Tuesday, January 28, 2014

Why Tenants AND Landlords Should Love Tenant Rep Brokers

by Kristian Lee

I have recently completed a transaction where I was the representative for the Landlord on a property and executed a lease with a tenant who did not understand the talent (Tenant Rep) AND time required to open a new location! Although the tenant was a very smart medical doctor, they had no experience in commercial real estate nor any experience in opening a new office location for the very first time!
At our first initial meeting they wanted to move quickly and get their practice up and running in short order. Negotiating the general lease terms through to the final proposals happened over a course of a few days, keeping on track with their fast pace desires.
Things started to stall once the lease was drafted and they brought in their general contractor to determine what needed to be done to the vanilla box suite.

At this time it was evident the process of commercial real estate was now taking over the speed of the transaction.
Since this tenant prospect was new to commercial real estate, AND they had no tenant representation (cringe) they had no clue how much time building-out their space would really take; the players necessary to execute the task; nor the cost and time needed to do it properly. For me, it was so very hard to watch this prospective tenant with no clue and the fact that my obligation was to the landlord. In my capacity, I was only able to advise them of the process, but not fully assist.
This is where a tenant representation broker can really ease the pain. A tenant representation broker is not just there to assist in finding the right space and negotiating a marketable deal, they are also there to hold the tenant’s hand and assist with the entire process and work hand in hand with the landlord’s broker.

Note to Tenant:

If believe you can go it alone (not advisable), please be aware of how long this stuff really takes and what professionals you need as an integral part of your team!

Note to Landlord:

If you want the process to go smoothly and have a great experience with your new tenant, who you will be living with you for the next 5 years, appreciate those tenant representation brokers who are at the frontline!
Blog Bonus: I want to share my take on what a typical timeline looks like. In this particular case, the tenant really had no idea how long and drawn out this process could be.

Typical Timeline

Step 1:

Allow a few weeks time to identify and meet a good broker to represent you. 

Step 2:

When evaluating a new location one must consider how it will best function for their needs. If construction is needed, it is advised to bring in a general contractor to discuss the layout, and obtain a budget. This could take a week or more depending on the build-out needs.

Step 3:

For a total renovation or building from a vanilla box an architect will be needed. The architect will put together the demolition plans, new construction plans, MEP (mechanical, electrical and plumbing plans) and prepare all the necessary documents for permit. This process is estimated to take 2-3 weeks.

Step 4:

Architect shall file for permit. Permit time ranges for every municipality but one can expect 4-6 weeks for issuance of permits.

Step 5:

During the permit filing, your general contractor will facilitate subcontractors and quotes. Once you have selected the trades they can start ordering materials.

Step 6:

Construction. This time frame varies based on the scope of the work. Most permitted jobs take anywhere from 4-8 weeks.

Step 7:

Final walk-through with the municipality to provide occupancy permit.
As you can see from the above list of the time and talent involved, from broker selection to lease execution to actual business opening, the entire process can take you 18 weeks or more.
Of course, the entire process is subject to many variables, such as, size of the deal, specific build-out needs, equipment vendor schedules, and building-specific issues, such as work schedules and other unforeseen conditions. No matter what, you should go in with your eyes wide open as far as the potential timeline and the impact on your business, when trying to find new space. Always remember that the tiniest detail overlooked, can throw your schedule off course and cause delays.
Based on the complexity of finding new space and preparing the space for your unique needs, it is vital to have the right team in place to assist you through the entire commercial real estate process from selection to opening and you need to have a realistic understanding of how long it really takes!

Full story: http://tinyurl.com/px4tj4r

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