All Forum Posts by: Robert T.

A small office is very similar to residential.  In that, while the tenant may have a SF requirement or room requirement, the exact layout does not matter that much.  Hence, a small office user is generally going to look at the layout and make a determination if it will work, rather than try and negotiate moving walls.  Therefore, your costs in between tenants are your general upkeep costs of the space, like cleaning, painting, or replacing the carpet.

If you get into bigger SF, then TI's start to matter more.  If you have a 2000 SF office, you  likely are not looking to go into the expense of finding 2x 1000 SF users.  However, if you have a 10,000 SF office, then the chances increase, since you may not be able to find one 10,000 SF user.  

Lastly, TI's are always a point of negotiation.  It is unlikely you will ever be able to settle on $xx/SF of TI and run it into your calculations.  If the going market rent is $12/SF, you may agree to lease at $15/SF in return for $35/SF of TI reimbursement.  

Very few tenants fail to pay the shortfall, especially if it's reasonable and legitimate. Mom and Pop Tenants will be the most likely to give you problems and you'll have to deal with these guys one on one, situation by situation. As you mentioned above, favorable recourse can be difficult.

While predicting exact increases for taxes, insurance and utilities can be difficult, it can be done with a reasonable level of accuracy. 

It's good to hear you regularly petition your taxes and shop insurance annually. Have you tried looking into capital type projects that will help reduce energy consumption (LED light fixtures for example)? Depending on the lease, sometimes you can pass these "energy saving" capital improvements through to the Tenants. These types of improvements can also be subsidized in whole or part by utility companies and can be eligable for federal tax credits/deductions.

For restaurant tenants don't forget to assess the current utilities at your site. Restaurants often have higher water & sewer requirements in addition to things like a grease trap etc. 1,100 sf is a pretty small foot print but it can be expensive to upgrade a water line etc. 

@KyleKingma

In NJ towns, It's often more about who you know and who is influential in town. These guys have to communicate with the planning and zoning boards and its better if they know all the folks vs. someone new to present the case ,etc. may not be trusted. Time is money and variance/zoning issues  can stretch out an extra month or two easily in many NJ towns if you don't have all your ducks in a row.

Hello BP,

Was wondering if there were any commercial (retail/office) landlords that can chime in on how they were offering terms on TI.  Are you offering a TI  allowance as an upfront incentive (where the tenant does not need to pay you back)?  Or are you paying for TI's up front but amortizing those costs over the term of the lease and charging this in addition to their base rent?

I know the answer obviously depends on your local market or how hard you negotiate but just wanted to see what some folks were actually doing in practice.   

Thanks in advance

Why would you pay an attorney for a variance application? A planning consultant is just as good: http://www.planningpeeps.com/firms-and-freelancers.html