Presented By Mark Rauch 

It often makes sense for a renewing office tenant, who has been in the same location for a number of years, to consider having their office premises re-painted and re-carpeted.  As someone specializing in exclusive tenant representation, it’s usually a fair request to ask the landlord to pay for these improvements, particularly for a space with 7 or more years of wear-and-tear. If there’s a 5-year lease renewal on the table and the carpeting has weathered well, but is just beginning to show signs of age, one question may be, how will these premises look in 2 or 3 more years, when there will be no economic incentive for the landlord to redo the space at that time?Factors involved in how long office carpeting should last include the following:High-traffic businesses (i.e. call centers, insurance claims offices, etc.) will experience significantly more wear-and-tear than do professional services companies, such as law firms and CPA offices.   Lower-grade carpet, generally speaking, will wear quicker than more expensive, higher grades.  Whether a carpet is installed over pad or glue-down, as well as the original floor preparations, may affect wear-and-tear.What’s involved in a “paint ‘n carpet job”, where the tenant is already in the space? Quick Paint & Carpet Jobs These jobs typically don’t involve reassigning offices, knocking-out/ removing walls or significant construction.  They’re typically done for cosmetic improvements.  Because the construction isn’t significant, the phases will usually occur over a weekend, with the move-out on a Friday and the move-back on Sunday.What You Need To Know   How big are the phases?     Where is the staging area?This is usually determined by the carpet company and/or landlord.When will the contents removal and return phases begin? Will there be painting?  Can items remain on the walls? Are they carpeting or can contents simply be moved away from the walls (usually 3-4′), for painting? Will the office contents be going back to exactly where they came from? Who is going to be on-site, overseeing the return phase? Tips: Always try to stage on-site & avoid trailer storage – trailer storage is more labor intensive, with more opportunity for damage.  If everything goes back “as is”, either request the tenant provide diagrams of each office and/or workstation or allow time for the supervisor to do it, to be posted on the door or cube entrance. A lot of times, people won’t remodel areas with tile (VCT) floors, so be sure to confirm. Make sure the tenant disconnects all computers, even if the furniture is just being pushed-away from the wall, for paint-only jobs. Major Remodels Involving “Swing Space” Many times, companies will take advantage of a remodeling, to reconfigure their office. That means different people and departments will occupy different spaces, at different times.  Because these projects take longer, companies will often assign a swing space, where the employees occupy a temporary space.  Unlike a quick paint and carpet job, the move-out and the move-back are not identical.   Direct Moves – This is where the employee or department moves once, directly into their final location. Swing Space Moves – This is where the employee or department moves twice, once to a temporary space and again to their final location. Tips: Always try to stage on-site, avoiding trailer or off-site storage.   Get a detailed floor plan and schedule of who goes where, when, from the tenant.    A lot of times, these involve temporary staging or storage, so inquire and make sure there is adequate staging/storage space for all the contents, etc.   Modular Furniture & Remodeling Moves   Modular workstations can dramatically complicate a  remodeling move.   It’s important to know what type of carpeting exists and what will be installed.  Rolled goods is the traditional type used most commonly and will generally require that all cubicles be completely disassembled and removed.  Carpet tiles are usually the less-common alternative, and, though often more expensive, usually can be installed without disassembling the stations.  On such occasions, the cubicle partitions can be raised slightly, using a “lift system”, enabling the carpet installers to both demo the old carpet, as well as install the new carpet tiles. Questions to be answered What type of carpet exists now & what kind is going back? If carpet tiles, does the carpet company plan on using the lift system?   Will the cubicles be configured exactly the same, in the move-back? Are they adding new product to the existing? Is there enough time (usually Friday pm, Saturday and Sunday) to complete all work to be completed? Tips: Leave plenty of time to complete the install, usually on a Sunday.  Look-out for weird start times, like 2 AM……..try to avoid them!   Who Hires Movers For This Kind of Work?   Many times the tenant will purchase a turn-key project, where the contractor will take-on and manage the entire process, including the move.   Tips: Be sure to find-out who will be on-site to direct the movers.  This is especially important for the Sunday put-back phase and can defuse potential unanswered questions, that can otherwise result in the need for a return visit, to correct.  Don’t assume the tenant knows how things work.  Most of them don’t normally work with movers and many of their sub-contractors tend to be somewhat independent. We need more interaction with the tenant than the others.  Miscellaneous Clearly define packing and labeling responsibilities, because your customer sometimes doesn’t view this like a regular move.  They think they can just leave Friday and come back Monday, without any inconvenience.  If a contractor is involved, make sure you define these responsibilities.  They may have given the tenant an expectation of some kind.  Remember, when we report to the contractor, they have usually sold the customer a “turn-key project”. Instruct the customer and the crew, to make a special note of punch list items for the construction company, because they generally won’t have time to note incomplete or damaged areas – The time frames are often too short.  It is easy to place any blame for damage, etc. Look-out for special finishes, like marble floors, wood-grain walls, etc.  There is usually no time for the contractor to do a punch list and the mover is often blamed, in an effort to get change orders  Look-out for freshly painted walls.  If the paint hasn’t cured, wall protection cannot be installed – blue tape, commonly used to install wall/corner protection, can cause problems.   Proper planning and preparation can go a long way toward a smooth outcome, on paint and re-carpeting projects. Nothing contained herein is to be considered legal advice. Always seek legal advice when evaluating any legal document What’s involved in a “paint ‘n carpet job”, where the tenant is already in the space?  Quick Paint & Carpet Jobs These jobs typically don’t involve reassigning offices, knocking-out/ removing walls or significant construction.  They’re typically done for cosmetic improvements.  Because the construction isn’t significant, the phases will usually occur over a weekend, with the move-out on a Friday and the move-back on Sunday. What You Need To Know   How big are the phases?     Where is the staging area? This is usually determined by the carpet company and/or landlord. When will the contents removal and return phases begin? Will there be painting?  Can items remain on the walls? Are they carpeting or can contents simply be moved away from the walls (usually 3-4′), for painting? Will the office contents be going back to exactly where they came from? Who is going to be on-site, overseeing the return phase? Tips: Always try to stage on-site & avoid trailer storage – trailer storage is more labor intensive, with more opportunity for damage.  If everything goes back “as is”, either request the tenant provide diagrams of each office and/or workstation or allow time for the supervisor to do it, to be posted on the door or cube entrance. A lot of times, people won’t remodel areas with tile (VCT) floors, so be sure to confirm. Make sure the tenant disconnects all computers, even if the furniture is just being pushed-away from the wall, for paint-only jobs. Major Remodels Involving “Swing Space” Many times, companies will take advantage of a remodeling, to reconfigure their office. That means different people and departments will occupy different spaces, at different times.  Because these projects take longer, companies will often assign a swing space, where the employees occupy a temporary space.  Unlike a quick paint and carpet job, the move-out and the move-back are not identical.   Direct Moves – This is where the employee or department moves once, directly into their final location. Swing Space Moves – This is where the employee or department moves twice, once to a temporary space and again to their final location. Tips: Always try to stage on-site, avoiding trailer or off-site storage.   Get a detailed floor plan and schedule of who goes where, when, from the tenant.    A lot of times, these involve temporary staging or storage, so inquire and make sure there is adequate staging/storage space for all the contents, etc.   Modular Furniture & Remodeling Moves   Modular workstations can dramatically complicate a  remodeling move.   It’s important to know what type of carpeting exists and what will be installed.  Rolled goods is the traditional type used most commonly and will generally require that all cubicles be completely disassembled and removed.  Carpet tiles are usually the less-common alternative, and, though often more expensive, usually can be installed without disassembling the stations.  On such occasions, the cubicle partitions can be raised slightly, using a “lift system”, enabling the carpet installers to both demo the old carpet, as well as install the new carpet tiles. Questions to be answered What type of carpet exists now & what kind is going back? If carpet tiles, does the carpet company plan on using the lift system?   Will the cubicles be configured exactly the same, in the move-back? Are they adding new product to the existing? Is there enough time (usually Friday pm, Saturday and Sunday) to complete all work to be completed? Tips: Leave plenty of time to complete the install, usually on a Sunday.  Look-out for weird start times, like 2 AM……..try to avoid them!   Who Hires Movers For This Kind of Work?   Many times the tenant will purchase a turn-key project, where the contractor will take-on and manage the entire process, including the move.   Tips: Be sure to find-out who will be on-site to direct the movers.  This is especially important for the Sunday put-back phase and can defuse potential unanswered questions, that can otherwise result in the need for a return visit, to correct.  Don’t assume the tenant knows how things work.  Most of them don’t normally work with movers and many of their sub-contractors tend to be somewhat independent. We need more interaction with the tenant than the others.  Miscellaneous Clearly define packing and labeling responsibilities, because your customer sometimes doesn’t view this like a regular move.  They think they can just leave Friday and come back Monday, without any inconvenience.  If a contractor is involved, make sure you define these responsibilities.  They may have given the tenant an expectation of some kind.  Remember, when we report to the contractor, they have usually sold the customer a “turn-key project”. Instruct the customer and the crew, to make a special note of punch list items for the construction company, because they generally won’t have time to note incomplete or damaged areas – The time frames are often too short.  It is easy to place any blame for damage, etc. Look-out for special finishes, like marble floors, wood-grain walls, etc.  There is usually no time for the contractor to do a punch list and the mover is often blamed, in an effort to get change orders Look-out for freshly painted walls.  If the paint hasn’t cured, wall protection cannot be installed – blue tape, commonly used to install wall/corner protection, can cause problems.   Proper planning and preparation can go a long way toward a smooth outcome, on paint and re-carpeting projects. Nothing contained herein is to be considered legal advice.  Always seek legal advice when evaluating any legal document.  I also wanted to reiterate that we are requesting meetings with Professional and Corporate Office Tenants.  We are looking to represent a handful of Tenants, each occupying 5,000 rentable square feet to 500,000 rentable square feet.  Please call or email us to schedule a time to discuss how we can help. My focused specialty is solely driven to advocate the office space interests of Southern California-based corporations and professional services firms in leasing and purchasing negotiations of all types-renewals, relocations, renegotiations, recasting, subleasing, terminations and investments on a local, regional, national and international basis through a network of offices in 200+ markets around the world. Assignments range from single office lease transactions to national and multi-national real estate portfolios.  It is my sincere desire to develop meaningful, long term relationships as your trusted Tenant Rep Consultant and friend.   Regards,   Mark Mark David Rauch Senior Vice President License # 01019455 Direct: 213-430-2469 Mobile: 818-943-2959 Markrauch@traversrealty.com  http://www.linkedin.com/in/markrauch  http://twitter.com/irepthetenant Mark Rauch’s Tenant Rep Times eNewsletter Archive Join Our eNewsletter Family Of Office Tenant’s To schedule a time to discuss your particular office space issues with me, please use the contact form below to send a direct request to me.  Messages are sent directly to my email inbox and will not be viewable by the public.  If you wish to post a public reply about any of my articles or any other portion of my website, please use the comment form available at the bottom of each article or page. Name(required) Email(required) Website Message

Nine Issues Concerning Expansion Or Contraction

KNOW YOUR COMPANY

Do you have a history of erratic growth or contraction? Are you likely to grow or shrink?

WHAT TYPE OF EXPANSION MAKES THE MOST SENSE?

• RIGHT OF FIRST OFFER Tenant has the right to lease the expansion premises on terms offered by the Landlord. If Tenant does not do so, the Landlord can take the space to the market on terms not materially more favorable than those rejected by the Tenant.
• RIGHT OF FIRST REFUSAL Tenant has the right to match a third party offer for the expansion premises.
• MUST TAKE SPACE Expansion space is automatically incorporated into the leased premises on a certain date on pre-negotiated terms and conditions.
• MAY TAKE SPACE Tenant has the option to incorporate expansion space into the leased premises on a certain date on pre-negotiated terms.

KNOW WHEN AND HOW TO EXERCISE THE OPTION TO EXTEND

If the Tenant fails to exercise the expansion option in strict accordance with the negotiated terms, the Landlord may not have to honor the expansion option. Remember – expansion options really favor the Landlord. Keep an eye out for form of notice, timing of notice and notice recipients.

CONFIRM THE RENTAL AMOUNT

In order for the expansion option to be enforceable, the rental rate for the expansion space must be clearly stated in the lease or a mechanism for determining the rental rate must be set forth in the lease. Also, consider whether the base year for operating expenses for the expansion premises should be the base year being used for the balance of the premises or the base year at the time of the exercise of the expansion premises.

KNOW THE RAMIFICATIONS OF THE TERM

Is the expansion space coterminous with the balance of the original leased premises, or is it for a separate period of time? For the most part, it is in the Tenant’s interest to have the lease term with respect to the expansion premises be coterminous with the balance of the original leased premises, but note that as a result of having a shorter term for the expansion space, the Landlord may require that any non negotiated tenant improvement allowance be prorated over the balance of the remaining term and in such event, the Tenant may have to fund a greater portion of the build-out for the expansion space than they did for the build-out of the initial premises.

CONTRACTION

Contraction options need to be negotiated early.
Contraction options rarely benefit the Landlord.

KNOW HOW TO NEGOTIATE THE CONTRACTION OPTION

As already stated, just as with expansion options, Landlords do not appreciate contraction options. If the Tenant fails to exercise the contraction option in strict accordance with the original terms of the lease, the Landlord may not have to honor it and the Tenant will be forced to continue to lease such space.

KNOW WHAT THE TERMINATION FEE IS

Fees can include:

• Unamortized brokerage commissions
• Unamortized tenant improvement allowances
•  Free rent
•  Rent for the anticipated time required to re-lease
  the premises (pre-negotiated)

BE PREPARED FOR POSSIBLE LOSS OF SPECIALLY NEGOTIATED RIGHTS IN THE LEASE
If a Tenant shrinks, the Landlord may cancel items such as:

• Renewal options
• Expansion options
• Building or monument signage

The Landlord may also include:

•  Relocation clauses
•  Reserved parking
•  Any other amenities or concessions

Nothing contained herein is to be considered legal advice.  Always seek legal advice when evaluating any legal document. 

I also wanted to reiterate that we are requesting meetings with Professional and Corporate Office Tenants.  We are looking to represent a handful of Tenants, each occupying 5,000 rentable square feet to 500,000 rentable square feet.  Please call or email us to schedule a time to discuss how we can help.

My focused specialty is solely driven to advocate the office space interests of Southern California-based corporations and professional services firms in leasing and purchasing negotiations of all types-renewals, relocations, renegotiations, recasting, subleasing, terminations and investments on a local, regional, national and international basis through a network of offices in 200+ markets around the world.

Assignments range from single office lease transactions to national and multi-national real estate portfolios. 

It is my sincere desire to develop meaningful, long term relationships as your trusted Tenant Rep Consultant and friend.  

Regards,  

Mark

Mark David Rauch

Senior Vice President

License # 01019455

Direct: 213-430-2469

Mobile: 818-943-2959

Markrauch@traversrealty.com

http://www.linkedin.com/in/markrauch

http://twitter.com/irepthetenant

Mark Rauch’s Tenant Rep Times eNewsletter Archive

Join Our eNewsletter Family Of Office Tenant’s

To schedule a time to discuss your particular office space issues with me, please use the contact form below to send a direct request to me.  Messages are sent directly to my email inbox and will not be viewable by the public.  If you wish to post a public reply about any of my articles or any other portion of my website, please use the comment form available at the bottom of each article or page.

Name(required)

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Website

Message

Office Space Disposition Options                                                                                                                                                            

The main goal to disposing of space is to reduce the remaining leasehold obligation. Many times this goal gets side-tracked in the process.  Issues such as insisting on current “market rents”, focusing in on regaining the total remaining value of the leasehold obligation or being tied to the original costs of the tenant improvements will most assuredly prolong or kill the true goal of regaining a portion of the rent.

 

OPTIONS: SUBLEASE, BUY-OUT, WRITE-OFF OR RECAPTURE

 

SUBLEASE:  The tenant’s representative identifies and negotiates sublease with a prospective sublessee.  The tenant’s representative then approaches the Landlord.  A sublease involves three parties: Tenant-Sublessee-Owner.  It is not unusual for the tenant and sublessee to reach agreement, but landlord does not approve, based on various issues including the prospect’s financial stability, years in business, etc., preventing a successful sublease transaction.  It is imperative to have an open dialogue with the Landlord to identify his/her goals, objectives and reservations prior to beginning the process.  Also, the sublessee must agree to the terms and conditions in the primary lease.  Rights such as parking, expansion, extension, subleasing are personal to the Tenant and usually not transferable.  Identify the important items at the beginning of the process with the sublessee, then immediately discuss the items with the Landlord.  It is important that all parties are fully involved from out of the gate.

 

An assignment would be another option.  While assignments and subleases are both means to achieve substantially similar ends, they do yield different legal and business results.  The differences will be the subject of a future article

BUY-OUT:  From the Tenant’s standpoint, this is the cleanest option.  In many cases the Landlord will require that a creditworthy replacement tenant is lined up.  A cash settlement is negotiated between the Tenant and Landlord that releases the Tenant from all remaining leasehold obligations. The Tenant should try to negotiate a net present value settlement although it is not unusual for the Landlord to request the total remaining leasehold obligation be paid up front.

WRITE-OFF:  In certain instances, the Tenant will opt to continue to pay the rent on the vacant space and not attempt any of the other alternatives.  This might happen if the subject space is small, sublease rent would not offset the cost to retrofit the space or there is little lease term remaining.

 

RECAPTURE:  It is usually a good idea to negotiate any recapture rights out of the original Master Lease document.  Recapture rights enable the Landlord to take the space back under certain conditions.  The Landlord can aggressively market the subject space with the objective of locating a longer term tenant willing to pay market rent.  In that case, the Landlord would have the right to terminate the existing leasehold and sign directly with the prospect..    The potential Subtenants could spend thousands in attorney’s fees and months negotiating a sublease only to then wait an additional 45 days for the landlord to decide if he/she is going to recapture, and then have the Landlord recapture! If the Landlord recaptures, they may be stuck with doing a deal at a much higher rent than they planned, or they may have to walk away from the deal.  The Landlord can aggressively market the subject space with the objective of locating a longer term Tenant willing to pay market rent.  In that case, the Landlord would have the right to terminate the existing leasehold and sign directly with the prospect.

 

Nothing contained herein is to be considered legal advice.  Always seek legal advice when evaluating any legal document.

 

Nothing contained herein is to be considered legal advice.  Always seek legal advice when evaluating any legal document. 

I also wanted to reiterate that we are requesting meetings with Professional and Corporate Office Tenants.  We are looking to represent a handful of Tenants, each occupying 5,000 rentable square feet to 500,000 rentable square feet.  Please call or email us to schedule a time to discuss how we can help.

 

My focused specialty is solely driven to advocate the office space interests of Southern California-based corporations and professional services firms in leasing and purchasing negotiations of all types-renewals, relocations, renegotiations, recasting, subleasing, terminations and investments on a local, regional, national and international basis through a network of offices in 200+ markets around the world.

 

Assignments range from single office lease transactions to national and multi-national real estate portfolios.

 

It is my sincere desire to develop meaningful, long term relationships as your trusted Tenant Rep Consultant and friend.  

Regards,  

Mark

 

 

 

 

 

Mark David Rauch

Senior Vice President

License # 01019455

Direct: 213-430-2469

Mobile: 818-943-2959

Markrauch@traversrealty.com

http://www.linkedin.com/in/markrauch

http://twitter.com/irepthetenant

Mark Rauch’s Tenant Rep Times eNewletter Archive

Join our eNewsletter List

To schedule a time to discuss your particular office space issues with me, please use the contact form below to send a direct request to me.  Messages are sent directly to my email inbox and will not be viewable by the public.  If you wish to post a public reply about any of my articles or any other portion of my website, please use the comment form available at the bottom of each article or page.

Name(required)

Email(required)

Website

Message