Friday, February 20, 2009

Commercial Lease Negotiations

If there is one thing I wish all clients, brokers, and project managers could understand, it is the critical importance of involving an architect in site selection. During the five years that CONima has been in business, we have saved our clients hundreds of thousands of dollars in avoided costs by evaluating buildings prior to signing a lease.

Unfortunately, I've probably seen clients spend well over twice that amount trying to resolve fundamental problems with buildings that went unnoticed because they were not evaluated prior to leasing.

So numbers are easy to throw out and they sound impressive, but they mean very little without understand what an architect actually does during the site selection and lease negotiation phases of a project. For this article, I will focus on tenant improvement related work only, as core and shell construction has an entirely separate set of concerns.

So what are the tasks?

Programming and Fit Planning:
Every client knows how many people they have working for them, and most have an idea how many they want to plan for in the future. However working off of simple ratios of square footage per person ignores office standards, adjacency requirements, ancillary spaces, labs, data centers, etc...all of which are critical components to laying out a space successfully. Unfortunately, once a lease is signed, it is too late to make sure that the building suits your needs, and typically will result in making some level of sacrifice in programmatic functionality of a space.

Egress and Path of Travel:
Nobody would advertise a building that doesn't meet code, right? This is a much more frustrating problem for clients that I've had to resolve for both landlords' and tenants'. The problem is twofold.
  • Codes change every few years, and things that were legal when a building was built are no longer so. With the recent adoption of the International Building Code this problem has become so exaggerated that many buildings are no longer considered legal because the method of calculating allowable floor area has now changed. Modifications to the occupancy classification further complicate this, resulting in different exiting and fire rating requirements.
  • Subdividing floorspace for multiple tenants is the other major cause of headaches. Code requirements change significantly when trying to exit multiple companies from one building or floor as opposed to just one. In this case the distance between exits, overall exit travel distance, fire protection systems, and fire separations become critical. As a simple rule of thumb, one of my professors once told me,"Draw a fire in front of an exit, now see how many will die as a result. If the answer is more than zero it's your fault."
Accessibility (ADA / Title 24)
This category has unfortunately made a few landlords hate me. Accessibility is a very broad topic, but the priorities to negotiate into a lease are those deficiencies that are the most expensive to repair.
  • Bathrooms, not just having a 5ft wide stall, but making sure the toilet is spaced the correct amount from the adjacent wall, are grab bars present, how much clearance is in front of the toilet? How high are the counters? Is there adequate knee space below them? Do the shower dimension comply? Fixture mounting heights? etc... A single bathroom can quickly cost over $100,000 to bring into compliance
  • Building Entry, the accessibility requirement for most buildings is to have a fully accessible path to the public way. Most cities will bend this to just require it to the parking lot, but this is not much relief. In California especially, for years California's guidelines differed from federal in how to create a curb ramp to an accessible parking space, causing a great deal of commercial parking lots to currently be illegal. Additionally, the slope of the sidewalk to the building, irregularities in pavers, damaged or raised door tresholds, etc...can also lead to a great deal of remediation work. A recent client had to spend $40,000 repaving the entry plaza to their office because their lease did not include a provision for maintaining and accessible pathway into the building.

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