Wylie, TX · Member since 2014 · 58 posts · 5 votes
Good evening.
Looking for some wisdom / experience from someone who has leased up office suites to various tenants in small, historic, boutique environment or something similar.
What kind of issues can come up either between the tenants themselves or in dealing with multiple leases under one roof? Would love to hear your success stories and horror stories.
@Colton T. I currently manage a portfolio for a client of ~130k sf of historic office buildings, with each property typically being in 15k-25k sq. So, I am extremely familiar with these boutique offices that you refer to.
When leasing, we had an attorney draft a standard lease agreement. We do the leasing for these properties without a commercial broker since it's not a complex transaction. It's also unlikely that the tenants that are looking to lease this type of space have a broker either. We don't offer any TI, what you see is what you get. We'll freshen up the paint and wax the terrazzo floors, but you're not getting a kitchen, new carpet and the nines.
You have to understand, the majority of tenants that take these boutique offices are typically solo shops (attorneys, counselors, designers, insurance, logistics) and occasionally have up to 4 employees. The longest lease term we offer is 3yrs, but the majority are 1yr leases. The majority of these tenants are not established and are just trying to figure out if they have a viable business proposition and are trying to do so outside their personal residence.
From the management standpoint, collecting rent from these small tenants is significantly more difficult than my large corporate tenants. We require all our tenants to pay online through a portal (which has an automatic payment option), but often the small tenants are accruing late fees and or NSFs.
Looking for some wisdom / experience from someone who has leased up office suites to various tenants in small, historic, boutique environment or something similar.
What kind of issues can come up either between the tenants themselves or in dealing with multiple leases under one roof? Would love to hear your success stories and horror stories.
Thanks
Colton
There’s nothing unique or tricky about this. Office space is fairly straightforward. The main thing you want to watch out for is what type of renovations will be requested when you turn the space over.
Looking for some wisdom / experience from someone who has leased up office suites to various tenants in small, historic, boutique environment or something similar.
What kind of issues can come up either between the tenants themselves or in dealing with multiple leases under one roof? Would love to hear your success stories and horror stories.
Thanks
Colton
Are you not using a commercial broker? Commercial attorney? You're worried about tenant-to-tenant issues? Do you have any tenant signed yet? Multi-tenant has some issues, I'm about to publish an article on Right to Quiet Enjoyment. Have a client considering a suit up in Plano...
I leased space for 7 years in a nicely renovated old building that began life as a grand home. There were 15 offices, but a total of 20+ tenants when you included the part-time and virtual tenants. We had a receptionist in common and shared a copy machine, kitchen, bathrooms, and conference room. You knew when moving in to the space that you had neighbors and got to know them pretty quickly. Never had any tenant-to-tenant issues while I was there.
It may have also helped that the landlord was there every day because his business was also a tenant.
@Colton T. The key to smoothly leasing and operating older office buildings is to have your (or someone you trust) finger on the pulse of the city and understanding zoning/permits/use/ADA. I leased a building built in the 1800s and there were multiple deals that fell through because 1) the building was grandfathered in as non-ADA compliant, but the tenant could not run their business in a building without an elevator, 2) the building was grandfathered in to not need fire sprinklers (and Ownership didn't want to spend $100k+ to put them in), that crosses off a lot of large national tenants who have higher standards. I could go on.
That being said, once we knew all of the quirks it was easy to weed out the tenants who could or could not succeed in that building.
@Colton T. I currently manage a portfolio for a client of ~130k sf of historic office buildings, with each property typically being in 15k-25k sq. So, I am extremely familiar with these boutique offices that you refer to.
When leasing, we had an attorney draft a standard lease agreement. We do the leasing for these properties without a commercial broker since it's not a complex transaction. It's also unlikely that the tenants that are looking to lease this type of space have a broker either. We don't offer any TI, what you see is what you get. We'll freshen up the paint and wax the terrazzo floors, but you're not getting a kitchen, new carpet and the nines.
You have to understand, the majority of tenants that take these boutique offices are typically solo shops (attorneys, counselors, designers, insurance, logistics) and occasionally have up to 4 employees. The longest lease term we offer is 3yrs, but the majority are 1yr leases. The majority of these tenants are not established and are just trying to figure out if they have a viable business proposition and are trying to do so outside their personal residence.
From the management standpoint, collecting rent from these small tenants is significantly more difficult than my large corporate tenants. We require all our tenants to pay online through a portal (which has an automatic payment option), but often the small tenants are accruing late fees and or NSFs.