Sk.....SK thanks for following me on Twitter! https://t.co/1LaPXmxXSf

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

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Shalonda Gordon thanks for following me on Twitter! https://t.co/vzDXQEhaEH

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— Nathan K Smith (@AustinTenantAdv) November 20, 2019

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— Nathan K Smith (@AustinTenantAdv) November 20, 2019

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Why Landlords Will Only Do 5 Year Office Leases in Austin Tx

If you are trying to lease office space in Austin you have probably noticed that many landlords won’t agree to anything less than a 5 year lease. Don’t think that just because a space is vacant that a landlord will do a short term lease. Just because a space is vacant doesn’t mean they are not making money especially in a multi-tenant building that is mostly occupied.

Obviously landlords prefer long term tenants because it makes their investment more stable and profitable, however there are other reasons why they won’t do anything shorter than 5 years that I will explain below. 

They have a lot of interest in the space

If the space has a cool “creative” build out and/or is in a great location (e.g downtown Austin) you can bet that there will be a lot of interest in it. Most companies these days are looking for similar space…………cool creative spaces with open layouts, a few offices and a conference room, and break area. If a landlord is getting a  lot of activity on a space they are going to give first dibs to the company that is willing to sign a 5 year lease. It doesn’t matter if you submitted your 3 year proposal first. If another company comes in behind you that is willing to do a longer lease expect the landlord to give them preference.

If you are only able to commit to a 3 year lease then it’s important that you be negotiating multiple options at the same time, because it’s highly likely that one of those spaces gets leased out from under you to a group willing to sign a longer lease.

The space needs a lot of tenant improvements

If a space just needs carpet and paint the landlord might consider a 3 year lease unless there is a lot of interest in the space as discussed above. However if the space needs a lot of work (e.g. carpet, paint, remove walls, build new walls, hvac, electrical, etc..) then the landlord will need a longer lease.

Landlords are in the business of making money when they rent office space. The more a landlord spends on improvement costs the longer lease they need to be able to recoup that initial investment. It would not make sense for them to spend more money on a space than what they are able to receive in rent payments. A longer lease gives them more time to amortize the costs and be profitable on leasing the space.

For example, say you were leasing 2,000 sf office space in downtown Austin at $8,000 per month and the landlord offered to give you a $40,000 tenant improvement allowance. Keep in mind that about $3,000 of that is operating expenses (aka nnn). With a 5 year lease the landlord is able to amortize that cost over a longer period of time thus allowing them to be profitable sooner. 

It’s a Class A Office Building

There are some class A office buildings that will do 3 year leases, however most of them are willing to wait for a company that is willing to sign a 5 year lease. These buildings don’t like to have tenants always moving in and out. They prefer to lease to established companies with great credit that have the confidence in their business to sign longer leases. Most companies that lease class A office space also like to have nice finish outs which warrant a longer lease because of the high build-out costs.

 

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

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— Nathan K Smith (@AustinTenantAdv) November 15, 2019

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— Nathan K Smith (@AustinTenantAdv) November 15, 2019

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

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Top 11 Considerations When Leasing Medical Office Space

Health care practices have a variety of requirements when leasing medical office space. Whether the office space will provide clinical, diagnostic, laboratory, or other services, healthcare providers’ needs differ drastically from the needs of ordinary office tenants. Though finding an appropriate medical office space can be challenging, qualified medical office real-estate brokers can streamline the process and save you time and money!

Here are 11 essential issues to consider when reviewing spaces and negotiating leases for medical office space:

1.  Cost: Though the sticker price (in other words, the rent) of an office space is the most obvious aspect of a space’s affordability, consider other factors that will increase real-estate expenditures. For instance, if you’re leasing an ordinary office space for conversion into a medical space, it is important to account for conversion costs, which may be quite high. These costs may be enough to deter you from converting a traditional office space, especially since the conversion costs may not pay off in the long run; conventional office spaces lease for shorter periods of time than medical spaces do, and opportunities for renewal may be limited.

2.  Accessibility: Depending on the nature of the practice, the office space must be in a location accessible to patients. Visitors with serious illnesses or physical handicaps must be able to easily make their way to the space, or they may simply decide to seek help elsewhere. Consider whether the space you’re looking at already has enough wheelchair ramps, elevators, electronic doors, and other accessibility amenities. Planning to add a practice’s own accessibility features may be more costly than anticipated, and may not even be very helpful, especially if accessibility aids might be relegated to inconvenient locations in or around the building.

3.  ADA Compliance: Because accessibility requirements for medical offices are strict, as per the Americans with Disabilities Act, anyone seeking medical office space should look for a location that already meets as many of the stringent requirements as possible. Because installation of ADA-compliant accessibility amenities may be expensive, as discussed above, it is important for tenants to try to negotiate lease terms that place at least some of the costs of ADA compliance on the landlord.

4.  Parking: Usually, it’s a good idea to have a lot more parking space for a medical office than for an ordinary office: experts estimate that a medical office should have five parking spaces per thousand-unit of square footage inside. Also consider proximity; the office should have a convenient drop-off area adjoining a closely located parking lot.

5.  Improvements: Traditionally, landlords require that any improvements or changes to the building be made by contractors that they know and trust. Because medical office spaces have unique improvement requirements, you will have to communicate clearly with the property owner about introducing new contractors specialized in building medical facilities. The landlord will retain the right to access the space as demolition and remodeling takes place, in order to check in and verify that the value of the property is not negatively affected by the remodel.

6.  Biohazards: Another deterrent to owners of conventional office spaces may be biohazards; the office will probably generate and dispose of biohazardous waste, regardless of the type of medical practice. Furthermore, the office might require installation of machinery that presents radiation risks, such as X-ray machines and and CT scanners. In such cases, special shielding will need to be installed, and landlords may balk at the magnitude of such modifications, especially since shielding modifications are not usually covered in standard office space leases. Therefore, be aware that the lease for a conventional office space will have to be negotiated in detail, which may delay the process and incur legal fees.

7.  Use: Matters such as improvements, biohazards, and ADA compliance, discussed above, will almost certainly fall outside the range of standard lease language. To prevent lease violations, avoid boilerplate leases and conceive of a lease adapted to the specific needs of the tenant with a medical practice.

8.  After-hours Access: Many conventional office-space leases limit access to standard business hours (8-5). However, medical practices frequently see patients during extended hours, or operate 24 hours a day. Be sure that the lease specifies access terms appropriate to the needs of the medical practice, and also ensure that the lease language specifies exactly how, and to whom, responsibility for utilities costs will be allocated.

9.  Landlord Access: Usually, conventional leases allow landlords the right to enter any part of the space at any time to make sure that it is being used properly. However, medical practices must ensure the privacy of their patients, so lease language should specify a protocol by which the landlord may access the leased space without violating patient confidentiality. The landlord should expect access to the space by appointment or during certain hours, but the lease language should be clear and sensitive enough that the needs of both tenant and property owner are fully addressed.

10.  Exclusive Use Provisions: Because competition among healthcare providers can be stiff, tenants should negotiate lease terms that prevent the landlord from leasing adjoining or proximal office space to identical but competing medical practices. For instance, if the office space is located on an office strip or in a building with multiple suites, a competing medical practice should not be able to set up shop in the same strip or building. That said, make sure that the lease language is very specific regarding what a competing practice consists of, as the presence of a complementary medical establishment might be beneficial, or even desirable.

11.  Find a Qualified Broker: In the search for medical office space, it is best to start out with a lease broker with proven experience negotiating for medical offices or facilities. These brokers will be better suited to negotiating complex lease terms that account for exclusive use provisions, landlord access, after-hours access, biohazards, ADA compliance, and accessibility installations. Qualified brokers will streamline the leasing experience and will help secure a lease that fully benefits your medical practice.

The list above is only a few of the considerations when leasing medical office space.  It’s important that healthcare providers engage the right team to find the right space and to review and negotiate all the terms and conditions that will allow them to operate their practice.

If you need help finding and leasing medical office space don’t hesitate to contact us!

SEXYXXX thanks for following me on Twitter! https://t.co/mzZRoxLVqR

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

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Which is the right office space for you?

Looking at the Building’s Features

Many companies or office leases often take into consideration the economic value of a workspace before renting it. However, occupancy costs do not just include the rent rate.

When considering a property as a potential office space, office tenants should also consider the building’s features and the Landlord’s service as it can influence the rent rate. It is most common to hear about tenants and brokers reporting poor performance and drawbacks because they did not take into account the building’s full potential and features.

There are other factors which are often overlooked but must be considered when checking a property:

Efficiency

Although some properties offer low lease rates, it may not be useful and practical once you compute the total cost of occupancy and the space’s efficiency. In one specific scenario, a person can offer you a 10,000 square foot space with a 20% loading factor (a percentage is allotted for non-business related space) while a landlord can offer the same price for a 12% load. Although the first offer is cheaper, the landlord’s building may be better because the tenant can put more desks in the space without being restricted by the load factor.

Always remember to compute the occupancy cost projections based on the absolute and present values and analyze them per usable square feet. This will allow tenants to see the differences in common area factors and efficiency.

Operating expenses

This is the overall equivalent of the expenses needed by tenants such as taxes, janitorial, maintenance and personal expenses while using the office space. Get the advice of a broker who can ensure that the building selected would give cheaper operation costs. Tenants should also consider using building efficiency items such as energy-saving appliances and an HVAC system.

Building system

Not all buildings can provide and support specific technologies or industries, which is very important because it can affect production capacity. The technology industries – for instance, would require higher power and cooling capacity for their office space but it may not be allowed or applicable with the building. Other businesses – like those requiring a mobile workforce, would need a very big parking space which would not require constant parking contracts.

The IT sector and telecommunication providers would also need the building to support redundant fiber loops. Others would even require the building to provide them a space for back-up generators for their 24/7 operation

Management

The building must have a dedicated and friendly staff for tenants to discuss building-related inquiries and needs. Some tenants may even speak with other tenants to get their reviews regarding the building as it would allow them to determine the management’s quality and the services offered for tenants.

It is important to check whether the building’s management can deliver the quality needed by the tenant and how close do they work with the existing tenants.

Usually, tenants complain about the following

• Heating, ventilation and air cooling system (HVAC)
• Janitor or maintenance staff
• Elevator
• Parking

Tenant mix

Some tenants may find their building option wrong especially once they see that the existing tenants may pose problems for the company. Others may find it likely that their competitors are in the same building.

Having an attractive tenant mix can show potential tenants that the building would not just support higher economics but also show that it is the best place to be. The building and its tenants also is key in developing a brand and creating the labor base. Usually the property gives out the first impressions over a building.

Green building

Nowadays, sustainability is a critical factor that businesses must meet because of the growing standards needed to make buildings greener and environment-friendly. It is also a must have nowadays to support a company brand.

The tenant’s broker must be able to determine green building terminologies and assist in checking whether or not a building passes its green building standard. In the US, for example, brokers must be familiar with the Leadership in Energy and Environment Design Green Building Rating System as passed by the US Green Building Council.

Costs and other factors

Finally, some companies also take into consideration other factors like the coolness or benefit factor of a building. However, this should not be the case because not all benefits can be received from a specific building.

One must need to be cautious with regard to renewing lease and check if the financial capacity of the company can handle additional lease costs in the market place. Of course, tenants can do both to ensure that the building is fit for your needs.

Difference Between USF and RSF Calculations in Commercial Leases

When evaluating commercial lease options whether you are renting office space, warehouse space, or retail space, it’s very important to understand the difference between usable square feet (USF) and rentable square fee (RSF) when calculating your monthly and yearly rent.  This is often misunderstood by tenants as many landlords use different names for this such as R/U factor, common area factor, add-on factor, R/U ratio, etc.  If you don’t know then make sure you know how many sf your company needs to physically be able to occupy and ask what the USF/RSF ratios are as the amount of rent you pay is determined by these numbers.

Usable Square Footage or USF

This is the amount of square footage that you actually occupy and do not share with any other tenants.  This only includes the space that your furniture, equipment, and employees reside in.  For example if you measure your office with a tape measure and come up with 10 feet x 12 feet or 120 square feet this is your usable space.

Rentable Square Footage or RSF

RSF is is the square footage used to calculate your rental rate.  This is the USF + your share of the buildings common areas that are shared by other tenants in the building.  Common areas shared by all tenants include restrooms, janitorial closets, electric and telephone rooms, lobbies, fitness center, etc.  Common area does not include stairwells, elevators, and other mechanical space.  In Austin, Tx common area percentages range from 17% to 21%.  When asked how many SF a particular space is most landlords and listing agents will respond with the RSF however it’s important to confirm that number.

How to Calculate Rentable Square Feet

Let’s say your company needs to physically occupy 2,000 usf.  The building you like has a common area factor of 20%.  To determine your rentable square feet perform this calculation:  2,000 usf x 1.20 (common area factor) = 2,400 rentable square feet.  When you ask landlords how many square feet they have available most of them will respond with the RSF.

Do All Buildings Have a USF and RSF?

No.  In some buildings such as retail space or garden style office space your USF typically equals your RSF because these types of properties have no common areas and tenants have their own restrooms and entrances.  When quoted a square footage it’s important that you confirm whether they are quoting USF or RSF.

Key Takeaway

There is no standard for how many square feet of common area buildings have.  When asked how many sf an office space is most building owners and listing agents will respond with the RSF, however it’s important that you confirm whether it’s USF or RSF.  As you compare buildings it’s important that you know how many square feet that you need to physically occupy AND ask each landlord what their common area factor is…………meaning HOW MANY SF WILL YOU OCCUPY VS HOW MANY SF YOU PAY RENT ON. If you are looking for Austin office space for lease and would like more information about this topic feel free to call Austin Tenant Advisors.

Difference Between Commercial Office Building Classification Types

When searching for office space it’s important to understand the building class types as it’s how you are able to compare them to each other. Office space buildings are typically classified as A, B, or C which represent a subjective quality rating based on each buildings ability to attract similar tenants.  The following factors are typically considered when determining a buildings class:

• Age of building
• Location
• Building finishes
• Technological capabilities
• Rental rates
• Amenities
• How well building is maintained
• System standards and efficiencies
• Location and accessibility
• Market perception

Building amenities would be considered as services provided in a building that are helpful to office tenants or their employees and include services such as fitness centers, child care services, food facilities, copy services, building conference rooms, mail service, dry cleaning services, etc.  Building finishes would include the quality of materials, architectural design, and other hardware and finishes.

Definition of Classes of Office Space

Class A Office Space

Typically the most prestigious office buildings in the best locations (e.g Austin office space for lease in downtown Austin). These buildings will compete for the premier office users who seek “image” space, and rents will be higher than average for the area. Class A office buildings will have state of the art building systems, modern technology, amenities such as fitness centers and conference rooms, high level building finishes, defined market presence, and the best accessibility.

Class B Office Space

These types of buildings are well suited more most types of users and the rents will be in the average range for the area.  They are typically 10-20 years old however the building and systems are well maintained. Some maybe a little outdated and not have the most modern technology and mechanical systems, however after a few upgrades some can be converted to class A. You typically won’t find any security guards, fitness centers, or other amenities found in class A.

Class C Office Space

These office buildings compete for tenants seeking value, functional space. Rental rates will typically be below average. They buildings are typically about 20 years old. Some have been renovated and are well kept, however most of them will lack modern upgrades. For example the HVAC systems may not function as well and the elevators and other mechanical systems are outdated. Class C Buildings are typically found in the least desirable areas

In summary if you are a company that needs to have a certain “image” level then Class A space is right for you.  If you just want to be in a nice, well maintained building with average lease rates then go with Class B space.  If you are a startup or nonprofit and on a budget then Class C office space will be your least costly option.

Flavius Aetius thanks for following me on Twitter! https://t.co/mmo6ft1gxu

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— Nathan K Smith (@AustinTenantAdv) November 6, 2019

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— Nathan K Smith (@AustinTenantAdv) November 2, 2019

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