To be trusted is a greater compliment than being loved.
George MacDonald
By Alex Kopicki for the Young Entrepreneur Council (YEC)Published November 14, 2014FOXBusiness
In its most basic element, finding office space is a simple process. On one side you have supply (landlords and building owners) and on the other side you have demand (tenants looking for space). Where these two intersect you have a documented agreement in the form of a lease. This should be a straightforward transaction that mirrors the process of renting out an apartment; however, signing a long-term lease for office space can get confusing — and expensive — very quickly.
Commercial real estate (CRE) has not kept up with the times. The industry is riddled with archaic terminology, lack of standardization and limited regulation. All of this leads to an extremely inefficient leasing process, which in most cases results in the tenant paying extra money. Here are the top three things you may not know about your long-term office lease.
All Square Footage Is Not Created Equal
CRE pros love using the phrase “square footage” and its many derivatives to talk about commercial property. In basic terms, the square footage of a building describes the physical size and boundaries of a space. Because this is the common denominator of all office space throughout the country, you would think it is measured using a standard system. But that couldn’t be further from the truth.
Every market measures buildings differently, meaning you might be paying for space you literally cannot use. For example, in some markets your usable square footage might be measured to the inside of an exterior wall cavity. If your lease stipulates that you pay rent on a price per square foot (PSF) basis, that extra space inside the exterior wall cavity could be adding a couple hundred dollars more to your rent payment every month — even though you get no benefit from it. Makes you start to question why square footage is the common denominator in all of commercial real estate, right?
You Can Amortize Tenant Improvement Packages Into Your Rent
A tenant improvement (TI) package can be defined as money (in the form of improvements to an office space) that a landlord “gives” to a new tenant upon execution of a long-term lease. These TI packages are great marketing tools for landlords to entice tenants to choose their building over a competitor’s, and landlords will make sure you know this. But when you dig deeper, who actually pays for the tenant improvements? You guessed it: the tenant.
As the tenant, whether you’re a large or small business, it’s nice that you don’t have to come up with the initial cash to fix up your space. However, in the long run, a landlord still passes on the cost of the improvements to the tenant by building them into the rent schedule. Most landlords amortize TI costs into the rent schedule at an interest rate of 10 percent or higher, and they typically do so over a short period of time. These costs add up very quickly and may leave you wondering why your budgeted rent of $500 per employee actually comes out to $600 when all is said and done.
Common Area Maintenance Expenses May Contain Hidden Fees
Common Area Maintenance, or CAM, is an expense category that landlords use to throw in a variety of miscellaneous charges. As a tenant, you are responsible for a pro-rata share of this expense, which is based on how many square feet you lease in the building. CAM is a usual expense you should expect to pay when signing a long-term lease, but you need to be careful. Sometimes CAM includes an asset management or property management fee. These are expenses a landlord has to pay but then passes on to the tenant. But does that really make sense? Wouldn’t it be nice to know exactly what your monthly rental payment is getting you?
Commercial real estate, specifically finding office space for your business, doesn’t have to be this confusing. If you have fewer than 25 employees, you should consider a simpler real estate solution — such as desks on demand or a month-to-month agreement.
It is these exact issues and the painful process of commercial leasing that led my business partner Jeff Jacobson and I to create Kinglet, an online marketplace connecting small businesses and entrepreneurs with affordable office space. The process Kinglet provides is a stark difference from traditional leases: It is simple, flexible and — most importantly — painless.
No matter what you decide, be careful and educated about what you’re getting yourself into before signing a lease.
Alex Kopicki is the co-founder and chief executive officer of Kinglet. Kopicki earned a bachelor’s degree in History from the University of Pennsylvania and a master’s degree in real estate from the Johns Hopkins Carey Business School. For more than 11 years Kopicki has led teams to complete over $600 million worth of commercial real estate development. Kopicki was named a National Developing Leader by NAIOP in 2009, and he was added to the Baltimore Business Journal’s Top 40 Under 40 list in 2014.
The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launchedStartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.
A little about me and my expertise – video
commercial / investment real estate / Arizona land specialist
https://www.youtube.com/watch?v=PPs3kpKR4nY
I go to great heights to sell or purchase your land
http://walter-unger.com/?p=10118
http://en.wikipedia.org/wiki/Timeline_of_Phoenix,_Arizona_history
3
Facts of Arizona – year 1848 to 2013
http://walter-unger.com/?p=9507
4.
Feel free to contact Walter regarding any of these stories, the current market, distressed commercial real estate opportunities and needs, your property or your Investment Needs for Comercial Investment Properties in Phoenix.
View my listings and my profile at:
http://www.loopnet.com/profile/14101172900/Walter-Unger-CCIM/Listings/
Please go to my web-site and get all the newsflashes and updates in Commercial Investment Real Estate in Phoenix and Commercial Investment Properties in Phoenix daily
Check out my professional profile and connect with me on LinkedIn.
Follow me on Facebook:
http://www.facebook.com/ungerccim
Follow me on Twitter:
https://twitter.com/Walterunger
Follow Me on Google+
https://plus.google.com/u/0/b/114560883588623379451/
Walter Unger CCIM, CCSS, CCLS
I am a successful Commercial Investment Real Estate Broker in Arizona now for 20 years and I worked with banks and their commercial REO properties for 3 years. I am also a commercial landspecialist in Phoenix and a Landspecialist in Arizona.
WHETHER YOU LEASE OR OWN
NOW IS THE TIME FOR YOU TO EXPAND, UPGRADE OR INVEST.
we are at on the a rise of the cycle in Commercial Real Estate. so there is only one way and it’s called we are going up and now is the time for you to expand, upgrade or invest in Commercial Properties in Phoenix. The prices on deals I may get you will not be around forever.
If you have any questions about Commercial Investment Properties in Phoenix or Commercial Investment Properties in Arizona, I will gladly sit down with you and share my expertise and my professional opinion in Commercial Properties in Phoenix or Commercial Properties in Arizona with you.Obviously I am also in this to make money, but it could be a win-win situation for all of us.
Please reply by e-mail walterunger@ccim.net or call me on my cell 520-975-5207 or Office:480-948-5554
Thank You
Walter
Walter Unger CCIM
Associate Broker, West USA Commercial Real Estate Advisers
7077 E. Marilyn Road, Bldg 4, Suite 130
Scottsdale, AZ 85254
Cell: 520-975-5207
Office : 480-948-5554
Fax: (480-658-1172
View my listings and my profile at:
http://www.loopnet.com/Profile/14101172900/Walter-Unger-CCIM/
a little about me and my expertise – video
commercial-investment real estate adviser-land specialist
https://www.youtube.com/watch?v=PPs3kpKR4nY
Delivering the New Standard of Excellence in Commercial Real Estate
- Commercial Real Estate Scottsdale
- Commercial Real Estate Phoenix
- Commercial Real Estate Arizona
- Commercial Investment Properties Phoenix
- Commercial Investment Properties Scottsdale
- Commercial Investment Properties Arizona
- Land Specialist Arizona
- Arizona Land Specialist
- Land Specialist Phoenix
- Phoenix Land Specialist
- Land For Sale Phoenix
- Land for sale Arizona
- Commercial Properties For Sale Phoenix
- Commercial Real Estate Sales Phoenix
- Commercial Properties Phoenix
- Commercial Properties Arizona
- Commercial Land Specialist Phoenix
- Commercial Land Phoenix
- Multifamily land Phoenix
- Retail Land Phoenix
- Industrial Land Phoenix
- Land Commercial Phoenix
- Land Retail Phoenix
- Land Industrial Phoenix
- Land Multifamily Phoenix
- Industrial Land for sale Phoenix
- Land Industrial
- P
- Investment Real Estate
Disclaimer of Liability
The information in this blog-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided “as is,” with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.