Office Condo Trend Growing
A new option that lets businesses own the space they occupy is showing up in cities large
and small -- office condominiums. Just like with residential condos, the office condo owner shares common spaces, belongs to a condo association, and pays a maintenance fee.
Most office condos are designed for small companies whose space needs are fixed for an extended period of time. They typically range in size from 5,000 square feet down to 1,000 square feet or even less. While condo suites can be much
larger as well, up to 50,000 square feet, a more practical option at that size is usually a freestanding property designed for a single owner-occupant.
Some cities are seeing a lot of office condo activity while others have very little. It seems that growing markets with a high percentage of service clients are well suited for office condos. Small firms seeking to serve the local
population and business base may buy a duplex office condo in a low-rise development built to resemble housing in the area. In a few downtowns, including Houston, existing buildings are being converted to office condos, usually buildings
that haven't had much leasing success.
Several factors drive the decision to buy office space, including favorable financing and the view of real estate as a good investment that adds value to a business. Also, office condo owners will not face rising rents, and have control
over their place of work. However, rising interest rates will certainly impact their usefulness. While not for everyone, an office condo can fit your business plan. Talk to our office about local offerings.
The past two months we have been presenting to you ways a landlord can try to "double dip" its tenants after a lease is signed. Here's one more.
More of the Top Ten Ways Landlords Double Dip
Last quarter we presented three of the top ten ways a landlord can try to double dip on
expenses after a lease is signed. Here are four more areas to watch in your lease negotiations.
4. Surcharges on standard maintenance and HVAC.
If you had a plumber come to your house on a Sunday, you would expect a weekend surcharge to be added to the bill. Landlords of commercial buildings will also seek to add surcharges for maintenance they think goes beyond standard
maintenance. Replacing light bulbs is typically considered standard in a multi-tenant office building, but moving an outlet after initial build-out is not. Too often there is not a description in the lease of what is standard and what is
not. This allows the landlord to charge for "above standard" services on almost any maintenance item. The solution is to spell it out in the lease.
A related problem area is the heating and cooling of a building. It is crucial to establish in the lease what are normal hours and what are after hours. You also want to know what the per-hour charge will be for after hours HVAC to make
sure that the landlord is not making an excess profit there.
5. Supervision and overhead charges for managing construction.
What is the construction management fee on initial build-out (if any) and what is the charge for work done after the initial build-out (like moving an outlet)? Quite often it is never listed in the lease and the landlord charges what it
wants. Again the key is putting the details in the lease. You also want to know what you are getting for this fee. Is the landlord holding the construction contract or simply managing the process for you and taking a fee?
6. Charging tenant more for supplies and services than landlord paid for them.
Whenever the landlord self-performs services like janitorial, light electrical, maintenance, and construction, you want to make sure they are charging reasonable prices that are comparable to those that would come from an outside
contractor or firm. And to the extent landlords buy in bulk, tenants should get the benefit as well. A tenant's leverage is greatest before the lease is signed, so make sure these items are addressed when negotiating your lease.
Typically, a landlord will not lose a deal over an issue such as this, but once a vaguely worded lease is signed, a landlord can take advantage of the lack of detail in the document.
7. Common ownership of companies that provide services.
It is important to understand how your landlord conducts business. Do they have an affiliated company that provides property management and other services to tenants? If so, you will want to know how the costs associated with property
management are allocated. For instance, you may be leasing in a large office park, or your landlord may have multiple buildings in your market. You want to make sure that they have a reasonable allocation of management costs amongst the
whole portfolio of buildings. These costs may include building engineer and property manager wages and benefits, management office expense, and costs for fixed equipment like trucks and tools. Typically a fair allocation is on a per
square footage basis.
If a company affiliated with the landlord provides services such as maintenance, cleaning, trash and snow removal, landscaping, or security, you want them to charge you fair prices. One way to do this is to have your lease state that the
cost of any work self-performed or performed by an affiliate of the landlord (especially the property management fee itself) is provided at a cost consistent with arms-length fees and costs incurred at comparable buildings in the market.
Even when your landlord contracts out services to companies they don't own, you want to make sure the fees charged are market-based and that your landlord is not subsidizing the costs of one property with those of another.
As you can see, a seemingly simple thing like property management can have complexities that hide overcharges. The best way to protect yourself against this form of double-dipping is to have your tenant rep's input into the expense
section of your next lease.
Online Maps Offer New Choices
After years of MapQuest having the game all to itself, a whole new universe of online mapping
is opening up, thanks to Google, MSN and Amazon. The information available ranges from basic maps and directions to satellite imagery and street-level photography.
The first level is right at the usual Google site, but you need to click on "Local" above the search box. The Google Local interface then lets you type in a location to get a map. The map repositions instantly as you move your cursor, an
improvement over the pauses and reloading you face on MapQuest.
You can get general directions by typing in two cities, but to use actual street addresses, you do have to click on "Directions" and put them in two different boxes.
The next step up is Google Earth, which takes a pretty advanced PC with a good graphics card to run. There's also software to download. People become fascinated with the amount of detail visible in the satellite photography, to the extent
that some foreign countries have expressed concerns about eye-in-the-sky spying.
Amazon is also trying to get into the online mapping game. Their A9 search site has a mapping section maps.a9.com. Its "blockview" feature offers street-level photography along main streets in most major cities. There's no software
download needed. Business travelers should find blockview a great way to picture their hotel and other destinations.
Meanwhile Microsoft doesn't want to be left behind. Its MSN Virtual Earth combines mapping and local search. When you're looking at a location, you can switch back and forth between a road map and an aerial map, with or without labels, at
a click. And double clicking zooms you right in.
The technology gets even slicker. With the right kind of cell phone, you can get maps sent to your screen. Not only that, if your phone has GPS technology, MapQuest will find you and send you information on your location, including
points of interest. Right now Nextel GPS phones and some Blackberries can use the MapQuest Find Me service, but many others can receive maps.
State Bar of Texas' Advanced Real Estate Law Conference
ATR's Candace Baggett and John Hanly spoke at the State Bar of Texas' Advanced Real Estate Law Conference in San Antonio on June 29-30, 2006. Drawing upon their extensive backgrounds as tenant representatives, Candace and John addressed
work letters and other issues important to tenants in the construction of leasehold improvements.
"I never had a policy; I have just tried to
do my very best each and every day."
Abraham Lincoln
