Leasing Guide

Office

Introduction

Here at Tenavox, we aim to make the first step in your commercial lease experience a smooth one. The search for commercial office space is at first an exciting prospect. A significant step towards growth in your organization, it marks a need for a real corporate presence for your clients and customers in a given area. Commercial real estate is an integral part of the life cycle of an organization's growth. It can be a milestone in many cases. Unfortunately, in many other instances it can feel like a root canal!

While searching for space you find listings with vacuous quotes and leasing jargon like NNN or FS or MFSG…
Brokers are available for hire but who are they? What type of history do they have in representing Tenants of my size, scope and corporate needs?
Why can't I just find out what it's like to be a Tenant in that building, from other Tenants? This journey shouldn't be so difficult!

Easy access to accurate, useful and transparent information is what we bring our members along with leasing resources (like this one!) to help our Tenants make better lease decisions. So let's get down to business:you've decided to lease office space so let's focus on office buildings in this interactive guide. If you have any questions just pause the presentation at any time to take more time , you can also print this as a PDF and take it with you, This guide is yours, 100% free as a thanks for joining our community.

Questions, Questions, Questions.

To successfully complete a commercial lease transaction we think that every Tenant should start with a broad set of questions.Here are a few of our favorites to get started on the right path.

  • What is our initial estimate of space, how many executives do we have on staff and administration?
  • Do we prefer a more open, modern plan or a traditional office-intensive build out. What about growth?
  • How much conference/meeting space do we require?
  • How much do we plan on growing our employee base? Will this location be a key component of our brand for five, seven, or even ten years?
  • Do we need to identify purchase opportunities instead of leasing space?
  • Would being situated in a building with your clients benefit you?
  • How would being close to your company's vendor resources impact your spending?
  • Can your group gain efficiencies in your industry or a branding advantage with this space or building as compared to others in this market?
  • Is LEED certification important for your company's values and image?

With the right guidance and tools your corporate space can be leveraged as a strategic advantage for your business within your industry. Your space should not only be a place where people work, but a flexible, dynamic and cost-effective instrument for your organization both now and in the future. With the right help you can put your physical space needs on par with your company's long-term vision and goals. Here at Tenavox we have resources in place to help you space plan from day one.Not sure how much space you need? Use our innovative office growth meter to estimate your square footage. (Add in metrics such as time and growth expectations to see how long a space could potentially hold you based on your plans? )Need even more help, handy with your drawings? Visit our partners for space planning resources and have a great idea of your space needs well before you execute a lease.

Office Buildings and the Way They're Leased

Commercial buildings come in a variety of shapes and sizes, in all markets across our great country. There are what seems like 100 ways to quote you a rent and everyone seems to think their building is the best of course. Most buildings are "represented" by either a Broker or a Property Manager. Their job is to represent the fiduciary needs of their client, in this case a Landlord. You will see on our site contact information for buildings, these are the representatives. In the world of Tenants, 90% of the time you will be dealing with a representative, it is rare to deal with an owner directly (sans on some smaller assets). So what is the job of these "representatives"?
Simple, make the best deal for the Owner.
Every product in commercial real estate to this point has been built around this premise, serve the ownership and their representatives in the goal of finding them the best deals. This is NOT how Tenavox works. We are the first Tenant-driven site in commercial real estate. Our goal is simple, empower the business to make the best decision possible. We have a data, tools, resources and much more more in our platform to help you make a better lease decision. All free. SO what about those other sites? Well, the simple truth is most "listings" you see (online or otherwise) for commercial buildings in your area are just a glorified sales pitch or a digital sign. They're interested in showing you a couple pretty pictures, some basic marketing info on the building (like CLASS A AMENITIES) and of course a phone number to call. None of this however gives you any information on what it's like to be a Tenant there, OR, what deals are actually getting done with Landlords. Tenavox doesn't give you a sales pitch, we give you the real deal…

For example, Here is the traditional way to classify a building…
The professional way to define a building is the "metropolitan building definitions" brought to you by BOMA, the building owners and management association…

Class A

Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.

Class B

Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area and systems are adequate, but the building does not compete with Class A at the same price.

Class C

Buildings competing for tenants requiring functional space at rents below the average for the area.

Now here at Tenavox we go for definitions that make actual sense to real businesses. Imagine that!
So, we came up with our own proprietary ratings system. (FAQ Link)

This takes into account the very professional standards of BOMA and adds in a dash (a lot) of realism and relevancy to the process. We include Tenant experience, actual rent metrics from real Tenants, parking, amenities, LEED certifications (don't worry we'll explain that soon) Landlord engagement/responsiveness, market conditions and much more to give you a patented, easy, digestible way of comparing assets, score by score. We do the same thing with rates. A quoted rate is frankly worthless, here at Tenavox we give you our best estimate of where deals are actually being done in a particular building, so you can use this as leverage in your negotiations. Don't be quoted a rate... be empowered! More on rates below...now let's get started.

First go to our interactive map and pull up your area (submarket/s) on Tenavox that you're most interested in leasing and select the area tool. Once buildings are identified you can sort by rating, size, reviews, responses, availabilities and more. With this information in hand you can narrow down which buildings interest you the most! Real reviews allow to get actionable feedback and compare that with availability and ratings for a given building. You will get the experience of being a Tenant in a given building before signing a lease!
You're an educated consumer when you go purchase a TV, a car, even renting a hotel room for a night! At Tenavox you have the same empowerment.

Finding Space

So now you have a few buildings identified and are interested in seeing spaces. At Tenavox, we are NOT a listing site. Landlord's don't pay to throw flyers at you, because we're not interested in that, just real feedback from Tenants and making our members more educated consumers.
But if you're interested in seeing spaces in person (and who isn't) we do allow you to contact our reviewed Landlords for information on specific availabilities to schedule a tour. Please keep in mind, some Landlords are not on Tenavox yet, because no one has reviewed that building yet. That isn't a bad or a good sign, it just means we do not yet have a current of former Tenant who has shared their experience. These come in daily and as soon as it's added it will be moderated and posted.

If you have a specific building you want information on we may have some ideas for you however, CONTACT US and we will go out and work with the Tenants in that specific building to gain real reviews for our members. However, before you see spaces (and you do want to do that) let's get nitty gritty on how leases are quoted by Landlords, Brokers and Property Managers.

How Rates are Quoted

So we already established why quoting rates is effectively marketing for a landlord and not a useful tool for a Tenant. Since you're using Tenavox you have the power to know what a deal should really be made for, in a particular building, using the information and tools we provide you with! That being said, you're still going to get quoted when you select a particular building and each building representative will handle this individually, usually with a proposal or a "letter of intent" (link to below definition). These outline the business terms of a lease before signing of a document. They are useful in negotiating the business terms, rent, size, timing, etc… before the binding document that a lease contract encompasses. We cannot stress this enough, every deal done is unique, there is no one size fits all in commercial real estate. Every lease is negotiated individually and factors in concessions, credit, timing of occupancy, term, size, types of lease structure, time in business and many more factors for each lease ultimately. We will give you the information to negotiate the best possible terms and to fight back against the dreaded "quoted" list of terms. Here is what to look for when you do get quoted, and what those terms mean…

The way rates are quoted vary building to building, submarket to submarket, nationally.
Seriously. There are over 10.4 Bilion SF of office space in buildings in 93 major markets. There is no universal standard that is all-encompassing. The reason is simple. Every Landlord has the freedom to quote a rate/lease structure they think is best for their asset, and that's fine by us. That being said, here are the most common lease quotes and structures…

Important: not only is every building different, every LEASE is different. Read your letters of intent and leases carefully for the way your potential Landlord defines these items and bills them. It's incredibly important and we will cover responsibilities and attorney review of a lease as well. HINT: We recommend this strongly!

Full Service: This is the standard for a traditional office building. Full service gross generally means that you are quoted a single rate, on a per square foot basis (either monthly or annually) for your rent. The rate should include ALL expenses and base rent calculations, from taxes and insurance to janitorial services, electricity, landscaping, management fees, administration, security, capital repair allowances, utilities, improvements and much more. The Landlord pays all of these expenses annually and then bills the Tenant as part of that quoted rate. Note that this can change year to year,(LINK to expense section). We have a full glossary if you have a specific question but in short, Full Service should mean ALL rent and expenses quoted into one number. Of course, that's not the end of it...there are things Landlords should not be charging you for (another reason we recommend attorney's review every lease) but some examples are leasing commissions, tax preparation fees, partnership fee related to ownership of the building, depreciation of the building, special tenant-specific (not you) needs and more… These definitions are a great resource but we cannot stress enough, every lease has it's own language and there are many ways leases can be broken out, maintained, responsibilities and the differences can cost you thousands of dollars over the term. Hire a Broker to show you what responsibilities in your potential lease are commensurate with the market and hire an attorney to make sure the Lease reflects it. This is covered extensively later but it needs to be said more than once. HIRE a Tenant representation broker and HIRE an attorney to review your lease.

NET: In this lease structure the rate is quoted in a set of two terms(?). Base rent and operating expenses (per square foot usually). This is done to specifically show the Landlord is NOT going to pay or be responsible for certain items. The structure breaks out who is responsible for what operating costs. In this scenario the breakout allows Landlords to separate certain items that would normally be included in a Full Service Lease. In this case base rents and operating expenses are separated for transparency to Tenants and ease of accounting. It is somewhat standard in a NET lease to not include utilities or janitorial services. This structure is also very common in business parks where the Tenant has direct control of their own space's major HVAC and plumbing/electrical systems. If it's not shared in your OPEX it doesn't mean it's free, you just pay the provider directly for utilities. There are some responsibility differences in this lease and often a NET lease is seen in properties without common HVAC, elevators or major systems shared by other Tenants. You may have your own bathroom or AC unit dedicated to your space. This is normal, but make sure you have a thorough understanding of who is responsible for what, more on this below. Read the lease!

NNN: Yet another way to quote leases. Typically seen in newer buildings (in really big projects too): the rent is broken out from operating expenses like a NET lease but additionally the Tenant is responsible for an increased degree of operational costs from a NET lease. Think of it as a NET lease with even more costs broken out and every responsibility (shared by other Tenants or not) is broken out very clearly. The premise is simple in NNN, there is base rent, and then EVERYTHING else which the Tenant must pay for. It's a lease structure which places the total onus upon the Tenant . For obvious reasons this is becoming more and more popular with Landlords… It's incredibly important to have brokers and attorneys parse the expense and operations sections so you are protected against out of control pass throughs (DEFINED TERM) that are not market standard.

So What Do Expenses Include/Not Include?

Expenses billed on the "base year"...

Gross: This is seen in a full service lease in most cases, so why don't they call it full service expenses? For the same reason no one knows if aliens exist, people do what they want unfortunately. However, every structure that doesn't say it includes everything is breaking something out, this isn't a bad thing but it needs to be accounted for in your operating expenses specifically. Leases allow Landlords to collect everything related to the operations of a building (within reason) on a pro-rata share, but expenses can change year to year. To cover this a Landlord will typically set your operating expenses on what is called a "base year" usually the first year of your lease. Now the catch is that the lease usually allows the Landlord to reassess expenses annually; if this number increase (say your base year is $10.00 PSF/YR and expenses go to $10.25 PSF/YR) the Landlord will send you a reconciliation for this amount, in the form of a bill. You have the right to audit your Landlord if you feel this is not correct but this is time consuming and difficult. Your best bet is to set you base year as far in advance as you can negotiate: if you sign a lease in September, try to get next year's base year to avoid any surprises. Typically taxes are the only thing that moves the needle annually (everyone hates these) but if the building sells and a new management company comes in and your fee doubles, that's not copesthetic (it's copacetic but I'd use another word—like OK) with us. Have your broker get you a controllable expense cap! This handy little tool allows you to keep controllable items (defined in the lease) from jumping up over 3, or 5% per annum just in case Joe's brother who owns the building and is down on his luck needs to supplement his income with "property management" fees. Keep a close eye on this, but your broker and attorney will review this highly as well, if they're worth their own fees..

NET/NNN: NET expenses are like Gross expenses except they typically come with line items related to each charge for expenses. You're paying expenses in a lease no matter the structure , a NNN or NET lease will just break these out from the beginning as opposed to a gross lease which some say hides them in a total number. The idea in this lease structure is to say who is responsible for paying for what. There may be an increased onus of pass through and responsibilities to Tenants in a NNN structure. Read your Lease!

Debt service should never be paid for by the Tenant!
Responsibilities .. (besides rent ;)

A note on responsibilities: Leases can be incredibly complex. In a shared office building with a common HVAC system (or common restrooms, elevators, etc… COMMON Area items). If one of these systems fails and requires replacement, this is billed as a capital improvement to all tenants and depreciated over time (usually 10/15 years) so that Tenants don't get a huge bill at once. Since it's a benefit to all Tenants it's shared. This is very common in Gross leases and most NNN leases. However, in some NET leases a Tenant may have their own HVAC or plumbing systems for a toilet, sink etc.. What's great for Landlords is they will have YOU be responsible for these items since they are in YOUR space. This makes sense after a certain period of time as you don't know how a Tenant may treat a system however upon lease execution these systems should be warrantied for a period of time. It's absolutely not acceptable to sign a lease and to be required in three months to buy a new AC unit. This is common in smaller business parks and assets with no major common systems. It doesn't mean you should not be asking for an inspection and a warranty for these systems if you are going to be responsible for it directly. ASK these questions and save serious money down the road…

Negotiating

The best tool for negotiations is relevant comparable lease information. Here at Tenavox we track this through our review-based database. Compare any "quoted" terms you have to our database and our estimated range of deals done to make a better lease decision. Ultimately, your results may vary based on your business profile but it's important to be educated before engaging with a building representative.. Speaking of representatives...

Tenant Representatives

SO you know the building has a representative..and you're using Tenavox, but you may still need some help. Even though you're armed with education on deals done, reviews, lease definitions and types of lease structures and you have a pretty good idea of what those quotes mean... we still recommend engaging a qualified Tenant broker in your commercial lease negotiations. Why you ask? Because having someone to represent your interests levels the playing field at the fiduciary level. Now you have someone actively engaged on your behalf to field negotiations, plus, you have a business to run! So how do you find a good representative? Well we have a continually updated list here (LINK to Tenant reps) who we have professionally pre qualified and recommend to our users. If you have someone already in mind, make sure you ask them the questions we learned the answers to right here in this guide. A qualified tenant broker should know WAY more than a market study, ensure they have relevant experience in the buildings/market you're most interested in and can provide you with what is their real job, counsel and advice in your lease. If they can't tell you their experience with a building or market, don't have access to relevant comps or don't seem to know the difference in the terms we've outlined here….do not hire them! The best Tenant representatives can become a part of your operational team, providing the very best advice on what terms you can safely offer to make a great lease decision. While you are now a more educated consumer and can absolutely make a better lease decision no website replaces the hands-on market experience of a truly qualified Tenant representative. The key here is qualified, if they can't answer the questions we outlined above they have no business representing your business. Period.

Finely tuned tenant representatives complete far more work than a market study… the best brokers are masters of negotiations in their specific markets. CRE is a particularly local industry. Hire a broker who has a track record of success and relationships with local landlords who can streamline the process for you. Here at Tenavox we are your first step to making a better lease decision but we are strong believers in a TEAM approach. There is no magic to doing an office lease but there is a process of negotiations, analysis, space planning and attorney review... find someone who has and CAN manage this process for you. We have suggestions for some of the best in your market "here" but here is what we recommend to look for in a Broker.

https://www.linkedin.com/pulse/how-should-tenant-advocate-provide-value-commercial-lease-feinberg?trk=mp-author-card

If you truly feel you can handle this process yourselves we're OK with that, Tenavox is for the Tenants and hopefully you have gained enough confidence and market knowledge to find the best home for your business. We're available (here) for any questions you may have for us.

We're not done yet though, now it's time to get into the nitty gritty of negotiating a Lease. Before you execute a lease document there are several important things to consider, the first of which is handling and agreeing to business terms before you are presented with a lease document. This is that "letter of intent" we mentioned.

What is a Letter of Intent?

Most Landlords, Brokers and property managers start their negotiations by outlining the principles upon which a deal could be reached. . These are the business terms of a lease. A quality letter of intent should outline the basics facts:, building, address, age built, space size, ownership and brokerage parties who would be party to a potential lease. More importantly, it will have the monthly or annual quoted rates per month or year outlined, the style of the lease (NNN, FS, etc..) and how expenses are currently billed and calculated. If construction is needed on a space the LOI should call out the dollar amount being contributed by each party and the way in which these planning and eventual construction payments would work. It should also outline the terms of which commissions are paid and any lease options, renewal, expansion, termination, etc.. that a Landlord may offer.

Space Planning

If you're not sure how much space your organization really needs, start with our Tenant estimator here at Tenavox! You estimate how much space you may need potentially by employee, style of space you prefer and potential layouts.

Landlords typically offer some initial planning done by an architect as well, these will be more accurate than an estimate and allow you to see what your space would really lay out as on paper. It serves as an initial guide for contractors to price as well. Make sure you have the architect add all the items you consider to be important into this plan so they are accurately priced. If this is not done, there can be confusion during the process. Note that these initial space plans are not final, hard bid plans. Those require what are called CD's or construction drawings and are done after lease execution as they are quite detailed and costly. A contractor will use these as a full blueprint for your space construction as opposed to their initial bid which although is usually quite accurate is not the final word (Number ☺).

Until you have CD's and a hard bid you should NEVER start construction on your space. That's how surprises occur. These costs come out of what we call TI, or a Tenant improvement allowance. These vary market to market and space to space but it is an allowance a Landlord will provide towards the finished construction of a space. It includes a PSF number typically, be sure to negotiate this AFTER you have an initial bid to ensure you have a good idea of costs before agreeing to a TI allowance number. For example, it can cost upwards of $65/PSF to finish a space from shell with standard building finishes in a construction budget.

Quick note on types of space and construction, you may hear "shell" space and "second generation."

Shell space: This is space that has never been built out. It is usually a cold, dark, shell. Meaning nothing is in from HVAC, electrical to walls and paint. It is a blank canvas. It costs more to build out.

Second generation: I say second, it could be tenth. Basically this means space that does have improvements already built out. It should have walls, electrical, HVAC and cabling already included. This is space you want to make changes to but not build from scratch. Usually cheaper since some improvements can be reused.

A Landlord initially may only quote $50 or $40 PSF and expect Tenants to make it up. Use the market knowledge gained here on Tenavox and with your representatives to make sure the Landlord is contributing a fair number. It is not uncommon for Tenants to contribute to their space construction but rent, TI and concessions (free rent periods) are all heavily intertwined.

Lease Options

Leases can allow for several options for Tenants. Work to get your organization flexibility through options. An expansion option allows you to have a right to take additional space at a point in your lease (triggered either by you or the Landlord having an offer on the space in question) without having to take that space right now and spending the capital. It's an excellent way to plan for growth for your business but save dollars in the short term. Renewal options also give you a right to extend your lease at a market (or sometimes fixed) rate down the road during your lease term, ensuring stability for your business. Although rare, termination options and ongoing rights of refusal for space around can be granted in some cases as well. The only way to negotiate these is to first ask, always ask!

Landlords and Their Brokers

99% of buildings are listed and exclusively represented by a Landlord representative. These brokers have one job, and that is a fiduciary responsibility to their Landlord client. Make no mistake, they do not work for you. Using Tenavox in combination with a qualified representative of your own ensures you will make a far better deal. The Landlord's broker is not motivated to make a deal that favors you, quite the opposite. Educate yourself and empower yourself to make your commercial lease work for you, not the other way around.

What About Executive Suites or Co-op Spaces?

Executive suites offer Tenant's an all-inclusive, usually short-term, option to lease space. They operate primarily as a Sub-Landlord, meaning they lease an entire floor of an office building and the provide Tenants with the ability to lease small (even one office) spaces on a more flexible basis. Some services like Regus or WeWork even provide you with mail, copy, internet, phone and reception services for when you're starting out. These spaces are usually quoted as a monthly rate, not on a PSF basis. This is because on a PSF basis you would be paying about 2-3X the market rate. Since traditional landlords do not offer these types of arrangements executive suites are a great option for new businesses or expanding organization's in a given market who are unsure of how long they need space or how much space they will potentially need. This gives them flexibility without the commitment of a long-term lease arrangement. Make no mistake however, divide your rate by the size of office and you will see the payment is far above a traditional quoted lease rate. However, it's often a fair trade considering the flexibility of size and term not offered by traditional landlords. Just make sure you understand the costs up front and it can be an amicable arrangement on a short term basis.

Property Managers

Property Managers are not the leasing agent in most cases. It is their job to handle any issues or potential questions you may have once a lease is executed. They handle construction management and maintenance of the major systems in a building. Tenavox allows you a forum to voice your opinions and concerns with both your Landlord and their representative and this includes property managers. If you are not getting what you need from the Landlord's representative, motivate them to do better by posting a review today! We give the Landlord and their representatives a great forum to respond and resolve issues on their Tenant's behalf, but a little public motivation never hurts ;)

Hire a qualified commercial real estate attorney to negotiate the provisions of your lease. Once you have an agreed to LOI and a space plan you will receive a lease draft. This is a Landlord document, it will not be in your favor. An attorney will negotiate and rewrite provisions on your behalf so the document has a fair and actionable starting point should any issues arise down the road. We cannot stress this enough, hire an attorney. If you need help selecting a qualified CRE attorney in your submarket contact us here, we have a great partners that can assist you.

Executing a Lease Document

OK, you have lease and it's been negotiated, you have a plan and its ready to go, you're ready to sign. Congratulations, execute more than one original so you can keep one and then upload it here on Tenavox. It's 100% secure and confidential and we will keep it for you on your profile page, free of charge. Anytime you have a question or need access to the document it's here, anywhere in the world.

Summarizing Your Lease

This is a short summary of your business terms, lease options, key dates and contacts. If you don't have a broker and did not receive one with your lease send it to us! We'll create one and store it here on Tenavox for you free of charge. As always, 100% free of charge and 100% secure.

Issues Once You're a Tenant

Leases are not easy and sometimes issues arise during your term. This is why Tenavox exists, if you're having an issue that is not being resolved or just want other business owners to be aware of how a Landlord, building or representative operates, post a review today! Our platform gives you a voice. Crowdsource potential issues and suggested improvements to your building with Tenavox. You can post a review here, refer your fellow Tenants here, and see some examples of our product in action here. It's a resource for every commercial Tenant, to help hold Landlords and their representatives accountable for their assets. Your are a Tenant, not a number on a spreadsheet, and they should treat you with the respect you deserve.

Conclusion

So that's our leasing guide. Keep in mind this is not the end all, be all of a lease process but we hope it's a great start and continuing resource for our members throughout their commercial leasing experience. Tenavox is about the Tenant community having the resources to make better lease decisions. If you have more questions or comments see our FAQ for specific questions. Make the best lease decision for your business with Tenavox! As always Contact Us.

Leasing Guide

Retail

Introduction

Here at Tenavox, we aim to make the first step in your commercial lease experience a smooth one. The selection of the right location for your retail storefront or restaurant is an incredibly important decision. Often an organization's only interaction with their customer base it's success is highly dependent on choosing not only the right location but size, position within a center and understanding the true economics of a retail shopping center lease. Before making a multi-year commitment with hundreds of thousands of dollars invested use the resources here at Tenavox to ensure your lease space will work for you, and not the other way around.

Easy access to accurate, useful and transparent information is what we bring our members along with leasing resources (like this one!) to help our Tenants make better lease decisions. So let's get down to business: you've decided to lease a retail space, use our interactive guide to help you answer questions and our free resources like our retail sales per square foot calculator and curated content sections. If you have any questions just pause the presentation at any time to take more time, you can also print this as a PDF and take it with you. This guide is yours, 100% free as a thanks for joining our community.

Questions?

To successfully complete a commercial lease transaction we think that every Tenant should start with a broad set of questions. Here are a few of our favorites to get started on the right path. It all starts with your business.

  • What is our initial estimate of sales, on an annual basis for this location?
  • What demographic features contribute to my business success? Income? Households?
  • Are there any features of a center I require, i.e. a drive thru, end-cap, special signage?
  • What is the ideal spacing from a potential competitor, is it within the center, miles away?
  • Do we need to identify purchase opportunities instead of leasing space?
  • How would being close to your company's vendor resources impact your spending?

With the right guidance and tools your retail space can be leveraged as a strategic advantage for your business within your industry. Your space should not only be a place where people sell products, but a flexible, dynamic and cost-effective instrument for your organization both now and in the future. With the right help you can put your physical space needs on par with your company's long-term vision and goals. Here at Tenavox we have resources in place to help you space plan from day one. Not sure how much space you need? Use our innovative retail sales per square foot to identify what the healthy standards are for your industry and combine that with your annual sales to get an ideal space calculation. With this is hand, it's time to begin the process of searching space!

Retail Shopping Centers and the Way They're Leased

Commercial buildings come in a variety of shapes and sizes, in all markets across our great country. There are what seems like 100 ways to quote you a rent and everyone seems to think their building is the best of course. The simple truth is most "listings" you see for commercial buildings in your area are just a glorified sales pitch. They're interested in showing you a couple pretty pictures, some basic marketing info on the building (like CLASS A AMENITIES) and of course a phone number to call. None of this however gives you any information on what it's like to be a Tenant there, OR, what deals are actually getting done with Landlords. Here is the BOMA way to classify a building…
The professional way to define a building is the "metropolitan building definitions" brought to you by BOMA, the building owners and management association…

Class A

Most prestigious buildings competing for premier retail users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.

Class B

Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area and systems are adequate, but the building does not compete with Class A at the same price.

Class C

Buildings competing for tenants requiring functional space at rents below the average for the area.

Now here at Tenavox we go for definitions that make actual sense to real people. Imagine that.
So, we came up with a proprietary ratings system. (Show the digestible ratings systems link)

This takes into account the very professional standards of BOMA and adds in a dash (a lot) of realism to the process. We include Tenant experience, actual rent metrics from real Tenants, parking, amenities, traffic patterns, demographics, signage, credit, tenant mix and more (don't worry we'll explain all that soon) along with Landlord engagement/responsiveness and more to give you a patented, easy, digestible way of comparing assets, score by score. Let's get started.

First go to our interactive map and pull up your area (market/s) on Tenavox that you're most interested in leasing. Once buildings are identified you can sort by rating, size, reviews, budget and more. With this information in hand you can narrow down which buildings interest you the most! Real reviews allow to get actionable feedback and compare that with availability and ratings for a given building. You will get the experience of being a Tenant in a given building before signing a lease!
You're an educated consumer when you go purchase a TV, a car, even renting a hotel room for a night! At Tenavox you have the same empowerment.

Finding Space

Type of Centers

Power centers, Malls, Mixed-use centers, neighborhood centers...the taxonomy can be daunting. Here are some basics:

Power centers are typically greater than 100,000 S.F. and anchored by major retail users, think Wal-Mart, Target or grocery-level centralized assets with many supporting uses. Often flanked by pad sites with fast food, pharmacy, retail, auto or restaurant users. These centers are highly desirable for certain businesses because of their large amounts of foot traffic and consistent daily activity. Very high credit standards typically.

Mixed-use centers are a combination asset with some level of retail, office and typically some apartment living construction all contained within one development. These are currently in vogue and command high rents due to the quality of their construction, location and "all in one" packaging that is attractive to retailers. The idea is to serve live, work and play consumers in the current retail environment. Usually high credit standards, they look for top of the line users depending on the developments.

Neighborhood centers are the most common type of retail. These are your run of the mill 10,000-40,000 S.F. local centers strategically placed to serve a specific traffic pattern for users, fill a gap in spacing between major power centers or grocery users or in some cases just a lower cost alternative to the current retail offerings. These centers will have lower rates and feature regional/local credit tenancy (easier entry for new businesses) but still offer plenty of viability to potential tenants who find synergy in the tenant mix or location for their business.

A quick note on credit. It's extremely important to Landlords, going hand in hand with term and rent. It's often the only way a Landlord can vet a potential business and its viability. If there is a construction allowance being provided Landlords will be even more interested in your history and ability to repay their investment. If you are a new business be prepared for personal guarantees and letters of credit along with a solid business plan to help persuade Landlords of your success.

Let's Search!

So now you have a few buildings identified and are interested in seeing spaces. At Tenavox, we are NOT a listing site. Landlord's don't pay to throw flyers at you, because we're not interested in that, just real feedback from Tenants and making our members more educated consumers.
But if you're interested in seeing spaces in person (and who isn't) we do allow you to contact our reviewed Landlords (either directly or through our partners) for information on specific availabilities to schedule a tour. You also have the ability to set a marketplace inquiry and out top rated landlords in your defined area will contact you! Please keep in mind, some Landlords are not on Tenavox yet, because no one has reviewed that building yet. That isn't a bad or a good sign, it just means we do not yet have a current of former Tenant who has shared their experience. These come in daily and as soon as it's added it will be popped up. If you have a specific building you want information on we may have some ideas for you however, CONTACT US and we will go out and work with the Tenants in that specific building to gain real reviews for our members. However, before you see spaces (and you do want to do that) let's get nitty gritty on how leases are quoted by Landlords, Brokers and Property Managers.

Traffic Patterns

Traffic and the patterns it presents on the major thoroughfares surrounding a particular center or building can have a major impact on both leasing availability, rents and ultimately how successful your business location will be. For example, morning businesses (think donuts, coffee, etc..) are best suited to high volume of "going-out" traffic patterns on thoroughfares where commuters are taking on the way to major centers of employment. Better yet, being located within major centers of employment! Think carefully about how a center's traffic patterns will impact your business. Is it accessible to the traffic and easily entered/exited for purposes of shopping? Does the center have a potential issue with too much traffic making it a difficult to reach property (i.e. major highway mid-block centers)? What is the average speed of the traffic, can commuters and shoppers stop easily, is it lighted at a major intersection?

Position Within a Center/Co-tenancy

Being located in a center is one thing, being well-located is an entirely different proposition. Think about like-minded businesses that shoppers or customers would find helpful to them, would being located near these tenants increase your business? Studies show a massing effect on the psyche of a potential consumer is a boon to the retail industry. People generally shop for more than one thing, so try to find co-tenants and positions within centers that would be a natural extension for your customers. Work together!

Engage a local attorney to assess any questions you may have related to permits, restrictions or parking questions, each lease varies widely!

Void Analysis?

Retail brokers in commercial real estate will use a fancy term when representing chain retail, "void analysis" for their clients. While this sounds complicated it's not difficult and frankly with the software we provide at Tenavox you can accomplish the very same task. The basics are spacing between locations or competitors to make sure you don't end up with locations that either overlap or cannibalize your stores or get eaten up by a very good performing competitor location. With Tenavox, enter your proposed business (i.e. coffee shop) and our map will auto-populate with the existing shops (thanks Google) within your self-defined search areas. With this tool and our map layers for income, demographics and traffic in hand you can be sure your locations are spaced properly and built for maximum success.

How Rates Are Quoted

The way rates are quoted vary building to building, submarket to submarket, nationally. Seriously. There is over 15.4 Bilion SF of retail space in buildings in 93 major markets. There is no universal standard that is all-encompassing. The reason is simple. Every Landlord has the freedom to quote a rate/lease structure they think is best for their asset, and that's fine by us. That being said, here are the most common lease quotes and structures…

Important: not only is every building different, every LEASE is different. Read your letters of intent and leases carefully for the way your potential Landlord defines these items and bills them. It's incredibly important and we will cover responsibilities and attorney review of a lease as well. HINT: We recommend this strongly!

NET: In this lease structure the rate is quoted in a set of two terms(?). Base rent and operating expenses (per square foot usually). This is done to specifically show the Landlord is NOT going to pay or be responsible for certain items. The structure breaks out who is responsible for what operating costs. In this scenario the breakout allows Landlords to separate certain items that would normally be included in a Full Service Lease. In this case base rents and operating expenses are separated for transparency to Tenants and ease of accounting. It is somewhat standard in a NET lease to not include utilities or janitorial services. This structure is also very common in business parks where the Tenant has direct control of their own space's major HVAC and plumbing/electrical systems. If it's not shared in your OPEX it doesn't mean it's free, you just pay the provider directly for utilities. There are some responsibility differences in this lease and often a NET lease is seen in properties without common HVAC, elevators or major systems shared by other Tenants. You may have your own bathroom or AC unit dedicated to your space. This is normal, but make sure you have a thorough understanding of who is responsible for what, more on this below. Read the lease!

NNN: Yet another way to quote leases. Typically seen in newer buildings (in really big projects too): the rent is broken out from operating expenses like a NET lease but additionally the Tenant is responsible for an increased degree of operational costs from a NET lease. Think of it as a NET lease with even more costs broken out and every responsibility (shared by other Tenants or not) is broken out very clearly. The premise is simple in NNN, there is base rent, and then EVERYTHING else which the Tenant must pay for. It's a lease structure which places the total onus upon the Tenant . For obvious reasons this is becoming more and more popular with Landlords… It's incredibly important to have brokers and attorneys parse the expense and operations sections so you are protected against out of control pass throughs (DEFINED TERM) that are not market standard.

Percentage Rent

Ahh, the kicker in a lease proposal. What is that dirty term…? Can a retailer really be charged for a potential portion of their net sales profits? Short answer? It depends. Some very nice centers have the ability and gravitas to charge their tenants a piece of profit (usually 4-8%) of a business's annual net sales profits. This is a negotiable term and tenants have been winning the battle on this in recent years with landlords. Fight as hard as you can to get it out, but if you're dead set on the best center in the city you can be prepared to make a landlord-friendly deal, unfortunately percentage rent is part of that package.

So What Do Expenses Include/Not Include

NET/NNN: You're paying expenses in a lease no matter the structure, a NNN or NET lease will just break these out from the beginning as opposed to a gross lease which some say hides them in a total number. The idea in this lease structure is to say who is responsible for paying for what. There may be an increased onus of pass through and responsibilities to Tenants in a NNN structure. Read your Lease!

Debt service should never be paid for by the Tenant!

A note on responsibilities: Leases can be incredibly complex. In a shared building with a common HVAC system (or common restrooms, elevators, etc… COMMON Area items). If one of these systems fails and requires replacement, this is billed as a capital improvement to all tenants and depreciated over time (usually 10/15 years) so that Tenants don't get a huge bill at once. Since it's a benefit to all Tenants it's shared. This is very common in Gross leases and most NNN leases. However, in some NET leases a Tenant may have their own HVAC or plumbing systems for a toilet, sink etc.. What's great for Landlords is they will have YOU be responsible for these items since they are in YOUR space. This makes sense after a certain period of time as you don't know how a Tenant may treat a system however upon lease execution these systems should be warrantied for a period of time. It's absolutely not acceptable to sign a lease and to be required in three months to buy a new AC unit. This is common in smaller business parks and assets with no major common systems.

IN RETAIL YOU USUALLY DO NOT HAVE COMMON SYSTEMS AND ARE RESPONSIBLE FOR YOUR OWN MECHANICAL, PLUMBING AND ELECTRICAL COSTS...GET IT INSPECTED BEFORE SIGNING A LEASE. ASK these questions and save serious money down the road…

Signage

Signage is an incredibly powerful piece of marketing for your business. Nearly every retail center lease should include a right for you to use (at your cost of installation) to place your signage on your storefront. In addition, often there are monument or even tower signage availabilities where you can reserve a panel to alert passing traffic to your presence. Try to negotiate your ability to exclusively use a panel (or two depending on your size) on the monument and make sure you have all of the signage requirements understood and agreed to in your lease before execution, paying for a sign and then being out of compliance with the shopping center's regulation or deed restrictions is a nightmare.

Tenant Representatives

OK you're armed with lease definitions and structures and you have a pretty good idea of what those quotes mean. At this point in Tenavox consumer experience we strongly recommend engaging a qualified Tenant broker in your commercial lease negotiations. While you are now a more educated consumer and can absolutely make a better lease decision no research site replaces the hands-on market experience of a qualified Tenant representative.

Brokers complete far more work than a market study… the best brokers are masters of negotiations in their specific markets. CRE is a particularly local industry. Hire a broker who has a track record of success and relationships with local landlords who can streamline the process for you. Here at Tenavox we are your first step to making a better lease decision but we are strong believers in a TEAM approach. There is no magic to doing an office lease but there is a process of negotiations, rent analysis, space planning and attorney review... find someone who has and CAN manage this process for you. We have suggestions for some of the best in your market "here" but here is what we recommend to look for in a Broker.

https://www.linkedin.com/pulse/how-should-tenant-advocate-provide-value-commercial-lease-feinberg?trk=mp-author-card

We're not done yet though, now it's time to get into the nitty gritty of negotiating a Lease. Before you execute a lease document there are several important things to consider, the first of which is handling and agreeing to business terms before you are presented with a lease document. This is often referred to as a Letter of Intent.

What is a Letter of Intent?

Most Landlords, Brokers and property managers start their negotiations by outlining the principles upon which a deal could be reached. . These are the business terms of a lease. A quality letter of intent should outline the basics facts:, building, address, age built, space size, ownership and brokerage parties who would be party to a potential lease. More importantly, it will have the monthly or annual quoted rates per month or year outlined, the style of the lease (NNN, NET, etc..) and how expenses are currently billed and calculated. If construction is needed on a space the LOI should call out the dollar amount being contributed by each party and the way in which these planning and eventual construction payments would work. It should also outline the terms of which commissions are paid and any lease options, renewal, expansion, termination, etc.. that a Landlord may offer.

Space Planning

If you're not sure how much space your organization really needs, start with our Tenant estimator here at Tenavox! You estimate how much space you may need potentially by employee, style of space you prefer and potential layouts.

Landlords typically offer some initial planning done by an architect as well, these will be more accurate than an estimate and allow you to see what your space would really lay out as on paper. It serves as an initial guide for contractors to price as well. Make sure you have the architect add all the items you consider to be important into this plan so they are accurately priced. If this is not done, there can be confusion during the process. Note that these initial space plans are not final, hard bid plans. Those require what are called CD's or construction drawings and are done after lease execution as they are quite detailed and costly. A contractor will use these as a full blueprint for your space construction as opposed to their initial bid which although is usually quite accurate is not the final word (Number ☺).

Until you have CD's and a hard bid you should NEVER start construction on your space. That's how surprises occur. These costs come out of what we call TI, or a Tenant improvement allowance. These vary market to market and space to space but it is an allowance a Landlord will provide towards the finished construction of a space. It includes a PSF number typically, be sure to negotiate this AFTER you have an initial bid to ensure you have a good idea of costs before agreeing to a TI allowance number. For example, it can cost upwards of $65/PSF to finish a space from shell with standard building finishes in a construction budget.

Quick note on types of space and construction, you may hear "shell" space and "second generation."

Shell space: This is space that has never been built out. It is usually a cold, dark, shell. Meaning nothing is in from HVAC, electrical to walls and paint. It is a blank canvas. It costs more to build out.

Second generation: I say second, it could be tenth. Basically this means space that does have improvements already built out. It should have walls, electrical, HVAC and cabling already included. This is space you want to make changes to but not build from scratch. Usually cheaper since some improvements can be reused.

A Landlord initially may only quote $50 or $40 PSF and expect Tenants to make it up. Use the market knowledge gained here on Tenavox and with your representatives to make sure the Landlord is contributing a fair number. It is not uncommon for Tenants to contribute to their space construction but rent, TI and concessions (free rent periods) are all heavily intertwined.

Lease Options

Leases can allow for several options for Tenants. Work to get your organization flexibility through options. An expansion option allows you to have a right to take additional space at a point in your lease (triggered either by you or the Landlord having an offer on the space in question) without having to take that space right now and spending the capital. It's an excellent way to plan for growth for your business but save dollars in the short term. Renewal options also give you a right to extend your lease at a market (or sometimes fixed) rate down the road during your lease term, ensuring stability for your business. Although rare, termination options and ongoing rights of refusal for space around can be granted in some cases as well. The only way to negotiate these is to first ask, always ask!

Landlords and Their Brokers

99% of buildings are listed and exclusively represented by a Landlord representative. These brokers have one job, and that is a fiduciary responsibility to their Landlord client. Make no mistake, they do not work for you. Using Tenavox in combination with a qualified representative of your own ensures you will make a far better deal. The Landlord's broker is not motivated to make a deal that favors you, quite the opposite. Educate yourself and empower yourself to make your commercial lease work for you, not the other way around.

Property Managers

Property Managers are not the leasing agent in most cases. It is their job to handle any issues or potential questions you may have once a lease is executed. They handle construction management and maintenance of the major systems in a building. Tenavox allows you a forum to voice your opinions and concerns with both your Landlord and their representative and this includes property managers. If you are not getting what you need from the Landlord's representative, motivate them to do better by posting a review today! We give the Landlord and their representatives a great forum to respond and resolve issues on their Tenant's behalf, but a little public motivation never hurts ;)

Attorneys

Hire a qualified commercial real estate attorney to negotiate the provisions of your lease. Once you have an agreed to LOI and a space plan you will receive a lease draft. This is a Landlord document, it will not be in your favor. An attorney will negotiate and rewrite provisions on your behalf so the document has a fair and actionable starting point should any issues arise down the road. We cannot stress this enough, hire an attorney. If you need help selecting a qualified CRE attorney in your submarket contact us here, we have a great partners to help you select a legal counsel.

Executing a Lease Document

OK, you have lease and it's been negotiated, you have a plan and its ready to go, you're ready to sign. Congratulations, execute more than one original so you can keep one and then upload it here on Tenavox. It's 100% secure and confidential and we will keep it for you on your profile page, free of charge. Anytime you have a question or need access to the document it's here, anywhere in the world.

Summarizing Your Lease

This is a short summary of your business terms, lease options, key dates and contacts. If you don't have a broker and did not receive one with your lease send it to us! We'll create one and store it here on Tenavox for you free of charge. As always, 100% free of charge and 100% secure.

Issues Once You're a Tenant

Leases are not easy and sometimes issues arise during your term. This is why Tenavox exists, if you're having an issue that is not being resolved or just want other business owners to be aware of how a Landlord, building or representative operates, post a review today! Our platform gives you a voice. Crowdsource potential issues and suggested improvements to your building with Tenavox. You can post a review here, refer your fellow Tenants here, and see some examples of our product in action here. It's a resource for every commercial Tenant, to help hold Landlords and their representatives accountable for their assets. Your are a Tenant, not a number on a spreadsheet, and they should treat you with the respect you deserve.

Conclusion

So that's our leasing guide. Keep in mind this is not the end all, be all of a lease process but we hope it's a great start and continuing resource for our members throughout their commercial leasing experience. Tenavox is about the Tenant community having the resources to make better lease decisions. If you have more questions or comments see our glossary here below for specific lease terms and a link to our partner resource sites. Make the best lease decision for your business with Tenavox. As always, we're here to help, Contact Us to discuss.