Why the Patriot Act May Appear in Your Next Lease

You may have heard of the Patriot Act in terms of government wiretaps and other surveillance issues. But increasingly, clauses relating to the Patriot Act are showing up in commercial leases. Here's why: To prevent terrorist groups from having access to property or financial resources in the U.S.

In order to restrict known or suspected groups and individuals from doing business here, the U.S. government maintains a list of "specially designated nationals (SDN) and blocked persons." All U.S. companies are expected to know who they are dealing with and not to do business with anyone on the SDN list. More information is available on the Treasury Department's Web site, www.treas.gov, under "Fighting Terrorist Financing."

In addition to the Patriot Act of 2001, there is also a Presidential Executive Order signed in 2001 that enforces penalties against companies who do business with known terrorist organizations. So one lease clause is often named "Compliance with Executive Order and USA Patriot Act." Another clause covers the termination of the lease agreement if it is discovered the tenant is a so-called "blocked person." Yet another warrants that no owner, director, officer or managing member of the tenant is on the SDN list.

Finally, there could be a clause attesting to the fact that none of the funds the tenant will be using for lease payments will be derived from transactions that violate U.S. law or are from improper sources.

Your legal counsel can advise your company on how to comply with these types of clauses as part of the lease negotiation process.

Timing Can Be Critical in Lease Negotiations

Whether your firm renews its lease or relocates at lease expiration, timing can be critical, and an exclusive tenant representative is your best ally in reviewing the market and coming up with a successful timing strategy.

When space continues to satisfy the need, and the decision is to renew, timing the approach to the landlord is the next decision. Too soon and the landlord will not engage; too late and deal points could be lost. There should be enough time allowed not only to negotiate but also to maintain a viable perception of relocation.

If space no longer serves its purpose, timing your entry into the market becomes the next important consideration. You need to allow enough time to find alternatives, negotiate business terms and lease language, space plan, and construct any tenant improvements. In a market with reasonable vacancy, this process can be accomplished within six to twelve months. However, when vacancy is low (probably below 15%), time factors must be extended to accommodate the market. It is not uncommon that the best space is presently occupied by another tenant who may need time themselves to complete their relocation.

Within local markets there are also submarkets, each with its own trends and cycles. Tenants within tight submarkets often have to relocate to other submarkets to accommodate growth or achieve lower rents. A tenant broker's knowledge of movement within any submarket can provide important insights for developing an effective strategy for measuring lead time.

Timing may not be everything, but it certainly is one critical factor that is best to have working in your favor. Look for other critical factors in future newsletters.

Office Design Can Improve Productivity

Businesses that ignore the design and layout of their workplaces are failing to optimize the full value of their human capital. According to a new survey, office workers believe they could be 21% more productive if given a better working environment. Almost half said they would log an extra hour a day under better working conditions. These boosts in productivity could add billions to the bottom line of businesses that improve the workplace environment.

The Gensler 2006 U.S. Workplace Survey revealed that nearly 90% of senior executives feel that a better physical working environment would have a positive impact on performance. However, this apparently isn't carried out in practice, because 46% of workers do not believe creating a productive workplace is a priority at their companies, and 40% say that minimizing costs is the main reason behind their workplace's current layout. One in five respondents rated their current physical workplace environment as being only "fair to poor."

Gensler, a global design and consulting firm, also found that over 90% of workers said the quality of their working environment affects their mood and attitude about their work. Almost as many (89%) believe that the quality of their working environment is very important to their sense of job satisfaction. As clues to what worker's want, the survey found that two-thirds of workers believe they are more efficient when they work closely with co-workers, yet about 30% said their current workspace didn't encourage this. The survey illustrates that companies can use strategically planned workplaces to be more competitive in the global market.