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When working with or for prospective tenants to find them new space to occupy, it is useful to compare buildings in a logical and material way. Some agents choose to specialise in leasing commercial space and comparing buildings is undertaken as a standard part of the professional services provided.
It is useful if you create a checklist for the process of property comparison. An excel spreadsheet is ideal for the purpose. The quality of your checklist will test and support your skill in judging property functionality for the tenant in both tangible and intangible ways. Ordinary agents and brokers do this in only a superficial way and with little attention to the process or to detail.
So this process can be a distinct part of your commercial property leasing services and if done in conjunction with the tenant, will show your complete understanding of what the tenant needs. Compiled in a correct way it can build tenant confidence in your services and strengthen future ties or repeat business. So let’s now look at what you can put in your ‘Property Comparison Matrix’.
The comparisons are to be made property to property. The data is entered into the columns of a spreadsheet. These headings below should be the columns of your spreadsheet.
- Rent – this is the rent required to be paid in the first year of the lease. How does it compare to the market and other properties around?
- Rent review profile – this is the escalation profile of rental over the term of the lease. Rent reviews are to be done in different ways and you need to know how they may impact the landlord or the tenant (it does depend on who you are acting for as to your interpretation)
- Incentives available – this is the type of incentive that can be given in the lease deal and its relevance to the tenant at the start of the lease. Is it in the form of a rent reduction, rent free period, fitout fund, or provided established existing fitout? There are advantages and disadvantages to be assessed in each case.
- Term of lease – the term of the lease that the tenant can achieve in the property is important and will be a fundamental factor for them to consider. How flexible is the landlord in giving the tenant a longer occupancy if required?
- Option available – some tenants need an option to occupy the space for an extended time. If this can be provided by the landlord it will be a selling point for the new lease. Care must be exercised in how the rent will be set in the new lease term of the option.
- Lease deposit - this is the amount of deposit required by the landlord for the premises. The amount of money is usually one month’s rent paid in advance.
- Rental guarantee – this is the type of guarantee required by the landlord as part of lease acceptance. It is common for guarantees to be either cash, directors or personal guarantees or bank guarantees. The amount sought by the landlord will vary.
- Moving costs – every property will present differences in moving costs. This can be due to the distances involved in the relocation and or the physical attributes of the property to which they locate.
- Services – each new property will have unique services such as telephone, cable internet, water, power, cleaning, air conditioning, security, and transport access. It is the relevance and convenience of these to the tenant that needs to be reviewed relative to each property.
- Amenities – each property has certain design features that are classified as amenities for use by the tenants. This can be car parking, signage, storage, common areas, landscaping, toilets, showers, and tea rooms. These things will have different relevance to each tenant. The more modern the building, the better the variety of amenities. This will then attract more tenants and also support the ongoing rental.
- Landlord funded fit out – each landlord will provide certain basic works as part of the leasing process for a new tenant. This can include new carpets, other floor coverings, painted walls, suspended ceilings, air conditioning configuration, lighting configuration, tenancy entrance point doors.
- Public transport – with some businesses, public transport is essential for both staff and customers. This requirement needs to be understood in the leasing process.
- Transport corridors – some businesses need to be near transport corridors or access points such as railheads, ports, or airports. You need to identify this early in your discussions with the tenants.
- Proximity to the greater business community – some tenants need to be in close proximity to other businesses of similar type. Your assessment of the local precinct in this regard is essential.
- Space Useability factor – each property will have a usability factor linked to the design and layout of the available space. Just how convenient is the available space to the incoming occupant?
- Floor loading factors – in multi storey occupancy, the floor loading factor needs to be considered when situations of high weight loading could occur. This could be for the reasons of storage, file records, or libraries.
- Service core location – the service core location will have relevance to the design of a new fitout for a tenancy. Usually the service core is located on the least important exterior wall so that it does not detract from the views from the property and hence the rents that you can achieve.
- Core to window depth – the distance between the service core in the tenancy space and the exterior walls is important to tenancy design. The greater the distance, the greater the flexibility in fitout configuration.
- Common areas – every building will have common areas particularly when there are multi tenant occupancy factors to consider. The common area will be in the entrance way to the main part of the building, and also on the relative floors adjacent to the lifts or stairs. It is the functionality and convenience of these common areas that can be a factor in the tenant’s business operations.
- Interior columns – the older the building, the more you will find interior columns located within the tenancy space. These columns can be a hindrance in designing the new tenancy.
- Floor to ceiling elevations – modern buildings give ample floor to ceiling elevations which can accommodate partitions and fit out structures for privacy and functionality of the business. A distance of 2.6 meters is considered a standard satisfactory elevation for office space application. Any extra space beyond that will give the feeling of spaciousness and therefore be a selling point in the leasing promotion.
- Ceiling structures – the construction of the ceiling in each relevant tenancy space should give flexibility to the fitout design. It should also have ample space between it and the slab above for necessary modifications to air conditioning, communication cabling, and power cabling.
- Ceiling privacy – when tenancies are located in close proximity to each other, there is a need to ensure that privacy can be achieved above the ceiling space. This is to prevent any private discussions or meetings being overheard. Architects or engineers can advise you if this is to be a priority in tenancy negotiations. The standard t-bar ceilings with suspended acoustic ceiling tiles are not satisfactory for solicitors and similar tenants where high level confidentiality and security is needed.
- Module size – this is a matter of calculation known to many architects as being fundamental to the size of office structures within the tenancy. Essentially the office structures within a new fitout are designed to match the module size and the layoff points from the window mullions around the perimeter of the building. This means that the partitions between offices correctly link up to the perimeter of the building at mullion points and not half way through a window line.
- Air conditioning – the air conditioning design in the new premises needs to be considered by the tenant. As you change the fitout design, you need to change the air conditioning within that space. Engineers and architects would normally be involved in the review process and costs assessment on behalf of the tenant.
- After hour’s air conditioning – many tenants require the function of air conditioning after normal business hours. Some buildings will not be able to satisfy this need. The landlord and engineers relevant to each building must give you an assessment of this capability.
- Lifts and elevators – in multilevel buildings, the use of lifts or elevators will become fundamental to the tenants business. The quality of the lifts and elevators in providing this service needs to be assessed. Some lifts travel faster and quieter than others and this will be an issue for the occupants of the building given that they use the lifts frequently and daily. It is also important to note the methods of security in using these elevators after hours.
- Security – every building will have different levels of security. This will affect the function of the business, the access of its customers, the access of its staff, and the security of its confidential documentation and procedures. Can the security system in the building easily incorporate changes in the business and the staff of the tenant?
- Neighbouring tenancies – the proximity and type of neighbouring tenancies may have some relevance to the incoming tenant. This needs to be individually assessed. Major high profile tenants in the same building will attract other corporate tenants.
- Floor ducting –this is the conduit capabilities for running communication, power, and other essential cabling through and around the workspace. It is important that there is flexibility in achieving this for the tenant. If the tenant has high numbers of telephone or computer active staff then ducting will be of concern.
- Energy factors – today we find that tenants are very aware of the energy consumption costs in occupancy. They want the advantages of air conditioned space however utilising sensible levels of fresh air and natural light where possible. The costs and consumption of energy in the building should be minimised so that the tenants can claim compliance to greenhouse and energy initiatives. This is a fine balance requiring special engineering design built into the property. You need to identify whether your building complies with energy initiatives.
- Workplace health and safety – each building and tenancy will have workplace health and safety design factors incorporated into the structure. Each building at the time of construction must comply with health and safety codes established by the local building authority. The systems for example can be fire sprinklers, hydrants, fire stairs, air -conditioning fire safety designs. The systems of health and safety in each tenancy can vary so that this is an element of assessment and priority relative to the incoming tenant on each property.
- Floor coverings, wall treatments, and window treatments – all of these are both cosmetic and functional for the new occupancy. The quality of these should be a commercial standard. Some landlords may choose to take the cheaper option with the cheaper products which will deteriorate quickly during the term of the lease. Commercial grade materials are desirable at all times. This should also be enforced on the tenant when they consider their individual fit out construction.
- Existing fitout – It could be that the potential new property that the tenant is considering has some established fitout which is useable in the new occupation. This will be a cost advantage for the tenant in minimising its costs of new fitout.
- Storage – with today’s modern business, it is a great advantage to have storage capabilities onsite for the use of tenants. Typically these areas can be in car park locations, plant rooms, and service areas that are not frequented by tenants or members of the public. Obviously the areas need to be secured and in doing so a rental will be charged to the tenants for the use of the space.
- Signage – many tenants require a business presence that is identified by exterior signs. This can be signs on the exterior of the building, pylon signs, and directory board signage. In most cases, rental is charged for signage. It is the importance of the signage and the buildings ability to provide it that will be relevant to the tenant.
- Car parking – the availability of onsite parking is important to many tenants today for both staff and or customers. Car parking should be separately charged to the tenant given the number of spaces that they require. The availability of car parking and the number of car parks available will influence the tenant in their future occupancy decision.
- Expansion space – many tenants need to know that expansion space can be achieved in the premises as time proceeds. This should be looked at and assessed in case it is of interest to the tenant.
- History of the building – some tenants and like to know that they are located in buildings that have an established presence and performance. Any history of the building will be of interest to the tenant.
- Quality of ownership – well established landlords with a history of quality building performance will influence a tenant in their occupancy decision. Gather whatever information you can regards the landlord’s track record in building performance. It will also be interesting for the tenant to know if the landlord regards the building as a long term holding or short term investment.
- Quality of maintenance – it is easy to see if the building is well maintained from its general appearance. Experienced landlords will spend money on cosmetic upgrades regularly so that the building gives a first class appearance at all times. This then supports the rental in any new lease and the ability to escalate rental over time. Help the tenant and the landlord understand this critical component of ongoing occupation.
So the above list of topics help you create a substantial checklist that you can use with tenants and landlords. Importantly you can now compare properties for the advantages and relevance that they bring the tenant.
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