Don’t Wait Until Your Lease Expiration is Staring You in the Face

Dealing with your expiring office, retail, warehouse or flex space lease can be a stressful and aggravating process, especially if you wait until the last 2 -3 months of the lease term to address the issue.  Ideally, a tenant should begin to evaluate their situation about 12 months prior to the lease termination date; for some larger tenants it may be 18 – 24 months in advance.  There are some things in life that you can get away with by waiting until the last minute, studying for your final exams, purchasing holiday gifts, even making summer vacation plans, but waiting to assess your commercial real estate requirements until the lease expiration date is staring you in the face is not a good idea.  Most commercial lease terms are 5 – 10 years.  This is a significant commitment that you do not want to rush into.  With current market conditions being extremely favorable to tenants, this is a great time to negotiate a new lease or renewal of your existing lease that can help a company control occupancy costs for the next 5 – 10 years.  Additionally, with landlords offering aggressive build out concessions (mostly for office and flex space), there is a tremendous opportunity to address operational issues and create a space that provides for a more productive work environment.

As you review your current situation and get a better understanding of your requirements going forward, keep in mind the following timeline:

1. Assessing your current and future commercial real estate requirement – Determine current and future square footage needs, general design parameters and type of space that is needed. 30 – 60 days (for large tenants this could take several months)
2. Identifying the available options – this includes reviewing surveys of available properties, touring available properties and evaluating the potential of renewing and/or expanding at your current location.  30 – 90 days
3. Selecting the right option for your business – This step usually involves requesting proposals from one or more properties, negotiating with one or more properties until you reach terms and conditions that meet your requirements and completing preliminary space plans, also known as test fits, (typically paid for by the landlord) at 1 or 2 properties to understand design options and if the space will meet your operational needs.  30 – 60 days
4. Lease Negotiation/Execution – Once a site is selected and a proposal or letter of intent is agreed to by the tenant and landlord a lease is negotiated.  Most leases go through a round or two of negotiation before being ready for execution by the tenant and landlord.  30 days
5. Tenant Build Out – With the lease negotiated and executed, the construction of the space begins.  This includes the completion of all permit and construction drawings, the submission for and receipt of a building permit, the bidding of the work to general contractors, the selection of a general contractor and the completion of the work.  The length of this process will vary greatly depending on the size of the space, the amount of work that needs to be completed, the jurisdictional permit process, the intricacy of the work and the need for any long lead items.  60 – 150 days.

A competent commercial real estate professional can help a tenant work through the entire process listed above.  Best of all, in most cases the fees for the commercial real estate professional are paid by the landlord.  So you get the benefit of industry and market knowledge at no charge to you.  How great is that?

Typical Floor Plan

Modern Interior Office

Open Office Space Design

About Gary Edell

Gary Edell began his real estate career in 1988 with Carey Winston (now Transwestern Commercial Services) where he spent 8 years representing tenants and landlords throughout the Washington Metropolitan area. During those 8 years, Gary was involved in over 1 million square feet of leasing transactions. In 1996 Gary became the Vice President of Leasing for Penrose Real Estate Services, LLC where he coordinated the leasing and management for 750,000 sf of office space and 120,000 sf of retail space at King Farm in Rockville, MD. Upon completion of the leasing process for the King Farm retail and office properties, Gary coordinated the disposition of these assets in three transactions that totaled over $300M. Additionally, while at Penrose, Gary represented The American Red Cross on a national basis in the acquisition and disposition of commercial properties and completed over 2,000,000 sf of third party lease and sale transactions. In September 2011, Gary started 4 Dimensional Real Estate Solutions, a company dedicated to provide personalized solutions to the real estate requirements of tenants, landlords, buyers and sellers of commercial real estate. You can contact Gary at gedell@rcn.com

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