specialize in?
  • Get references for other projects they have done
  • Do they have employees or do they subcontract everything out?
  • What work will be completed by subs vs employees?
  • What vendors do they use (e.g. architects, electricians, plumbers, etc..)?

Obtain at Least 3 Preliminary Construction Bids

choosing the right commercial contractorNow you are ready to request preliminary commercial construction bids. You may have not signed a lease yet or closed on a property however BEFORE you do it’s important that you get at least 3 preliminary written bids first. The landlord may be giving you $50,000 in a tenant improvement allowance however how do you know if the total construction costs will be above or below that? In most cases it ends up being above and if so it might make this property too expensive for you. You don’t want to be surprised later on by finding out you have to come out of pocket by $100,000.

You need to set your expectations and having an idea of what the costs will be is VERY important. Even if you are 90% sure you are going with XYZ company getting a few other prelim bids will educate you on typical costs and you will be able to keep your contractor honest. Make sure the bids include a line item for every aspect of the build-out. For example total plumbing, electrical, flooring, walls, mechanical costs, etc.

Compare Each Commercial Bid

Make sure to compare each bid ensuring each one includes the same level of materials, tasks, and scope of work. You want to ENSURE they are apples to apples. If the landlord is charging a construction management fee make sure you know whether it’s on the total construction amount (hard and soft costs) or just the hard costs. Also make sure to get estimates on architectural and engineering fees if needed and insert those as line items on the bids.

Value Engineer the Construction Scope of Work If Needed

If the bids came back much higher than you anticipated then discuss with each contractor how you can value engineer. This essentially means reducing the scope where possible to get the costs down. You want to meet in person or jump on a conference call and go through the bids line by line. Do this with each contractor and find out where (if possible) you are able to reduce the costs. You can also negotiate with the contractor to see where they are able to reduce their list price.

Choose the Least Expensive Qualified Commercial Contractor

After comparing all the bids now is the time to choose a contractor. Don’t always go for the cheapest, however picking the most expensive doesn’t mean you will get the best service. I like to pick the “least expensive qualified contractor”. I also make sure I pick the one that I know has the time and bandwidth to work on my project. If I have a deadline it’s important that it gets met. In addition you want the contractor to commit in writing to give you weekly progress updates whether physical onsite meetings and/or conf calls. There needs to be some sort of penalty for not doing this. Communication is key to a successful build out.

Don’t Pay Contractors All Up Front

You may be required to pay a small retainer fee or money needed to cover ordering materials but paying the full construction costs in advance is not advisable.

Get Building Permits If Necessary

For small jobs a construction permit may not be required. However if the scope of work is significant the city will require a building permit. In most cases (such as City of Austin) a qualified commercial contractor is required to obtain permits of their work. Be wary of one that asks you to obtain a permit on their behalf. The party that pulls the permits is held responsible for any construction work that does not meet city code. Before the project begins request proof from the contractor that the building permits and trade permits (if required) have been obtained.

Weekly Construction Updates & Timelines

Communication is key for a successful tenant improvement finish out or other construction. Get in writing up front that the contractor will have a predefined day and time to either meet onsite or have a conference call to review construction progress and if the project is still scheduled to be completed on time. The best experiences I have had have been when we have all met in person to discuss project progress, obstacles, etc..

For more info checkout Federal Trade Commission Consumer Information hiring a contractor

City of Austin Building Permit Services Commercial & Residential Property

city of austin building permitIf you are planning on buying a commercial building or leasing commercial real estate Austin you will more than likely need to do some sort of construction and/or tenant improvements. Whether it’s office, retail or warehouse space, if it’s located within the City of Austin, and depending on the scope of work, you or your contractor will probably be required to pull a permit before getting started.

Services City of Austin Building Permits Provides

  • Issuing building permits
  • Issuing trade permits such as mechanical, electrical, plumbing, & irrigation permits
  • Permit payment services
  • Registering licensed contractors to perform work (e.g. mechanical, electrical, plumbing, and irrigation)

When is Permit Required in Austin?

A building permit in Austin is required to construct, erect, alter, enlarge, improve, repair, convert, remove, demolish, or move any structure or building within the City’s zoning jurisdiction or in particular MUDs (Municipal Utility Districts). The permit can be 

Before a permit is issued all building plans must be reviewed by Residential or Commercial Building Plan Review. Depending on the scope of work a trade permit (e.g. mechanical, electrical, plumbing, irrigation) may also be required. To determine whether or not your project needs a permit call (512) 978-4000

What Type of Commercial Work Does Not Require a Permit?

 An Austin building permit is not required for the following commercial work, however you still must comply with applicable city codes, building codes, etc. To see the full list and details of commercial work in Austin not requiring permit click here.

Building

  • Finish work such as carpeting, tiling, painting, cabinetry, counter work, etc.
  • Movable and non-fixed fixtures, racks, counters, cases, and partitions no higher than 5 feet 9 inches
  • One story detached buildings used as storage & tool sheds, playhouses, etc that are not greater than 120 sf, provided not in a flood zone
  • Fences 8 feet high or less provided not in a flood zone
  • Retaining walls 4 ft or less
  • Driveways and sidewalks no more than 30 inches above grade

Electrical

  • Replacing cables and cords on portable appliances
  • Replacing dimmer switches or fans
  • Replacement of electrodes, transformers, overcurrent protection devices, etc of same size, capacity, voltage, amperage, etc.

Mechanical

  • Portable heating appliances, cooling, ventilation equipment, evaporative coolers
  • Replacing any parts that do not alter its previous approved status or make unsafe

Plumbing

  • Work needed to stop leaking drain, waste, soil, or vent pipe
  • Work needed to clear a stoppage
  • Repairing and replacing fixtures and exposed traps

What Happens During Construction and After Permitted Work is Completed?

Depending on the scope and type of work that was permitted an inspection will be required during construction. After the work is fully completed whoever a final inspection must be performed. The inspection scheduling is the responsibility of the permit holder. This can be initiated by a licensed contractor, homeowner if listed at general contractor on permit, official agents registered under contractor, or a master trade contractor.

When Do Permits Expire?

Permits are only active for 180 days. On the 181st day the permit will expire if a project has not received any inspections. If you let the permit expire this must be resolved before they city will issue a new permit. To check if your property has an expired permit call (512) 978-4000.

City of Austin Permit Search

The Austin permit search tool allows the public to do searches for permits, plan reviews, inspections, and the status of those permits/cases. You can also view issued construction permits and the online user manual for public search assistance.

The city of Austin provides this tool so registered users can apply for permits online, pay for permits, schedule inspections, apply for right of way permits and assign permits.

 

 

Thursday, September 13, 2018

Lifespan of Commercial Heating Ventilation Air Conditioning Units

commercial hvac unit life expectancyIn most cases when leasing warehouse or retail space tenants are responsible for the maintenance, repair, and replacement (if needed) of the heating, ventilation, and air conditioning (HVAC) units. Before renting commercial space you need to make sure that you know how old the units are and how they have been maintained over the years or you will end up paying for costly repairs that were not caused by you. Below we will go into more detail as to why.

What Does HVAC Stand For or Mean?

HVAC stands for heating, ventilation, and air conditioning. In most states that experience extreme heat and cold HVAC is common in residential properties such as apartments and single family homes, hotels, senior living facilities, apartment buildings, commercial properties such as office, retail, and industrial space, etc.

How Long do Commercial HVAC Systems Last?

The life expectancy of commercial hvac units is typically 15 to 20 years however depends on a number of factors such as:

  • Size of the system in relation to the building or space square footage
  • Size of the Unit in relation to the ductwork size
  • Preventative maintenance regularity
  • How often filters are changed
  • Climate and weather conditions
  • Intensity of use such as extreme cold settings or hot
  • Installation quality
  • Compatibility of system components age vs the units age

Average Lifespan of HVAC Components

  • Central Air Conditioner – 15 years
  • Rooftop Air Conditioner – 15 years
  • Air Compressor – 15 years
  • Heat Pump – 15 years
  • Boilers – 30 years

How Much Does it Cost to Replace an HVAC System per Unit?

The average cost can range from $4,500 to $5,000 however that depends on the size of the space you are trying to heat and cool. For example if you are trying to cool a 1200 sf space you might need a 2 ton unit. A 5,000 sf space might need a 5 ton unit. For larger commercial spaces expect to pay anywhere from $4,500 to 10,000 for each hvac unit being replaced. Replacing HVAC units can be costly upfront however your roi will be tremendous. When all the units are of similar age the entire system within the premises is more reliable and efficient, which means you can worry less about repairs costs.

Why Worry About HVAC Units When Leasing Warehouse Space?

When your leasing industrial space such as warehouse space Austin or office/warehouse space you most likely will be responsible for 100% of the repair, maintenance, and replacement (if needed) all all the HVAC units that service your space. That is because those units ONLY service your space an no others as you see with traditional office space. If the units die or need repair you have to pay for those costs no matter how old or bad the units are.

Because of this you have to make sure that you don’t sign a lease until you know all the important details about the HVAC units such as:

  • Age of each unit
  • Date installed
  • Manufacturer & model numbers
  • Repair & maintenance history of each unit (work done and cost)
  • Warranty information
  • Operating instructions
  • Previous service agreements

During the negotiations ask the landlord to have all of the HVAC systems inspected, maintenanced, and repaired or replaced if needed before you take occupancy. You may also ask for a warranty for the first year or two.

If the units are newer ask if their is any remaining manufacturer warranty.

If the systems are older and close to the lifespan of 10-15 years then you definitely want to get some sort of warranty or CAP on any hvac expenses. You have to keep in mind that an old unit will need more repairs than newer ones. Also, your utility bills will be higher because the older units are less efficient.

At the end of the day if the landlord is asking you to take over the maintenance and repairs of HVAC units that are at or over the typical life expectancy you need to stand your ground and negotiate to have them take most of the responsibility………….or go find another space.