Kenda Horne thanks for following me on Twitter! https://t.co/XTRs3fFCWm

Kenda Horne thanks for following me on Twitter! https://t.co/XTRs3fFCWm

— Nathan K Smith (@AustinTenantAdv) January 30, 2019

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Temp Agency Broker thanks for following me on Twitter! https://t.co/inh7ZUrxF9

Temp Agency Broker thanks for following me on Twitter! https://t.co/inh7ZUrxF9

— Nathan K Smith (@AustinTenantAdv) January 29, 2019

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Pioneer Realty Capital thanks for following me on Twitter! https://t.co/ccubDKBVRt

Pioneer Realty Capital thanks for following me on Twitter! https://t.co/ccubDKBVRt

— Nathan K Smith (@AustinTenantAdv) January 28, 2019

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NickKnecht thanks for following me on Twitter! https://t.co/2WzekgHYjx

NickKnecht thanks for following me on Twitter! https://t.co/2WzekgHYjx

— Nathan K Smith (@AustinTenantAdv) January 25, 2019

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WPX_Hosting thanks for following me on Twitter! https://t.co/LoRHrMMcRT

WPX_Hosting thanks for following me on Twitter! https://t.co/LoRHrMMcRT

— Nathan K Smith (@AustinTenantAdv) January 23, 2019

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Austin office space lease rates are at an all time high https://t.co/QvrVJWKsYW

Austin office space lease rates are at an all time high https://t.co/QvrVJWKsYW

— Nathan K Smith (@AustinTenantAdv) January 22, 2019

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https://t.co/U9NIZZFzFh

https://t.co/U9NIZZFzFh

— Nathan K Smith (@AustinTenantAdv) January 22, 2019

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Things to Look For When Touring Warehouse Space

Before beginning your search for warehouse space, it’s crucial that you know your current and future business needs when it comes to industrial space because not every warehouse property has the same features. For example, some have truck courts big enough to accommodate 18 wheelers, and some don’t. Some have dock high loading, and others only have grade level. It’s important that you pick the right property because renting the wrong one can cost you hundreds of thousands, so make sure to do a lot of due diligence (or have your agent do it for you) because you can’t only rely on what the landlord’s listing agent tells you.

Once you have a handle on your current and future business needs and have a rough idea of your ideal location, size, layout, and budget, then you are ready to start your warehouse property search and tour spaces to figure out which ones will work best. Because every industrial building is not created equal, you need to ask a lot of questions to find out the features of each and determine which ones will work best.

Questions To Ask About Industrial Properties

What is the property zoning?

You need to ensure the area and building is zoned for industrial use

What “Use” is the property approved for?

If the property was previously used for manufacturing and your use is warehousing, you will need to apply for a change of use permit with the city.

What building power is available?

If you’re in manufacturing, then you may need more electric power than the average company. For example, the equipment you use may need 3 phase power.

What is the building clear height?

Clear height is the warehouse ceiling height. The more you have, the higher you can stack

What are the warehouse loading options?

Does the space have dock high or grade level loading? If you ship and receiving using 18 wheeler, then you need dock high.

How big is the truck court?

You need to make sure the truck court is big enough for 18 wheelers to maneuver around.

Does the warehouse have a fire sprinkler system?

Some businesses are required to have fire sprinklers in the warehouse. Check with your insurance agent and/or the clients you work with.

Can I park delivery trucks or trailers overnight?

If you plan on leaving trailers or trucks on the premises overnight make sure you are allowed to.

Do you have any industrial yard space?

Some businesses need outside storage to store raw materials.

We have only scratched the tip of the iceberg here. As you can see, there is a lot of info you need to know about each industrial building so you can make sure to ensure they will meet your needs. When searching for warehouse space for rent and touring properties make sure you know your needs and what questions to ask property owners and landlord agents. If you are unsure or don’t have much experience, then consider hiring someone who is. If you need helping finding warehouse space for rent Austin Tx give us a call.

Flacaforever thanks for following me on Twitter! https://t.co/5EMVeEAKiR

Flacaforever thanks for following me on Twitter! https://t.co/5EMVeEAKiR

— Nathan K Smith (@AustinTenantAdv) January 17, 2019

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Pioneer Realty Capital thanks for following me on Twitter! https://t.co/ccubDKBVRt

Pioneer Realty Capital thanks for following me on Twitter! https://t.co/ccubDKBVRt

— Nathan K Smith (@AustinTenantAdv) January 16, 2019

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What is a Tenant Improvement Allowance?

When leasing commercial real estate properties such as office space, retail space, or warehouse space, landlords will typically offer incentives to get tenants to lease space in their building. One of those incentives is offering a tenant improvement allowance (aka TI Allowance or TIA) to build out the space custom to your needs. 

The tenant improvement allowance is the amount of money that landlords are willing to spend or give to a tenant to renovate an office space in the landlords office building. It’s typically offered as a total dollar amount or a dollar per square foot and negotiated up front.

The goal of the tenant should be to negotiate enough tenant improvement allowance to cover most (if not all) of the total construction costs.

For example say you like a space, however it would be even more perfect if you could have 2 more offices and a break area with plumbing.  During the negotiation process you would want to ask for an allowance (MONEY) to build out the space.  The amount is typically negotiated and contingent on your credit, length of lease term. rental rate, market you are in, etc…

How Do You Get It?

It’s handled differently depending on the type and size of commercial space you’re renting. 

Landlord Controlled

At lease signing you have to write a check for any construction costs that exceed what the TIA will cover. Then the landlord will pay the contractors and all other vendors directly for all construction costs.

 In most cases with smaller office space (less than 10,000 sf) if the landlord has a construction manager they will want to hire the contractors and oversee the process. This is because they know the building well, have experience with office space build-outs, and have relationships with a lot of different contractors which they can leverage to keep costs to a minimum. When a landlord manages the construction process it’s known as a “Turnkey Build-out”.

Having the landlord manage this saves you time however their interests may not line up with yours. They may not seek as many competitive bids or have any incentive to cut costs, and if you make changes after the architectural plans have been approved you will be charged change order fees.  Also, if the construction costs end up being less than the TIA you will not receive the difference. For example if the TIA was $25 sf and the construction costs ended up being $20 sf you will lose the $5 sf.

If the landlord insists on managing the construction process then make sure to request that you have the ability to be a part of the general contractor approval process and that you are given a detailed work letter that outlines the construction process from beginning to end.

Tenant Controlled

The time frame of payment of the TIA is determined during lease contract negotiations. It will either be paid out after the construction has been completed and landlord receives all the receipts, OR be paid in cash at lease signing. You could also negotiate to have it paid a progress payments as work is completed.

For larger spaces you or a project manager you hire would want to manage the construction process. This will give you more control over the costs, timing, and details of the project. In addition you have the power to select the contractor that you want.

What is the Average Tenant Improvement Allowance?

The tenant improvement allowance you receive will depend on a number of factors such as the market, lease term, your credit, type of space, etc. In general if the space is brand new (aka in shell condition) Landlords might offer $25 to $40 sf. If the space is 2nd generation (has been leased occupied before) landlords may offer $20 or less. 

At the end of the day it’s important for the tenant to have a general idea of how much the construction will cost. During the negotiating process it would be a good idea to get at least 1 or 2 preliminary construction bids. You don’t want to accept a tenant improvement allowance of $15 only to find out that the total costs will be $25 sf.

If you are not able to negotiate enough tenant improvement allowance to cover the total costs then you could ask for additional tenant improvement allowance to be amortized.

How Do you Calculate the TI Allowance?

The tenant improvement allowance is typically given based on the rental square feet (RSF) of the commercial space. To calculate the Tenant improvement allowance simply multiply the RSF by the TI allowance you have negotiated.

For example if the square footage is 5,000 RSF and the tenant improvement allowance is $20 RSF. 5,000 x $20 = $100,000

What Does it Cover?

The tenant improvement allowance typically covers architectural, engineering and space planning fees as well as the total hard construction costs. In addition, if negotiated such allowance may be used at Tenant’s option for the cost of consultants, legal fees,
moving expenses, equipment, fixtures, furniture and/or signage.

Tenant Improvement Allowance Must Be Negotiated

Again the tenant improvement allowance is a negotiated amount that the landlord will spend to customize the space to your particular needs and is typically quoted in dollars per square feet.  They won’t always agree to pay for 100% of your ideal layout….especially if you are asking for hardwood floors, granite countertops, and other above standard finishes. Again landlords won’t just give you a tenant improvement allowance. You must know the market and negotiate well.

When evaluating spaces make sure to take note of your needs such as the ideal # of offices, break area, conference rooms, etc.  If you need a more customized layout make sure you ask for it before signing a commercial lease.  You want to compare how much allowance each landlord is willing to give.  Ideally you want them to pay for 100% of your build-out costs, however it all depends on your credit, length of lease term, the rental rate, and on whether it’s a tenant or landlord market.

Who Gets To Keep the Improvements?

The landlord is giving you a tenant allowance in return for your tenancy, and you may end up spending additional money out of your own pocket above and beyond the TIA however all the leasehold improvements will convey with the landlord. Tenant improvements-allowance.

Example of TIA in Commercial Lease Agreement

Construction Allowance.

Provided Tenant is not in default on the lease contract, Landlord agrees to give up to $300,680.00 (the “Construction Allowance”) to the cost of Landlord’s Work. Any costs of finishing Landlord’s Work above the Construction Allowance shall be Excess Costs (as defined below). Tenant shall pay Landlord a construction management fee equal to 4% of the cost of Landlord’s Work to compensate for its construction management services in connection with Landlord’s Work. Landlord shall deduct such fee from the Construction Allowance. The Construction Allowance is available for Tenant’s use from the date of this Lease through the last day of the twelfth (12th) full calendar month following the Commencement Date, after which Tenants right to same will expire and be of no further force and effect.

1.3 Additional Allowance. If the total construction costs exceed the Construction Allowance, Tenant may, before Landlord’s Work has been completed, ask that the Landlord increase the Construction Allowance by the amount of the excess, up to $60,420.00 (the actual amount of the increase being the “Additional Allowance”). If Tenant asks for the increase in the Construction Allowance, then Landlord shall raise the Construction Allowance by the amount of the Additional Allowance. Landlord shall prepare, and Landlord and Tenant shall promptly execute an amendment to the Lease increasing the Base Rent by the amount needed to amortize the Additional Allowance over the Lease Term at 9% per annum, with the increased payments starting with the first Base Rent payment due under this Lease.

Dan Saltman thanks for following me on Twitter! https://t.co/bYLuG0SNPi

Dan Saltman thanks for following me on Twitter! https://t.co/bYLuG0SNPi

— Nathan K Smith (@AustinTenantAdv) January 14, 2019

from Twitter https://twitter.com/AustinTenantAdv

Can You Renegotiate a Commercial Lease?

Renegotiating a commercial lease is possible if your business or the market changes and you are unsatisfied with your current situation. There are no guarantees that the landlord will agree to your requests however you will never know if you don’t ask.

Business climates and markets can change which at some time or another will require you to make some changes to what you are doing. You have many things to consider and one of those could be making changes to your commercial lease. You might be in a situation where you need to try and renegotiate a commercial lease with your landlord. For example:

• Business not doing well and having a hard time paying rent
• Need to expand however your existing building does not have anymore space available
• Lost a big client and need to reduce the size of your space
• Market conditions dictating better lease terms

It doesn’t matter if you are only in year 1 or 3 of a 5 year lease, contracts can be renegotiated, however knowing how to renegotiate a commercial lease is key to your success.

How to Renegotiate a Commercial Lease

1. Start the process sooner than later – The more time you have to the better. Commercial lease negotiates take longer than you think. 
2. Get some help – Consider hiring a commercial real estate attorney and commercial real estate agent to assist you. They know the laws and the current market conditions and will be able to consult you on your options.
3. Get educated – Get up to speed on market conditions and read your commercial lease contract thoroughly. It’s important that you understand how to interpret the lease. Your agent will be able to get you up to speed on the market.
4. Schedule a meeting with the landlord – When trying to renegotiate a commercial real estate lease it’s better to do it in person. If the landlord sees that you are sincere and being proactive you will have a better chance.
5. Be prepared to trade concessions – Landlords are not going to just give you everything you want. They will typically want something in return. For example if you want more tenant improvement allowance you may have to commit to more lease term. Or if you want to get out of your lease they may require you to pay some money upfront.
6. Communicate with the property manager – Just like with the landlord you want to have a personal relationship with them. They will have more incentive to work with you if they like you.

If you have any questions or need help renegotiating a commercial lease in Austin Tx give us a call.

 

 

 

 

The Manual thanks for following me on Twitter! https://t.co/vTui7mOzwz

The Manual thanks for following me on Twitter! https://t.co/vTui7mOzwz

— Nathan K Smith (@AustinTenantAdv) January 12, 2019

from Twitter https://twitter.com/AustinTenantAdv

What is Rent Abatement in Commercial Leases & How To Get It?

Rent abatement in a commercial lease means that the tenant does NOT have to pay rent for a certain time period during one of the following scenarios:

1. During the initial tenant improvements,
2. As a concession in lieu of a reduced rental rate,
3. Or when the tenant is not able to occupy the space because major property repairs are needed.

Rent abatement is a negotiable item in a commercial lease that must not be overlooked. To ensure that you negotiate rent abatement effectively it’s important that you consult with a real estate attorney and your commercial real estate agent because once the terms are finalized the clauses will be outlined in the lease contract and set in stone. Whatever happens after that will all be handled according to how the language is set forth in the contract.

Rent Abatement During Initial Tenant Improvements

Sometimes when you lease commercial real estate (e.g. retail space) the space is either in shell condition (brand new) or is 2nd generation space that needs a lot reconfiguration and improvements. Depending on the size of space, existing condition, and if a construction permit is required it could take anywhere from a few weeks to 6-9 months for any improvements to be completed.

It would not make sense to pay rent during the construction period so it’s important that you negotiate to have rental payments not start until substantial completion of all the tenant improvements.

Rent Abatement as a Concession

When negotiating commercial leases you ask for all kinds of concessions such as tenant improvement allowance, lower rate, expansion options, etc. Rent abatement (aka Free Rent) is also something that you can negotiate for. Investors that own buildings can have different investment objectives. Some prefer to cash flow a property and more likely to offer a lower rate. Others maybe trying to sell or refinance the building and more likely to offer free rent instead of a lower rate. You see the rents the landlords collects on a commercial property dictate the market value. The lower the rates the lower the potential value. It’s important to understand the investment objective of each building owner. 

Anytime you can negotiate to get rent abatement in addition to a tenant improvement allowance and other concessions you will be better off in the long run.

What happens if you get abated rent and default on the lease?

Getting rent abatement can help you lower your overall monthly rent costs or help you pay for tenant improvements that are above and beyond what the landlord is willing to give an allowance for. However keep in mind in most cases if you default or don’t fulfill the entire lease term you will be required to pay back all or a portion of any free rent given. This is also known as a clawback provision. During negotiations if a landlord is going to demand a clawback in the event you default or break the lease try to negotiate to where you only pay for unamortized free rent. For example if you were given $12,000 in rent abatement and the lease term was 3 years it would be amortized over 36 months ($4,000 per year or $333 per month). If you broke the lease after the 12th month you would have to pay back the rent abatement for the remaining 24 months or $8,000……..which is the unamortized portion.

Rent abatement on the base rent and nnn or just the base rent?

Rent abatement is negotiable. If the landlord agrees to it they would rather just give you free base rent and you pay the operating expenses (taxes, insurance, maintenance). That way they are at least covering their operating costs.

As a tenant you would rather receive free gross rent (not pay base rent or the operating expenses). Do your best to negotiate this. In the end free base rent is better than nothing.

Rent Abatement Due to Commercial Space Being Untenantable

In most commercial leases there is a Casualty clause (like in the example below) that talks about rent abatement in the event the tenant is not able to occupy or access a space because of fire or other casualty. It could be a partial rent abatement or full abatement depending on the scope of damage and what portion of the space the tenant has access to.  Potential scenarios could be fire or flooding, natural disasters such as earthquakes, tornadoes, and hurricanes, or condemnation by the city or government.

Rationale Behind Rent Abatement

Commercial property owners typically have business liability insurance on their building. The insurance would cover any damages to the property in addition to the abatement of rent. Personal property of a tenant that is damaged would be covered by the tenant’s own insurance. It’s a good idea for the tenant to have business interruption insurance as well to cover any potential financial losses. Since both parties have insurance – the tenant on personal property and the landlord on the property – the abatement puts the lease contract between landlord and tenant on hold until the property can be occupied again.

How Long Does the Abatement of Rent Continue?

The abatement last from the date of the casualty until the date the landlord has substantially completed the repairs and restoration. Rather than just let tenants out of a commercial lease when a casualty occurs Landlords want the ability to try to cure the defects first within a certain time period (which is negotiated). The restoration could take weeks or months however at some point if the insurance company or contractors determine that the repairs will take longer than the negotiated time frame then the tenant or landlord could terminate the lease.

Tenants Must Negotiate to Not Let Rent Abatement Be Nullified

Tenants need to negotiate to require that no matter who caused the casualty the abatement provision will still exist. For example some landlords have language in the lease that says if the tenant or tenants employee causes the casualty then the abatement clause is nullified and the tenant must continue paying rent while repairs and restoration is being conducted.

Commercial rent is income for a landlord which is paid for by tenants. Part of the rent a tenant pays includes the building insurance coverage. If the abatement clause is nullified then the landlord is able to double dip by getting rent from the tenant and file the claim with their insurance company.

Sample Rent Abatement Clause in Commercial Lease

To see an example of a rent abatement clause in a commercial real estate lease or if you are looking for commercial space for rent in Austin Tx feel free to give us a call at 512-861-0525

 

 

 

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

Josh Daspit thanks for following me on Twitter! https://t.co/Qoncn6tern

— Nathan K Smith (@AustinTenantAdv) January 5, 2019

from Twitter https://twitter.com/AustinTenantAdv

Before Leasing Retail Space Try These Alternatives First

Leasing retail space is expensive so before rushing out to sign a commercial lease it’s important that you prove that your products will sell. This applies to anyone wanting to open a retail business including health spas, restaurants, hair salons or any store that sells merchandise. 

Do people want to buy your products at a price that you can profit from? If you don’t know you need to determine if their is an active market before doing anything.

Ways to Sell Products Without Leasing Retail Space

1. Flea Markets

Consider renting a booth at a local flea market. There are a great way to test the market with your products. You can rent on a daily or weekly basis. You can find flea markets that are outdoors, indoors, upscale, or downscale. Just ask a lot of questions about each one and what type of customers typically visit each. Then pick the one that more closely relates to your target audience

2. Sell Retail Products Online

Amazon is huge right now. Looking into selling on Amazon whether you ship or if you use FBA. You can also test the marketability of your products on Ebay and Craigslist.

3. Wholesale Products to Local Retailers

Talk to existing retail shops who sell products that could potentially compliment yours. Do your homework to determine which ones sell to your target customer. Try to make distribution deals with these existing retailers. This might require that you discount your products and potentially not make much or any profit however it will help you figure out which of your products will sell………..and…………..at what price.

4. Home & Office Product Parties

Talk to a bunch of women and find out what types of products similar to yours that that interest them. Then organize small parties or meetups for groups of women who are interested in buying your type of products. You could also invite a few other retailers. This would be a low pressure atmosphere.

5. Restaurant Retailing

Visit a few restaurants and ask them if they would let you model your accessories. You could go from table to table showing off your products. Offer to give the restaurants commissions on any sales generated.

Benefits of Selling Products Before Leasing Retail Space

If you are able to try selling your products at different venues you will gain a lot of valuable information about your target audience and how to position your product to sell the best. Below are a few benefits:

1. You find out which products will sell
2. You discover the best selling environment for each product
3. You determine the best price at which your products will sell
4. You learn how to sell your products. Which sales approach works best for the type of customer that you want to attract
5. You will generate cash to run your business
6. You will know what products to stock in your store and how to price and package them
7. You will know where products sell the best
8. Gives you the opportunity to fine tune your products.

By not leasing retail space and first testing your ideas and sales via person to person, home based parties, etc if gives you the opportunity to fine tune your products and marketing. Once you determine that your products will sell at a price that you can profit from then you are ready to find and lease retail space. If you need help finding Austin retail space for lease give us a call at (512) 861-0525

515 Congress Ave Austin Tx 78701 – Bank of America Center

The Bank of America Center is a class A office building located in the heart of downtown Austin at 515 Congress Ave Austin Tx 78701. If you want to be at the center of it all, and within walking distance of the Warehouse & 6th street entertainment districts, the Texas State Capital, Austin Convention Center, and Lady Bird Lake this is the perfect class A office building for you.

If you are interested in leasing downtown Austin office space and would like help finding the options that best suit your needs call (512) 861-0525.

Building Size – 263,058 SF

Building Height – 26 Floors

Typical Floor Plate – 14,000 SF

Parking – Building has a parking garage with 340 spaces. Parking ratio of 1 per 770 sf at $195 per space per month. 

Access – 7:00 a.m. – 7:00 p.m Monday thru Friday. 8:00 a.m. – 1:00 p.m. Saturday

Security – Landlord provides on-site 24 hour access control (both manned and card key), 7 days per week. Card key access is required after hours for entrance and exit doors, & the elevators.

Amenities – Bike storage room, Jimmy John’s Deli, Coffee bar, Cava Grill. Also a 4,300 sf for profit fitness center with showers and locker rooms in lower level of project.

Asking Base Rental Rate – $39 (as of 1/1/2019)

Estimated Operating Expenses – $23.31 (as of 1/1/2019)

For information about available space at 515 Congress Avenue or other class A office buildings in downtown Austin give us a call. We will help you find great space and negotiate the best deal possible.

Powderkeg thanks for following me on Twitter! https://t.co/J3ObduqPmx

Powderkeg thanks for following me on Twitter! https://t.co/J3ObduqPmx

— Nathan K Smith (@AustinTenantAdv) January 4, 2019

from Twitter https://twitter.com/AustinTenantAdv

Fashion Flooring thanks for following me on Twitter! https://t.co/eXuPNKahI6

Fashion Flooring thanks for following me on Twitter! https://t.co/eXuPNKahI6

— Nathan K Smith (@AustinTenantAdv) January 1, 2019

from Twitter https://twitter.com/AustinTenantAdv