Friday, April 27, 2018

What are Commercial Real Estate Lease Operating Expenses?

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commercial lease operating expensesWhen leasing commercial real estate it’s important to understand what is being included in the rental rate and what all you are paying for. Most commercial leases are going to be triple net leases where you pay your pro rata share of operating expenses as well as the base rental rate.

In many cases such as when renting commercial real estate in Austin Tx the operating expenses are going to be about half of what your base rental rate is. For example in Northwest Austin class A office space base rates are $30 sf and the operating expenses are estimated at $16 sf. In downtown Austin operating expenses are over $20 sf. As you can see operating expenses are a significant portion of your total rent amount.

Below you will learn what operating expenses are, what’s included, and what can be negotiated.

Definition of Commercial Property Operating Expenses

The definition of commercial property operating expenses (OPEX) is the costs associated with maintaining and operating a commercial property such as office space, retail space, and warehouse space. Depending on the building lease structure the operating expenses maybe a component of the gross rent or be in addition to the base rent. Most commercial office leases in Austin are going to be triple net (NNN) leases in which the OPEX are paid by the tenant in addition to the base rent. With multi-tenant buildings each tenant is responsible for their share of opex which depends on the rentable square footage of their space compared to the total rentable square footage of the building.

What do Operating Expenses Include?

  • Property Taxes – The city is going to charge the property owner property taxes which are in turn passed along to the tenants. Taxes will typically be the largest portion of Opex.
  • Insurance – All commercial property owners need insurance as required by the lender.
  • Common Area Maintenance Charges (CAM) – such as maintenance & repairs, administrative fees, utilities, parking lot maintenance, management salaries, property lighting, etc. What is included varies by property type and building owner.

What is Not Included In Operating Expenses?

The short answer is they do not typically include capital expenses, debt service, commercial property marketing costs, leasing commissions, tenant improvement allowances, or capital reserves for future repairs.

Is Commercial Real Estate OPEX Negotiable?

If you are a larger tenant then landlords may be negotiable on their controllable items such as CAM charges since they can control how the building is managed. For example getting the landlord to agree to capping the annual opex increases. Landlord’s have no control over property tax increases, therefore will not agree to cap those.

How to Negotiate an Operating Expense Cap

  • Year to Year (aka Non Cumulative Cap) – Cap the CAM percent that the landlord can increase year over year. For example with a 3% year to year cap the maximum increase the tenant is responsible for is 3%, even if it increases to 4% the 1st year.  If CAM’s increase by 2% then tenant only responsible for 2%. Most tenants prefer this approach
  • Cumulative Compounding Cap – Again an annual maximum Cap is set however landlord can recoup previous years unused increases. For example  if CAM increases by 2% year 1, tenant pays 2%. Year 2 CAM increases by 4% and tenant is responsible for paying the 4% (3% for this year and 1% left from year before). Landlords prefer this method.

Examples of Commercial Property Operating Expenses

I pulled the info below from one of the commercial leases I was reviewing. Most have this sort of language in the lease that defines what operating expenses are AND what they are not.

Operating Expenses May Include the Following:

  1. Costs incurred by Landlord or Landlord’s agents and contractors in connection with the provision of services pursuant to Section 7 of the Lease (but excluding the cost of utilities consumed in the Premises and the premises of other Occupants of the Building and Project to the extent Tenant or any other Occupant is separately paying for the cost of utilities);
  2. Costs incurred by Landlord or Landlord’s agents and contractors in connection with maintaining the Project in accordance with Section 9.3 of the Lease;
  3. Professional building management fees and the fair rental value of any management office space in the Project;
  4. Costs of capital improvements, structural repairs and replacements to the Project (collectively, the “Permitted Capital Improvements”): (i) that are intended to reduce (or avoid increases in) Operating Expenses, (ii) that are required by a governmental authority subsequent to the Commencement Date (except for capital repairs, replacements or other improvements to fix an existing condition before to the Commencement Date which a governmental authority, if it had knowledge of such problem prior to the Commencement Date, would have required to be fixed pursuant to then-current government regulations in their form existing as of the Commencement Date and pursuant to the then-current interpretation of such governmental laws or regulations by the applicable governmental authority as of the Commencement Date), or (iii) that that are replacements, retrofits or refurbishments of nonstructural items which serve the Building and/or the Project in the whole or in part (including, without limitation, Building Systems, and items in Common Areas; provided, however, unless required by Law or in order to comply with Landlord’s repair and maintenance obligations under the Lease, in no event shall Permitted Capital Improvements include (1) purely cosmetic capital improvements to the Building or the Project or (2) the replacement of any Building Structure (other than sealants for any part of the Building’s envelope, including curtain walls and windows). Expenditures for Permitted Capital Improvements shall be amortized at a market rate of interest over the useful life of such Permitted Capital Improvement (as determined by Landlord’s accountants in accordance with GAAP);
  5. Costs of supplies, including, but not limited to, the cost of all building-standard lighting as the same may be required from time to time;
  6. Costs incurred in connection with obtaining and providing energy for the Project, including but not limited to costs of propane, butane, natural gas, steam, electricity, solar energy and fuel oils, coal or any other energy sources;
  7. Costs of water and sanitary and storm drainage services;
  8. Costs of janitorial and security services;
  9. Costs of general maintenance and repairs, including costs under HVAC and other mechanical maintenance contracts; and repairs and replacements of equipment used in connection with such maintenance and repair work;
  10. Costs of maintenance and replacement of landscaping; and costs of maintenance of parking areas (including, without limitation, the Project’s parking facilities) and other Common Areas;
  11. Insurance premiums and deductibles, including fire and Special Form coverage, together with loss of rent endorsement; public liability insurance; and any other insurance carried by Landlord on the Project or any component parts thereof (all of such insurance shall be in such amounts as may be required by any Superior Rights Holder or as Landlord may reasonably determine);
  12. Labor costs, including wages and other payments, costs to Landlord of worker’s compensation and disability insurance, payroll taxes, welfare fringe benefits and all legal fees and other costs or expenses incurred in resolving any labor disputes;
  13. Reasonable legal, accounting, inspection, and other consultation fees (including, without limitation, fees charged by consultants retained by Landlord for services that are designed to produce a reduction in Operating Expenses or to reasonably improve the operation, maintenance or state of repair of the Project) incurred in the ordinary course of operating the Project;
  14. Costs incurred by Landlord or Landlord’s accountants in engaging experts or other consultants to assist them in making the computations required pursuant to the Lease;
  15. Costs of subsidized food service that is made available to all Occupants;
  16. Costs necessary to comply with any REAs or any ground or underlying lease of all or any portion of the Land;
  17. Seasonal and holidays displays; and
  18. Events, parties and celebrations that are available to all Occupants.

Operating Expenses Do Not Include the Following

In no event shall Operating Expenses include any of the following (collectively, “Exclusions”):

  1. Costs of repair or other work caused by windstorm, fire or other insured casualty to the extent of insurance proceeds received;
  2. Costs of repairs or renovation necessitated by condemnation to the extent of any award received;
  3. Any interest or principal on borrowed money or debt amortization, except for Permitted Capital Improvements;
  4. Depreciation on the Project;
  5. Any costs incurred by Landlord associated with payment of damages as a result of any breach of this Lease by Landlord;
  6. Landlord’s payment of damages for personal injury resulting from the negligence or willful acts of Landlord’s Responsible Parties;
  7. Costs and fees associated with the sale or refinancing of the Project or any associated debt;
  8. Penalties for Landlord’s failure to pay taxes, assessments, debt services or any other charge, unless such failure arises from Tenant’s breach of the Lease;
  9. Costs for which Landlord is reimbursed (other than Operating Expenses paid by Tenant);
  10. All costs associated with the operation of the business of the entity which constitutes “Landlord” (as distinguished from the costs of Project operations) including, but not limited to, Landlord’s general corporate overhead and general administrative expenses;
  11. The cost of services provided by any affiliates of Landlord to the extent such costs exceed the costs of such services rendered by unaffiliated parties on a competitive basis for Comparable Buildings;
  12. Costs of installing any specialty service, such as an observatory, broadcasting facility, luncheon club, or athletic or recreational club;
  13. Costs (other than maintenance costs) of any art work (such as sculptures or paintings) used to decorate the Building;
  14. Interest and penalties due to late payment of any amounts owed by Landlord, except such as may be incurred as a result of Tenant’s failure to timely pay its portion of such amounts or as a result of Landlord’s contesting such amounts in good faith;
  15. Costs arising from Landlord’s charitable or political contributions;
  16. Rental loss, bad debt or capital expenditure reserve accounts (other than escrow accounts for the payment of property taxes and insurance premiums);
  17. Promotional gifts; entertainment, dining or travel expenses;
  18. Salaries, wages and benefits of personnel above the grade of property manager (unless equitably allocated); or
  19. Reserves for bad debts or for future improvements, repairs, additions or otherwise.
  20. Costs, including marketing costs, space planners’ fees, legal fees, advertising and promotional expenses, and brokerage fees incurred in connection with the original construction or development, or original or future leasing of the Project, and costs, including inspection costs and permit, license, incurred due to the installation of new tenants improvements in the Project after the Commencement Date or otherwise painting, decorating, improving or redecorating vacant space for tenants (excluding, however, common area costs of the Project or parking areas);
  21. Costs or amounts paid as ground rental for the Project by the Landlord;
  22. Costs to the extent arising from the gross negligence or willful misconduct of Landlord or its agents, employees, vendors, contractors, or providers of materials or services; or
  23. Costs incurred to comply with Laws to remedy a condition existing prior to the Commencement Date (including, the removal of hazardous materials in existence in the Building or on the Project prior to the Commencement Date).

 

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Thursday, April 26, 2018

Garza Ranch Office Space

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Garza Ranch Office SpaceGarza Ranch is a new 34 acre commercial development in Southwest Austin that will include 400,000 sf of office space, a 140 room, five story Aloft boutique hotel, a 370 unit apartment complex and a 2.2 acre park. The new project is located off of South Mopac Expressway in Southwest Austin, really close to William Cannon. Software House International (SHI) has already announced plans to build and move into 1 of the 2 buildings to be built. The remaining 150,000 sf has not been spoken for at this point.

Brandywine Realty already has contractors doing the infrastructure work to build roads and utilities to the property that is expected to be completed by the end of 2018. The office buildings are expected to be complete by the 1st quarter of 2020.

For more information about office space for rent in Southwest Austin  at Garza Ranch give us a call at 512-861-0525

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Wednesday, April 25, 2018

What are the Different Types of Commercial Real Estate Property & Buildings?

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different types of commercial real estate propertyWhen looking at the different types of commercial real estate property investors and tenants have different objectives. Investors look at commercial real estate (aka commercial property) as a way to make money by generating profits from land or buildings. The primary ways investors make money with commercial real estate properties are through one or more of the following: appreciation, cash flow, and principal build up by having tenant rents pay down the loan. Many investors are looking hard at investing in Austin Tx commercial real estate.

Tenants on the other hand are looking to rent commercial property in prime locations for their businesses. Since there are many different types of  commercial property tenants have to thoroughly evaluate their needs to determine which type is best suited for their company. To help below I have listed the different types of commercial real estate. 

Office Space

Office buildings consist of multistory buildings in the suburbs or downtown high rises and skyscrapers with common area lobbies, hallways, and bathrooms. These larger buildings can be up to 300,000 to 500,000 rentable square feet. They also can be single tenant properties, smaller professional office buildings and condos. Short term serviced executive suites and coworking spaces would also fall into this category.

Traditional office space are typically classified as A, B, or C. Class A office buildings will be the newest, nicest and most expensive buildings in the best locations, and with the best amenities. Class B offices are nice but typically a little bit older and without all the amenities. Class C buildings are the oldest, less maintained, and least expensive office buildings, and in less desirable locations.

Industrial Space

Industrial spaces have multiple categories as they are designed to service different types of users. They will range from small Flexible or R&D properties to larger warehouse and distribution centers. Companies that rent industrial space may need a little bit of office space however a large portion of it will be warehouse space used for bulk storage, retail warehousing, manufacturing, distribution, light assembly, etc. They typically equipped with loading docks that can be grade level allowing vehicles to drive in or dock high allowing 18 wheelers or box trucks back in to deliver product.

Retail & Restaurant Space

If you are looking for visibility for your company than retail space will typically have the best locations for your store or shop. Retail shopping centers, pad sites located on highway frontages, small neighborhood shopping centers, single tenant retail buildings, large big box shopping centers (aka power centers) with stores such as Petsmart & Best Buy, grocery store anchored centers, and regional outlet malls.

Multifamily

Multifamily includes anything larger than a fourplex such as apartment complexes or downtown high-rise apartment buildings and condos. You will also see mid-rise, manufactured housing communities (e.g. mobile home parks), and special purpose housing.

Land

Any raw, undeveloped or rural land in the path of future development. You will also see pad sites for sale on many highway frontage roads.

Other Types of Commercial Property

Any other nonresidential property including hospitality, hotels, self storage units, & medical space such as nursing homes and hospitals

The post What are the Different Types of Commercial Real Estate Property & Buildings? appeared first on Austin Tenant Advisors.

Monday, April 23, 2018

What Are the Different Types of Office Space?

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Office Space for lease comes in all different types, sizes, building classes, and shapes. Many companies right now are favoring open office space layouts, however those are not for everyone. Maybe you like eclectic old houses zoned for commercial use or prefer an office in a downtown high rise. Whatever your needs there are many to choose from. When searching for office space for rent in Austin Tx you will come across many different types of office space. Below are a few to consider to see which ones are the best fit for your company.

Traditional Office Space

Traditional office buildings are typically multistory office towers in the suburbs or downtown that have common area lobbies, bathrooms, and hallways. In most situations landlords handle all of the repairs, maintenance, and cleaning. Parking is on a square footage basis (2-5 per 1000 sf depending on the building). So if you lease 5,000 sf you may get 10-25 parking spaces. In downtown areas parking will be an additional charge.

For most law firms, financial services companies, accounting & investment firms, etc the traditional office layout works the best. Traditional office space allows your employees to have their own private rooms to work and meet with clients since confidentiality is key. Common features of traditional professional office spaces are

  • Reception
  • Conference room
  • Private offices
  • Bullpen
  • Break area.

Most traditional office space leases require that you sign a multi year lease that is typically 3-5 years or longer.

traditional office space in austin

Creative Office Space

Creative office space is also thought of as office space with an open layout. They all share a similar decor, layout, style, etc however creative offices share a few common traits such as

  • High ceilings
  • Floor to ceiling windows
  • Wood floors or nice carpet tiles
  • Big break areas
  • Fewer private offices and walls
  • Lots of glass walls

Creative offices encourage functional collaboration. With fewer walls between departments there is typically more transparency, collaboration, and communication between leadership, managers, and employees.

Office spaces that are creative also tend to be more efficient allowing you to fit more employees per square foot. You can get more people in a space when you have fewer rooms and more rows of tables or cubicles.

Startups, tech companies, creative agencies are typically drawn to creative open office space, however large companies and even law firms and financial companies are exploring this type of space to encourage communication and collaboration within and across departments and teams.

creative office space austin tx

Downtown High Rises

These are basically traditional offices spaces found in high density downtown areas. You will see downtown skylines painted with large class A office buildings typically 20 to 30 stories with 300,000 to 5,000 sf of rentable office space. Most of them come equipped with all of the class A amenities as described in the office building classification below. 

downtown office highrise austin tx

Coworking Office Space

These are basically shared office situations. You have the flexibility of doing shorter term leases and they come furnished. Shared meeting rooms, break areas, and desks are common. These are best for small companies or tech startups who need short term work space. You can either rent a desk, a room, or a suite of rooms. Along with the flexible commercial lease terms you get to enjoy socialized events and interaction with other tenants and companies. 

Executive Office Suites

These are typically plug n play work spaces complete with furniture, phones, internet, and reception services. Regus for example will lease a full floor of a building and lease them out in smaller parcels to other companies for short flexible terms typically month to month or 3, 6, 9, 12 month increments.

Old Houses Zoned For Commercial Office Use

These are basically houses that were once residential now zoned for office space use. You typically find these in or around downtown neighborhoods. These are great for those wanting their own entrance and cool eclectic space. Lot’s of creative users and tech companies like these for their proximity to downtown.

old house zoned commercial in Austin Tx

Flexible Office Warehouse Space

For those that needs a little bit of office and a little bit of warehouse space these are perfect. It allows you to have some office space with your own entrance and an overhead door in the back for shipping and receiving. Flexible offices spaces are typically single story buildings found in semi industrial areas. You will have your own entrance and bathroom that you must maintain. You are also typically responsible for the cost of maintaining the HVAC unit.

flex office warehouse space in Austin Tx

Types of Office Building Classifications

Most office buildings are in one of the following 4 categories: Class A, Class B, or Class C, however this is not an exact science. There is not an industry wide standard on what determines a building classification. It depends on the landlord or agent, building owner, market, and other buildings in the neighborhood. Office building classes are somewhat subjective and it depends on a number of factors such as

  • Building age
  • Condition
  • Amenities
  • Location
  • Rental rates
  • Curb appeal
  • Historical significance
  • Maintenance
  • Ownership
  • Building infrastructure (e.g. HVAC, IT, Plumbing)
  • Available technology
  • LEED certification

These building classifications are not permanent as they can change depending on market trends, renovations, etc.

What is Class A Office Space?

Class A office buildings will be the nicest and highest quality commercial office properties in the market. You will see a mix of downtown high rises, historical buildings, and suburban office spaces that have the best locations, most recent technology and infrastructure, lots of tenant amenities such as building conference room, fitness center, showers, onsite deli, etc. Class A office space will have the highest rental rates. These buildings will attract image conscious companies such as attorneys and financial investment firms.

What is Class B Office Space?

Class A office buildings are a little bit older but still have nice amenities and good ownership. You will find a mix of smaller tenants looking for nice space but at a lower price. You can find class B commercial properties in prime areas but at lower prices than class A. They typically don’t offer as many amenities and services

What is Class C Office Space?

Most Class C office buildings are older with little to no tenant services. The finishes are lower quality both internal and external and they lack modern functionality and technological advances. They will also not be in the best locations. Rental rates in class C commercial buildings will be the lowest.

 

Not sure what type of office space your company needs? No worries – it varies by your company situation, size, ideal location, budget, and plans over the next 3-5 years, however we can help you find exactly what you are looking for. 

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How To Avoid Problems With Commercial Leasehold Improvements

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Avoid tenant leasehold improvement issuesWhen you lease commercial real estate in most cases you will need to do some sort of leasehold improvements. If it’s a brand new space in shell condition then obviously it will require a lot more planning and work. If it’s 2nd generation space that has been leased before it may not require as much work (only carpet and paint in many cases) unless you need to remove or add a bunch of walls.

Regardless of what tenant improvements are needed the end result can determine your satisfaction. Below is the definition of leasehold improvements, a few common problems that you may encounter, and suggestions on how to avoid them

What are Commercial Leasehold Improvements?

The definition of leasehold improvements -Improvements done to commercial spaces that tenants rent out such as office, retail, or warehouse space. Examples are building or demoing walls and ceilings, new flooring, plumbing and electrical, cabinetry, building offices and conference rooms, etc. 

Leasehold improvements generally convey with the landlord upon the termination of a commercial real estate lease and the tenant moves out. The cost of the improvements is typically negotiated between the tenant and landlord. Depending on the landlord, your credit, market you are in, scope of work, total deal terms such as lease term length, lease rate, rent concessions such as free rent, etc you can generally negotiate to get them to pay for a portion or all of the improvements. The longer lease you sign the more money you can generally negotiate for commercial leasehold improvements.

Common Problems with Tenant Leasehold Improvements

  1. Over Budget – You expect to do the leasehold improvements at or below the tenant improvement allowance you pre-negotiated and you still go over budget. Every dollar above the allowance comes out of your pocket.
  2. Behind Schedule – Time = money. Delays in construction time could mean that you are in holdover in your existing space or have to delay the date you open for business. Or you could end up without a place of business until the space is completed.
  3. Disagreements – Arguments and disagreements over the scope of work and timing can diminish the excitement of your project. 
  4. Not meeting expectations – leasehold improvements done incorrectly that have to be redone cost time and money

Ways to Avoid Commercial Leasehold Improvement Issues

  1. Constant Communication – Make sure everyone is on the same page with the scope of work, budget, and timing. Consider having weekly conference calls or onsite meetings to review progress and obstacles. Don’t be afraid to clearly communicate the bad news either. If the tenants needs a contingency plan it would be nice to know sooner than later.
  2. Realistic Budget – Be realistic with the budget. Better to overestimate than underestimate. Don’t cut any corners and establish a worst case scenario.
  3. Create a Schedule – Be sure to estimate a timeline from Beginning to completion and provide enough time for each task. Make sure to build into the budget some contingencies and establish worst case scenario in case there are delays and problems.
  4. Know Your Limits – Don’t commit to more than you can handle. Be realistic with the scope of the project, the pricing, and the timeline. As long as you hire competent contractors you will increase the success of your commercial tenant leasehold improvements.

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Friday, April 20, 2018

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Thursday, April 19, 2018

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Benefits of Working With a Local Commercial Real Estate Company

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benefits of local Austin commercial real estate companyOne of the common misconceptions is that by choosing to work with a national commercial real estate company you are also choosing a bigger better company vs a smaller one. National companies often do have large offices however they don’t necessarily have a large office or strong presence in every city. Also the overall size of a company is not an indication of how better or strong they are in a specific market. For example just because you like your Austin commercial real estate broker does not mean you will like your Chicago commercial agent. Commercial real estate is a highly individual and local industry and a national firm could have a strong presence in one market however be a small player in another.

Also, just because a commercial real estate company is large does not mean you’ll end up working with an experienced agent. In many cases if you are a small tenant or buyer you may get handed off to a less experienced or new commercial agent.

At the end of the day when choosing a commercial real estate company you want to ensure that the person assigned to you has experience. And working with a local company has it’s benefits.

Why Use a Local Austin Tx Commercial Real Estate Firm

  1. Quick & Efficient – Local commercial real estate companies have less red tape and HR processes than national firms. They are more nimble and can respond more quickly when necessary.
  2. Local Austin Commercial Real Estate Agents – Sometimes a commercial broker from a national firm might be based in another city, however represents a client with an Austin, Tx presence. Many times I see them fly into town to search for space and negotiate deals for them . If they do not live and work here how well do you think they know the market compared to a local agent?
  3. Austin Commercial Real Estate Knowledge and Experience – Local agents keep a constant pulse on the market 24/7. The fact that they live here gives them a full understanding of the entire market (retail, residential, and commercial) which gives them insight into trends that will influence real estate decisions. When you are negotiating commercial space you want someone with commercial real estate transaction experience in Austin Tx.
  4. Less Commission Splits – Local brokers can be more attentive to your needs. After a lease is executed a national broker has to split a larger portion of their commission with their company (the house). They may also have to split again with other team members. Because a national broker may make less money on a deal then a local broker they may be less attentive to your needs. A local broker has more time to spend with you since a national broker has to work more deals to make the same amount of money as a local broker .
  5. Freedom to Choose Who You Work With – National companies have a network of offices in different cities which means you are typically forced to work with a certain broker in each market. You may like your agent in Chicago, however that does not mean you will like the person you are assigned to in Austin, Tx. With a local firm you have the ability to choose the agent you want to work with. Also in many cases they are members of organizations such as CCIM or SIOR which gives them a national presence if needed.
  6. Better Agent Retention – Agents at national firms tend to bounce around from shop to shop while local agents tend to stick to one company longer. 
  7. More Experience – If you are a small company you may get handed off to the new guy. This means that you will be working with a commercial realtor with little to no experience. With a local firm such as Austin Tenant Advisors you are working with the owner of the company who has over 12 years experience in commercial real estate as well as over 12 years of business, sales, marketing, and management experience.

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Wednesday, April 18, 2018

Congress Avenue Commercial Office Space Austin Tx 78701 - Need Help Finding Office Space on Congress Avenue in Austin Tx? Give us a call at (512) 861-0525

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Need Help Finding Office Space on Congress Avenue in Austin Tx? Give us a call at (512) 861-0525

Congress Ave Commercial Office Space Austin TxAre you searching for commercial office space on Congress Avenue in Austin Tx for lease, rent, or sale? If so let us help you. Just call us or email us and we can get started right away.

We specialize in helping buyers and tenants search, select, and negotiate office properties in Austin, Tx. Because our fee is paid for by landlords and building owners our services are free to you, however our fiduciary duty is to represent your best interests. Unlike other commercial real estate agents we have no conflict of interest since we do not represent landlords or owners. We only represent your best interests and are able to provide unbiased opinions on every property and give you insider information that they are not allowed to since they represent the owners.

How to Find Commercial Office Space on Congress Avenue in Austin Texas

There are over 18 Austin office buildings on Congress Ave with over 100 spaces. You could spend a lot of time searching on your own or let us help. We will save you a ton of time, help you avoid costly mistakes, and negotiate the best deal possible.

  1. Simply give us a call at (512) 861-0525 or fill out our contact form on the website.
  2. After learning about your ideal location, size, budget, and timing we will will identify all the properties that make sense for your business
  3. We will schedule tours with the best office spaces and walk them with you giving you our unbiased opinions on each one
  4. We will help you do an apples and apples analysis of each property and then draft and submit proposals on the best options.
  5. And finally we will help you negotiate the best price and recommend vendors to help prepare the space for occupancy.

Types of Commercial Office Space on Congress Ave

Whether you need to lease or purchase Office space on Austin’s Congress Avenue we got you covered. Office buildings on Congress Ave come in various sizes, prices, and building classifications. Some are old converted houses and others are modern office towers Downtown such as the Frost Bank Tower. The determination of Classes can be subjective depending on the marketplace or the landlord/broker listing a particular property, however the basic rules of thumb are as follows:

Traditional Office Buildings

These are multistory buildings/towers with many different tenants in different industries and sizes. Lobbies, bathrooms, and hallways are common to all tenants in the building. In most cases landlords take care of all the maintenance, cleaning, & repairs. The buildings are classified based on age, amenities, and quality of finishes (Class A, B, C). Class A office space is the newest, nicest, and most expensive. Class B are older than class A but well maintained and lower rates. Class C are the oldest, less maintained, and least expensive. 

Short Term Executive Office Suites

If you need temporary space or short term leases these are the way to go. Typically plug n play complete with furniture, phones, and internet service.

Old Houses Zoned for Commercial Office Use

Many old houses are zoned for commercial office use. For those that like quirky space with your own entrance and parking, and don’t mind being responsible for paying your own electric and janitorial then these might be a fit. You would also may be responsible for the maintenance, repairs, and landscaping for the property

 

Need Help Searching For Office space in downtown Austin on Congress Ave?

Give us a call (512) 861-0525 or fill out our website form and we will get started right away! 

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Monday, April 9, 2018

CityView Office Space – 1007 S Congress Ave Austin Tx 78704

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Cityview office space Austin TxCityView office space is a 4 story class A office building on South Congress located at 1007 S Congress Ave, Austin Tx 78704. If you are looking to be near downtown Austin on one of Austin’s most Iconic streets then you will want to check out this office building. Walking distance to numerous restaurants, retail, and entertainment your employees will love coming to work. Here they have a 12,500 sf space located on the 4th floor.

If you are interested in renting class A office space in downtown Austin give us a call at 512-861-0525. We will help you find the best options that meet your needs 

Building Size – 50,000 sf

Building Height – 4 floors

Floor Plate – 12,500 sf

Parking – 2.75 per 1,000 sf

Amenities – Walking distance to everything around downtown Austin

Class A Office Space

For information about this office building South of Downtown Austin or other Class A office spaces near downtown give us a call. We can help you find office space in Austin that meets your company’s current and future size, layout, and budget.

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Typical Commercial Real Estate Lease Term Lengths

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Commercial real estate lease term lengthDeciding on how long your commercial real estate lease term length should be is a delicate balancing act. On one hand you want to get as many concessions from the landlord as possible and maximize your ability to control the space for as long as you need it. On the other hand, you need the ability and flexibility to move out if the space does not meet your needs anymore. Choosing the the commercial lease term that makes the most sense for your company takes careful thought about your current and future business needs.

How Long A Commercial Lease Your Landlord Wants

Your landlord wants to receive highest possible rent for as long as possible. In a perfect world if they could get you to sign a 10 year lease or longer they would. Average commercial lease lengths are 3-5 years, however it’s contingent on market conditions, the existing condition of the space, your credit, and the scope of tenant improvements needed.  In a hot market landlords are going to push for a minimum of 3-5 year leases. If a lot of tenant improvements are needed and you are expecting the landlord to pay for most or all of it then expect to sign a 3-5 year lease or longer. The reason why is that they need more time to recoup their initial investment. There is no way for them to do that if you only sign a 12 month lease. It’s important that you or your commercial real estate agent understand the landlords needs to ensure that the building and space will accommodate your needs.

How Long a Commercial Lease a Tenant Wants

When determining how long of a commercial lease term to sign there are several factors to consider:

  • Your existing business situation. Are you a startup that does not know if things will work out, or are you an existing stable business with consistent income?
  • Ideal location. Some locations are more desirable than others which will require longer lease terms.
  • The monthly rent. Sometimes if you are willing to pay a higher rent the landlord may consider a shorter term. Paying a higher rate for a space would cost much less then having to pay for a space for 24 months longer than you actually need it.
  • Concessions like tenant improvement allowances, free rent, options to expand such as right of first refusals, etc. The longer the lease the more leverage you have to negotiate concessions.

If you are a new business or startup you may seek a short term commercial lease agreement (e.g. less than 3 years). That way if things don’t work out you are not stuck with a lot of lease term to pay for. Keep in mind that a shorter lease term typically means you will have less leverage to negotiate concessions such as tenant improvements or rent discounts. Depending on the space and building you are interested your only option maybe a 3-5 year lease or longer. If the space needs a lot of build out and you are asking the landlord to pay for most of that then expect to have to sign a longer term lease. If the market is hot and there is a lot of interest in the space you want then expect to have to sign a longer lease. 

Ideally you want to try to negotiate a commercial lease term that is less than the amount of time that you need it, however with options to renew and/or expand that will carry you beyond the time that you need it. For example a 5 year lease with a 3-5 year option to renew. If you are in doubt of the longevity of your business then stick to shorter business lease terms. If your business is stable with consistent sales then there is no reason to unnecessarily sign short term office leases because you will end up paying a premium to do so.

With the right help from a tenant representative you will be able to evaluate your current needs and determine the right commercial lease term for your company. 

 

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Wednesday, April 4, 2018

Right of First Offer When Leasing Commercial Real Estate

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right of first offer commercial leaseWhen leasing commercial real estate for a rapidly growing company it’s important that you negotiate to have options to expand, otherwise if you run out of space in that building your only option is to relocate your company to a different building. One of those options is called a Right of First Offer (ROFO).

What is a Right of First Offer?

If you have negotiated a ROFO then anytime a space becomes available the landlord has to “offer” it to you first. This gives you the ability to take the space or reject it before the landlord offers the space to anyone else. A ROFO could include only adjacent space, any space on your existing floor, or any space in the building.

How Does A Right of First Offer Work?

Let’s say you negotiated a commercial lease and the landlord conceded and gave you a ROFO. Then 6 months later a tenant who occupied space on the 5th floor moves out of the building. If you have a ROFO on that space or the 5th floor then the landlord has to offer you the space before offering it to anyone else. ROFO’s can be negotiated for a particular floor or space. The key is to understand your current and future space needs and do your best to negotiate rights to space so you have other expansion options other than having to relocate your business elsewhere.

Example of a Right of First Offer in a Commercial Lease

Landlord shall, prior to offering any of the space on the 2nd floor of the Building containing 31,211 rentable square feet and described as the “Offer Space” on Exhibit A (the “Offer Space”) to any party (including the then-current tenant or occupant therein), first offer to lease to Tenant the Offer Space in an “AS IS” condition; such offer shall (a) be in writing, (b) subject to the immediately following sentence, specify the part of the Offer Space being offered to Tenant hereunder (the “Designated Offer Space”), and (c) specify the lease terms for the Designated Offer Space, including the rent to be paid for the Designated Offer Space and the date on which the Designated Offer Space shall be included in the Premises (the “Offer Notice”). Landlord shall only be required to offer, and Tenant may only request to lease, one of the following three options: (a) the entire 2nd floor (31,211 rentable square feet); (b) 24,233 rentable square feet, depicted in Exhibit A as the “DHI Mortgage” space, or (c) 6,978 rentable square feet, depicted in Exhibit A as “Vacant”. However, if Landlord leases any portion of the 2nd floor, the options contained in the previous sentence shall be revised to be the unleased portion of the relevant space, e.g., if Landlord leases 10,000 of the 24,233 rentable square feet in clause (b), then clause (b) shall be deemed to include only the 14,233 rentable square feet remaining in that section of space. The Offer Notice shall be substantially similar to the Offer Notice attached to this Exhibit. Tenant shall notify Landlord in writing whether Tenant elects to lease the entire Designated Offer Space on the terms set forth in the Offer Notice, within five days after Landlord delivers to Tenant the Offer Notice. If Tenant timely elects to lease the Designated Offer Space, then Landlord and Tenant shall execute an amendment to this Lease, effective as of the date the Designated Offer Space is to be included in the Premises, on the terms set forth in the Offer Notice and, to the extent not inconsistent with the Offer Notice terms, the terms of this Lease; however, Tenant shall accept the Designated Offer Space in an “AS IS” condition and Landlord shall not provide to Tenant any allowances (e.g., moving allowance, construction allowance, and the like) or other tenant inducements except as specifically provided in the Offer Notice.

If Tenant fails or is unable to timely exercise its right hereunder with respect to the Designated Offer Space, then such right shall lapse, time being of the essence with respect to the exercise thereof, and Landlord may lease all or a portion of the Designated Offer Space to third parties on such terms as Landlord may elect. Landlord shall not be obligated to re-offer the Designated Offer Space to Tenant unless Tenant does not accept the Offer Notice and Landlord fails to enter into a Lease Agreement with respect to the Designated Offer Space within 180 days after the date of the Offer Notice. Tenant’s rights under this Exhibit shall expire as to any portion of the Offer Space that becomes subject to a new lease following the Lease Date. Unless otherwise agreed in writing by Landlord and Tenant’s real estate broker, in no event shall Landlord be obligated to pay a commission with respect to any space leased by Tenant under this Exhibit, and Tenant and Landlord shall each indemnify the other against all expenses, costs, attorneys’ fees, and other liability for commissions or other compensation claimed by any broker or agent claiming the same by, through, or under the indemnifying party.

Tenant’s rights are personal to TENANT and shall terminate, at Landlord’s option, if (i) this Lease is terminated, (ii) Tenant assigns its interest in this Lease or sublets more than 20% of the Premises, (iii) Tenant ceases to lease the entire Premises demised as of the Lease Date from Landlord and to occupy at least 80% of the Premises, or (iv) less than 15 full calendar month remains in the Term of this Lease (unless, concurrently with exercising its right, Tenant also irrevocably exercises its renewal right, in which event Tenant’s rights under this Exhibit shall terminate at the expiration of the initial Term).

In addition, it shall be a condition to the effectiveness of the exercise by Tenant of its rights hereunder that, at the time of exercise of the right of first offer or as of the effective date of the addition of the Designated Offer Space to the Premises, (x) there is no existing Event of Default by Tenant, and (y) Tenant satisfies the Net Worth/Credit Threshold, unless Tenant provides to Landlord additional security (either in the form of a security deposit or a letter of credit) in an amount reasonably acceptable to Landlord.

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Right of First Refusal When Leasing Commercial Real Estate

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right of first refusal commercial leaseIf your company expects to grow rapidly by hiring additional employees sooner than later you want to try negotiate a right of first refusal (ROFR) on any additional space in the building. This could be any contiguous space, non-contiguous space, both or a combination of.

Whether you are leasing office, retail, or warehouse space if you expect rapid growth then you must do your best to secure the option rights to additional space. Otherwise your only option will be to relocate your company. For example, in a hot area like the Austin commercial real estate rental market space is tight so it’s important to create more options for your company.

What is a Right of First Refusal?

A right of first refusal is a negotiated right of a tenant in a commercial lease to match any offer received by a landlord to lease a demised or other premises. Basically on any space that you have a ROFR on the landlord has to give you first dibs on any pre-negotiated deal with another party. You are not obligated to take the space. It’s your option.

Ideally you want to get a right of first refusal on any adjacent or contiguous space however that depends on what the neighboring tenants negotiated in their lease. If the contiguous space is not possible then you want to get a ROFR on any non-contiguous space which is space not adjacent to yours. It could be on the same floor or different floors. If another tenant already has a ROFR then you could get a ROFR that is secondary to theirs.

How a Right of First Refusal Works in a Commercial Real Estate Lease

Let’s say you are negotiating on 5,000 sf of Austin office space for rent in a particular building and you don’t quite know your future office space needs. To increase your chances of having more space in the building to grow into you ask for a right of first refusal. 

The landlord is still able to market any available space they have in the building. However if the landlord gets an offer from another potential tenant that they are willing to accept the landlord has to present the offer to your first, giving you the opportunity to accept or decline the space. 

If you accept the deal then you have to take the same rates and terms that were negotiated by the other party. If you negotiated an ongoing ROFR then you will be able to exercise a right of first refusal again in the future after that party’s lease expires.

Example of a Negotiated Right of First Refusal in a Commercial Lease

If Landlord receives a bona fide offer from a third party (including the then-current tenant or occupant therein) (a “Third Party Offer”) to lease any of the 14,209 rentable square feet of space on the 1st floor of the Building, or any of the 6,978 rentable square feet of space on the 2nd floor of the Building, in each case designated on Exhibit A hereto (the 1st floor space and 2nd floor space being, collectively, the “Refusal Space”), and Landlord is willing to accept the terms of such Third Party Offer, Landlord shall offer to lease to Tenant the Refusal Space on the same terms and conditions as the Third Party Offer; such offer shall (a) be in writing, (b) specify the part of the Refusal Space being offered to Tenant hereunder (the “Designated Refusal Space”), (c) specify the rent to be paid for the Designated Refusal Space, and (d) contain the basic terms and conditions of the Third Party Offer and the date on which the Designated Refusal Space shall be included in the Premises (the “Refusal Notice”). Landlord and Tenant hereby agree that: (i) if the Third Party Offer is for less than all of the Refusal Space located on the 1st floor, Tenant must exercise its right hereunder as to all of the Refusal Space on the 1st floor (not just that portion subject to the Third Party Offer) and otherwise on the terms and conditions of the Third Party Offer, (ii) Landlord may not accept any Third Party Offer for any portion of the Refusal Space located on the 1st floor prior to March 1, 2012, and (iii) Landlord will not require Tenant to respond to a Refusal Notice for any Refusal Space on the 1st floor prior to March 1, 2012. Nothing in the previous sentence shall pertain to the Refusal Space located on the 2nd floor of the Building.

The Refusal Notice shall be substantially similar to the Refusal Notice attached to this Exhibit. Tenant shall notify Landlord in writing whether Tenant elects to lease the Designated Refusal Space subject to the Third Party Offer on the same terms and conditions as the Third Party Offer in the Refusal Notice, within five days after Landlord delivers to Tenant the Refusal Notice. If Tenant timely elects to lease the Designated Refusal Space within such five-day period, Landlord and Tenant shall execute an amendment to this Lease, effective as of the date the Designated Refusal Space is to be included in the Premises, on the same terms as this Lease except (1) the Basic Rent and parking charges shall be the amounts specified in the Refusal Notice, (2) the term for the Designated Refusal Space shall be that specified in the Refusal Notice, (3) Tenant shall lease the Designated Refusal Space in an “AS IS” condition, (4) Landlord shall not be required to perform any work therein, (5) Landlord shall not provide to Tenant any allowances other than those contained in the Third Party Offer (e.g., moving allowance, construction allowance, and the like) if any, and (6) other terms set forth in the Lease which are inconsistent with the terms of the Refusal Notice shall be modified accordingly.

If Tenant is unable to exercise its right hereunder with respect to the Designated Refusal Space, such right shall lapse, with respect to the exercise thereof (it being understood Tenant’s right hereunder is a one-time right only as to each Designated Refusal Space the first time it is offered to Tenant hereunder), and Landlord may lease all or a portion of the Designated Refusal Space to third parties on such terms as Landlord may elect. Landlord shall not be obligated to re-offer the Designated Refusal Space to Tenant unless Tenant does not accept the Refusal Notice and Landlord fails to enter into a Lease Agreement with respect to the Designated Refusal Space within 180 days after the date of the Refusal Notice. Unless otherwise agreed in writing by Landlord and Tenant’s real estate broker, in no event shall Landlord be obligated to pay a commission with respect to any space leased by Tenant under this Exhibit, and Tenant and Landlord shall each indemnify the other against all costs, expenses, attorneys’ fees, and other liability for commissions or other compensation claimed by any broker or agent claiming the same by, through, or under the indemnifying party.

Tenant’s rights under this Exhibit are personal to Tenant and shall terminate, at Landlord’s option, (i) if this Lease or Tenant’s right to possession of any of the Premises is terminated, (ii) if Tenant assigns its interest in this Lease or sublets more than 20% of the Premises, (iii) if Tenant ceases to lease the entire Premises demised as of the Lease Date from Landlord and to occupy at least 80% of the Premises, or (iv) on June 30, 2012.

In addition, it shall be a condition to the effectiveness of the exercise by Tenant of its rights hereunder that, at the time of exercise of the right of first refusal or as of the effective date of the addition of the Designated Refusal Space to the Premises, (x) there is no existing Event of Default by Tenant, and (y) Tenant satisfies the Net Worth/Credit Threshold, unless Tenant provides to Landlord additional security (either in the form of a security deposit or a letter of credit) in an amount reasonably acceptable to Landlord.

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Tuesday, April 3, 2018

Office Space Planning Tips

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office space planning ideasAt a company grows proper office space planning becomes more important to ensure that employees are happy and productive and that the company is successful. You’re going to need more offices, open space, and collaborative space. You want to ensure that employees that work together frequently are in close proximity. Also, the ideal office space plan is one that will allow you to add seats when you need them however keep you from leasing or paying for more space than you need. In Austin Tx office space rental planning is a critical component when evaluating options.

The trend seems to be open office space concepts however just because it works for others does not mean it will work for you. You want to make sure you research what is working for others and what is not. You want a functional space that meets the overall needs of the company and culture. Some office planning experts suggest asking yourself a few key questions:

  1. What kind of space does each department need to work productively and efficiently?
  2. How does space effect each person’s job function?
  3. What is the ultimate goal or objective the company wants to obtain with the office space?

Why is it Important to Office Space Plan?

  1. Your employees will spend just about the same time at the office as anywhere else.
  2. The office environment is one of the most critical elements to employee job satisfaction.
  3. Businesses are trying to reduce their cost by properly using their office space by fitting more people into an existing space and having less space go unused.
  4. A good space plan can increase the flexibility for employees, attract and retain talent, support cultural changes, and enhance productivity & creativity.

Steps in Office Space Planning

  1. Create a list of departments – Visit each department. Find out what they like, need, and want as well as what they don’t like. Create a list of all the departments and how they interact with one another.
  2. Get a current headcount of all employees – How many employees do you have now?
  3. Estimate future headcount – When office space planning you need to forecast as best as you can how many employees you will have 12-24 months from now as well as 3-5 years from now. Most office space leases you sign will be 3-5 years so you want to make sure the space will accommodate your current and future needs or that you have expansion options.
  4. Use – What will each room be used for? You want to ensure that each room serves a purpose and/or function. Office space planners should take notes of needs and wants of each department to ensure the spaces is used 100%
  5. Layout – Do you need lots of offices or an open layout? The layout should compliment and support the overall use of the space.
  6. Determine who will be in offices or cubicles – Not every employee will be able to have their own office. Think about which employees need offices and which ones will be seated in the open area
  7. How many conference rooms – How many conference rooms do you have now? Are they being fully utilized? Based on your current and future headcount projections do you have enough conference rooms? 
  8. Break areas – Do your current employees use the break room? How often and to what capacity?
  9. Restrooms – Are there efficient restrooms to accommodate your current and future needs?
  10. Foot Traffic – How many people move through the space each day? Think about your employees, visitors, vendors, etc.
  11. Employee proximity – Which employees collaborate daily and need to be near each other?
  12. Equipment proximity – Which employees need to be near the copiers, printers, or other office equipment?
  13. Appearance – How do you want the space to look and feel to employees and visitors? Does it reflect your company culture?
  14. Technology – What are the technology needs? Cubicles used to be all hard wired with phone/data lines, however some companies have their employees exclusively use their mobile phones. Think about what technology you will be using now and in the future.
  15. Allow for growth – Consider the future growth needs of the company as you plan the office.
  16. Talk to Others – Have you spoken to other organizations about how they implement office space planning? What is working for them and what needs improvement?
  17. Think outside the box – What else should you be thinking about as your office space plan is developed?

 

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Monday, April 2, 2018

Music Lane Office Space – 1100 S Congress Ave Austin Tx 78704

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Music Lane Office Space 78704Music Lane Office Space consists of 2 class A office buildings located in South Congress at 1009 & 1100 S Congress, Austin, Tx 78704. If you are looking to rent office space close to downtown Austin within walking distance to numerous retail shops and restaurants and want to be a part of Austin’s South Congress experience then you definitely want to check out this new project.

If you are interested in leasing class A office space in Austin Tx and would like help finding the options that best suit your needs then contact us at 512-861-0525.

Building 1

  • Address –  1100 S Congress Ave
  • Size – 32,872 RSF… Floors 2-3
  • Typical Floor Plate – 16,000 RSF

Building 3

  • Address – 1009 S Congress Ave
  • Size – 18,903 RSF… Floors 2-4
  • Typical Floor Plate – 4,000 to 7,000 RSF

Parking Ratio – 2.5 per 1,000 sf. Structured parking garage under building 1

Class Office – A

Amenities on Site – Onsite fitness & dining options and parking

Asking Base Rental – Call for rates

Estimated Operating Expenses (NNN) – Call for rates

For information about Music Lane office space or other class A office spaces near downtown Austin Tx give us a call. We can help you search for and find the best options that meet your current and future needs.

 

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