This month we are in the middle of the Lease Tactics Blueprint.  If you would like to catch up on the first couple of steps, you can see my past newsletters by clicking here.

The 3rd step in the Lease Tactics Blueprint is Analyze and Compare Alternatives.  Once you have determined your top 3, your broker should prepare a Request for Proposal (RFP) to be sent to the Landlord’s brokers.  The RFP will detail all your specific requests, so everyone understands your needs and can address them.  The following items should always be included in a RFP:

  • Describe the Premises and location of the space
  • Length of term and commencement date
  • Rate (full service or triple net)
  • Tenant Improvements requested (allowance or turnkey)
  • Parking
  • Termination, Renewal or Expansion Options
  • Who pays for the HVAC maintenance
  • Concessions (free rent, moving allowance, stepped rent etc)

Depending on your space needs, if you don’t find a space that is set up exactly to your specific needs, you may need to have the tenant improvements priced out.  If the improvements are extensive and you are starting from a space that is in shell condition, it is important to ask for a space planning meeting.  Space planners can come up with ideas to maximize the existing features to cut down on costs.  They will prepare a plan that can be given to a contractor to prepare an estimate of the costs.  This allows the Landlord and the Tenant to know the costs involved, so negotiations can continue. 

Once you receive the responses to the RFP, your broker should prepare an analysis showing the costs and how each location compares.  The most important numbers to consider are your total effective rent (the rent adjusted downward for concessions and allowances and upward for tenant pass-thrus [operating expense increases]) and total effective rate (total effective rate divided by the square footage).  One space may have a lower total effective rent, but the total effective rate may be higher if the square footage is smaller than the other options.  A lot of people get focused on the price per square foot, but forget to consider the overall costs over the term.   

There are also other items to consider like the location, parking, flexibility and amenities.   Companies have begun to recognize that the right type of office space can reinforce your culture and improve productivity.  After cost, this is the most critical point to consider.  Ensuring your office is comfortable, has the tools needed to get the job done and has space for collaboration and independent thinking is crucial. 

Next month I will continue with Step 4 – Submit Final Offers and Negotiate Business Terms.

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