Leasing space, whether that be office, industrial / warehouse, or retail space involves a lot of thought on the part of the tenant. If you're in the retail business, but need some warehousing, you might want to consider "flex" space. If you need a warehouse and are looking for low rent, make sure you don't need 3-phase power. All users have a priority list of needs - whether they've realized it or not. Let's discuss a few of those so your experience will be a tad more enjoyable.
This is one of those types of articles where I can wonder pretty easily with a number of tangential issues and being an engineer, the problem is exacerbated. But I'm going to be as brief as possible, so just call me if you'd like to discuss these issues further.
STREET EXPOSURE / LOCATION Do you need street exposure or not? If you are a destination (i.e.; people seek out your products or services) it's not so important, but if you are in a competitive industry or trade, it may be critical. However!!! Retail customers are a finicky group and given almost any impediment to one shop, they will move on to a competitor -> retailers must absolutely make sure their location is conducive to their business. A coffee shop without much parking or on the "going home" side of the street, or tucked away behind other shops might not be a great idea, regardless of lower rents as many buyers make instantaneous decisions to buy or not. A corner with great street exposure but only "right-in / right-out" access is also problematic. Discuss your business plan with your real estate advisor so they thoroughly know how important these items are to your business and don't be surprised if your Broker, based on their experience with companies in your focus area, gives you some suggestions on important location issues.
ACCESS TO CLIENTS / CUSTOMERS We recently showed a regional real estate manager around the Treasure Valley as his company was looking to open a new type of service center for their clients. He was armed with the locations of his clients and told us where to find him a suitable shop. We sent him a list of properties which met his criteria. When he got to town, we queried him further on his location criteria & it became apparent that with him being from a very large population area, his frame of reference was different than ours vis-a-vis travel time. Once he understood our commute times from anywhere in the valley was less than he was used to, we were able to find him a suitable location at 1/2 the rent he would have encountered had he stuck to his original siting criteria. However, in some businesses, access to clients is more important. We recently placed an emergency response company and their highest priority was quick access to the interstate. When we investigated average travel times, we were able to look in areas originally not identified as acceptable and saved 25% of their Base Rent with an alternate, acceptable location.
USE-DRIVEN NEEDS Okay, doesn't seem like it needs a lot of discussion, but you'd be surprised. We had a meeting just a couple of weeks ago with a company that got a "great" deal (i.e.; the rent was really very low) on a warehouse a few months earlier , the problem was that it didn't have 3 phase power and the cost of them either modifying their equipment or bringing in 3 phase power was very high. We've also dealt with firms who have service trucks who hadn't identified the truck clearance needed to get the truck in the shop. There are some very fundamental items we commercial real estate agents generally go over with our clients, but make sure you have thought through any specialized needs your company has. We had one client recently who specified a certain size water main to the property to ensure adequate water was on-site. When we couldn't find that, given other constraints, we found that a smaller size main would deliver enough water for their given purpose. Another issue is racking / stacking height (especially in a warehouse environment). Fire Marshalls have certain constraints on the height of stacking and the use of racks. We met a client recently at a warehouse they were about to lease & the client was meeting with a vendor to order storage racks. Thankfully, we were present and we engaged the supplier in a discussion of his knowledge about fire suppression restrictions relative to local requirements. When we identified critical issues, the client and the supplier were able to discuss those issues with the local regulatory authority. Keep in mind that some "high stacking" may require a total redesign / replacement of whatever fire suppression system exists - at a significant cost.
HVAC ISSUES. Make sure if you have special equipment or cooling / heating needs they are identified early in the process. Tanning salons require more BTUs for cooling than a normal office or retail environment. Consider whether your application will require more heating / cooling than the space can accommodate. If it does, then your Broker will need to negotiate that item for you. Also, when investigating new properties, make sure to understand roof cuts for the HVAC system and who pays for that – is it included in the developer’s cost or is that a responsibility of the tenant?
POWER NEEDS. Most retail shops and small industrial shops will come with 200 amps, depending on the age of the unit and the size. However, don't assume anything about what is available to the unit you are reviewing. We were performing a review for a client of ours who needs 300 amps and a quick look at the electrical panel indicated the panel was rated at about that. We called an electrician and upon investigation (the electrician removed the panel cover) he found there was a much lower supply actually to the unit. Apparently, the contractor had used a left over panel out of convenience and had we not verified the actual amperage available, the tenant & landlord may have had a significant issue to resolve.
SUMMARY
Okay, so hopefully I didn't wander too far off the beaten path. The one point we want you to walk away with when searching for a new location, is to identify your business needs & technical needs in your chosen space - to the extent possible. Identify to your Broker, those items which are critical and which ones are desirable. Make sure, if you are in an existing location, your Broker tours your current location with you & discuss those things you like & dislike about that location. Your Commercial Real Estate Broker is your advocate and consultant, make sure you identify those things you know which impact your business and then engage your Broker into their thoughts and ideas on other items / issues you may not have thought about.
We wish you all a great holiday season. If you need assistance evaluating your commercial real estate needs, please feel free to contact us.
Sincerely,
Scott Nicholson
Boise Valley Commercial Real Estate, LLC
208 890 3939
scott@bvcre.com
Monday, December 1, 2008
Friday, August 8, 2008
Commercial Real Estate Listing FAQ #1
We deal with a lot of people with various levels of experience leasing commercial property. Some people are going out on their own for the first time, others are with an existing company, but may be responsible for the leasing process for their first time, while others have been through the process and are competent in the process. Another factor at work, although rarely discussed, is how to work with commercial real estate agents. We're going to break it down to its essential elements in a series of blogs to help those people who need a little refresher.
The leasing process starts with an identified need on the part of the prospective tenant (you!).
Identifying Space Size Requirements. What we often find is that the tenant may not know entirely what they need in terms of size (square footage) or zoning. In all fairness, several different sizes can work for any given tenant depending on the floorplan. For instance, some uses can use mezzanine storage which can be built in an existing space (if not already available) and other uses cannot adequately use mezzanine level space. Also keep in mind that not all realtors advertise mezzanine space the same since mezzanine space is generally perceived to be of less value as is basement space. A space may have some mezzanine available but not included in the "rentable" space calculations which will help when calculating NNNs or CAMs.
Note: Depending on the use and location (particulary in warehouse and retail applications), mezzanine, second floor space, and basement space is not of equal value to street level space. In office applications, the same may hold true depending on whether elevators are available.
Do You Have Flexibility On Your Floor Plan? Also, another thing we see is a company stating a certain square footage need, but may not realize that larger spaces may be more affordable. To restate that, too narrow a search may not reveal better values since the cost per square foot often goes down as the rentable size goes up since smaller spaces are generally less available / in higher demand and can command higher asking prices. With that in mind, we customarily perform searches from 75% of the target size to 200% of the target size to see if there are better value spaces available within that range.
Note: When performing searches to find "best value" remember to add in all costs of that space, not just the base rent. For example, if the rent per square foot or per rentable square foot is significantly less after adding additional rent (e.g.; NNNs or CAMs) and utility costs, make sure that "all in rent" still represents a good deal for you.
Clear Height Implications. In many industrial applications, users can high stack their products and the clear height is an important factor (with adequate racking, they can put more product in a smaller foot print), but make sure you know the building codes applicable to stacking. Depending on your product and the stacking height, the local fire marshal may require the sprinkler system to be modified to provide adquate coverage or the stacking height may be limited.
Note: Stacking Height may trigger additional sprinkler requirements - make sure you know if additional requirements are going to be imposed before signing a lease.
Zoning Requirements. The various political entities have different zoning requirements, sorry. We deal with this issue frequently and there is no single answer for the entire Treasure Valley. Boise is differnt than Meridian, Nampa, Eagle, Garden City, Star, Middleton, Mountain Home, and Caldwell. In one area, your use may be either allowed straight out, or be allowed based on administrative review, or upon application, hearing, and issuance of a conditional use permit (CUP), or straight out disallowed.
Note: Most communities have their zoning requirements posted on their web site. In those cases where there is any question, set up a meeting with the city's planning & zoning help desk where you can speak directly with city representatives. Keep in mind, though, that uless it is in writing, those opinions are just that. It doesn't happen often, but there have been instances of miscommunication between tenants and help desk personnel.
Parking Requirements. For call centers, above-average parking requirements limit available properties. The same holds true for parking of delivery vehicles or parts and equipment and food service (restaurants). Make sure you identify any special needs to your realtor.
Note: If you are in the food service industry (restaurants) or are looking for a call center or are a retailer looking for designated parking, remember that in multi-tenant centers, most parking is in common and owners may resist designated parking out of necessity. Be sure to address those issues early in the discussion.
Addressing Unresolved Issues. If you've found a great location, but have a few unresolved issues, tell your commercial realtor to issue a Letter of Intent (LOI) to the building owner and ask for a limited amount of time to resolve those unresolved issues.
I know this is a lot to absorb in a (not too) short blog. Feel free to contact us directly to discuss these issues further.
Best,
Scott Nicholson
Boise Valley Commercial Real Estate, LLC
208-890-3939
scott@bvcre.com
The leasing process starts with an identified need on the part of the prospective tenant (you!).
Identifying Space Size Requirements. What we often find is that the tenant may not know entirely what they need in terms of size (square footage) or zoning. In all fairness, several different sizes can work for any given tenant depending on the floorplan. For instance, some uses can use mezzanine storage which can be built in an existing space (if not already available) and other uses cannot adequately use mezzanine level space. Also keep in mind that not all realtors advertise mezzanine space the same since mezzanine space is generally perceived to be of less value as is basement space. A space may have some mezzanine available but not included in the "rentable" space calculations which will help when calculating NNNs or CAMs.
Note: Depending on the use and location (particulary in warehouse and retail applications), mezzanine, second floor space, and basement space is not of equal value to street level space. In office applications, the same may hold true depending on whether elevators are available.
Do You Have Flexibility On Your Floor Plan? Also, another thing we see is a company stating a certain square footage need, but may not realize that larger spaces may be more affordable. To restate that, too narrow a search may not reveal better values since the cost per square foot often goes down as the rentable size goes up since smaller spaces are generally less available / in higher demand and can command higher asking prices. With that in mind, we customarily perform searches from 75% of the target size to 200% of the target size to see if there are better value spaces available within that range.
Note: When performing searches to find "best value" remember to add in all costs of that space, not just the base rent. For example, if the rent per square foot or per rentable square foot is significantly less after adding additional rent (e.g.; NNNs or CAMs) and utility costs, make sure that "all in rent" still represents a good deal for you.
Clear Height Implications. In many industrial applications, users can high stack their products and the clear height is an important factor (with adequate racking, they can put more product in a smaller foot print), but make sure you know the building codes applicable to stacking. Depending on your product and the stacking height, the local fire marshal may require the sprinkler system to be modified to provide adquate coverage or the stacking height may be limited.
Note: Stacking Height may trigger additional sprinkler requirements - make sure you know if additional requirements are going to be imposed before signing a lease.
Zoning Requirements. The various political entities have different zoning requirements, sorry. We deal with this issue frequently and there is no single answer for the entire Treasure Valley. Boise is differnt than Meridian, Nampa, Eagle, Garden City, Star, Middleton, Mountain Home, and Caldwell. In one area, your use may be either allowed straight out, or be allowed based on administrative review, or upon application, hearing, and issuance of a conditional use permit (CUP), or straight out disallowed.
Note: Most communities have their zoning requirements posted on their web site. In those cases where there is any question, set up a meeting with the city's planning & zoning help desk where you can speak directly with city representatives. Keep in mind, though, that uless it is in writing, those opinions are just that. It doesn't happen often, but there have been instances of miscommunication between tenants and help desk personnel.
Parking Requirements. For call centers, above-average parking requirements limit available properties. The same holds true for parking of delivery vehicles or parts and equipment and food service (restaurants). Make sure you identify any special needs to your realtor.
Note: If you are in the food service industry (restaurants) or are looking for a call center or are a retailer looking for designated parking, remember that in multi-tenant centers, most parking is in common and owners may resist designated parking out of necessity. Be sure to address those issues early in the discussion.
Addressing Unresolved Issues. If you've found a great location, but have a few unresolved issues, tell your commercial realtor to issue a Letter of Intent (LOI) to the building owner and ask for a limited amount of time to resolve those unresolved issues.
I know this is a lot to absorb in a (not too) short blog. Feel free to contact us directly to discuss these issues further.
Best,
Scott Nicholson
Boise Valley Commercial Real Estate, LLC
208-890-3939
scott@bvcre.com
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