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Office Leasing Guide
                             WHAT YOU NEED TO KNOW BEFORE YOU SIGN
Colliers International                              Office Leasing Guide P. 1
THE OFFICE LEASING GUIDE

This step-by-step guide has been assembled
to reflect Colliers International’s knowledge
of the leasing process. You’ll find information
on tenant improvements, common pitfalls,
timelines and frequently asked questions.

The knowledge in this handbook will help
you make a major business transition with
minimum disruption.




P. 2 Office Leasing Guide                         Colliers International
Contents




>4         ALLOW US TO INTRODUCE             >7     THE OFFICE LEASING PROCESS                    > 13   DESIGN AND PROJECT
           OURSELVES                                Four steps to business productivity                  MANAGEMENT
           About Colliers International                                                                  Create the space to meet your visitor
                                             >8     DETERMINE YOUR PROPERTY NEEDS
>5         GETTING STARTED                          Take your requirement from notion to motion   > 14   TRANSLATING THE LINGO
           Making educated decisions about                                                               Glossary of terms and frequently
           your business space                                                                           asked questions
                                             > 10   EVALUATE MARKET ALTERNATIVES
                                                    Inspect and compare your options
>6         TOP 10 TENANT MISTAKES                                                                 > 19   RELOCATION CHECKLIST
           Avoid these common blunders                                                                   Your step-by-step guide
           in your leasing process           > 12   COMMIT TO PREMISES
                                                    Completing or varying your lease
                                                    documentation; commencing the
                                                    full design process




Colliers International                                                                                                        Office Leasing Guide P. 3
Allow Us to
Introduce Ourselves
ABOUT COLLIERS INTERNATIONAL




WHO IS COLLIERS INTERNATIONAL?                                                                                  WHY ENGAGE OUR SERVICES?

We are an award-winning team of office leasing        Colliers International professionals are equipped with    Working with Colliers professionals saves you the
professionals with intimate knowledge of the local,   the skills, knowledge and tools to intelligently assess   time and confusion of dealing with multiple agents,
regional and global leasing markets. We bring an      your space requirements. We ensure that your leasing      landlords or consultants.
in-depth understanding of business needs and the      decision—whether to stay or relocate—is informed by
                                                                                                                Our comprehensive database contains information
leasing process.                                      both your business needs and a thorough market
                                                                                                                on every office listing, agent and landlord, providing
                                                      evaluation.
We are committed to creating a business solution                                                                exhaustive data about every opportunity that fits
that meets your organization’s needs—now, and in      Colliers International’s culture of knowledge-sharing     your requirements.
the future. Your office space is more than just an    gives you access to experts in real estate management
                                                                                                                Our market knowledge provides forward-looking
address; it is where you make business objectives     services, project management, appraisal and valuation,
                                                                                                                analysis to help you take advantage of trends, and we
a reality.                                            and capital markets.
                                                                                                                offer a single point of accountability for your project
                                                                                                                to connect all of the specialists available to serve you.

                                                                                                                We are committed to accelerating your success.




P. 4 Office Leasing Guide                                                                                                                                 Colliers International
Getting Started
MAKING EDUCATED DECISIONS ABOUT YOUR BUSINESS SPACE




WHAT ARE MY OPTIONS?                             perception of your core values and elevate        improvement costs should be viewed as an          WHOM SHOULD I INVOLVE?
                                                 your brand in the minds of customers and          organizational opportunity—a well-planned
Stay put                                                                                                                                             Your internal steering committee should be
                                                 other stakeholders.                               and executed office will adapt to your
If your current space satisfies your business                                                                                                        led by a senior employee, and supported by
                                                                                                   organization’s growth and changing needs
needs, but you are approaching the end of        Employee Retention                                                                                  decision-makers and influencers including
                                                                                                   and minimize churn costs.
your lease, consider renewing your lease.        With an improved work space, you will boost                                                         human resources, IT, divisional heads and
We can help you ensure the space is avail-       staff morale and productivity. Our market         Balancing your tenant improvement costs and       staff. A single point of contact from your
able, and negotiate a new lease with the         research shows that even subtle changes in        their benefit to your organization is critical.   organization, matched with a single point
building owner.                                  the work environment create substantial           In addition, “make good” commitments will         of contact at Colliers International, is ideal
                                                 gains in productivity, resulting in improved      affect your cash flow when exiting a lease.       to make the process run smoothly.
Relocate
                                                 bottom-line financial performance.                These costs are covered in more detail later.
The expiration of your lease offers you an                                                                                                           You may wish to conduct a survey of your
opportunity to transform your business and                                                                                                           staff to determine their needs, preferred
create new efficiencies by relocating.           HOW MUCH WILL IT COST?                            WHEN SHOULD I START?                              work space amenities and location. Colliers
                                                                                                                                                     can survey your staff to determine the impact
                                                 Operational Costs                                 Plan, Plan, Plan
                                                                                                                                                     of relocation on commute times and employee
WHY SHOULD I RELOCATE?                           The negotiation of rent and tenant incen-         Whether you decide to stay or go, knowledge
                                                                                                                                                     retention.
                                                 tives depends on the dynamics of your local       is key. Understand your current situation,
Business Needs
                                                 market. In markets where over development         review other options, assess the marketplace      Professional real estate advice is a critical
If your current space is too small, too large,
                                                 or economic conditions have created higher        context and negotiate with your current           part of the project team. This will arm you
or inflexible, a new office can energize your
                                                 vacancy, this favors tenants. In other markets,   landlord to optimize the end result.              with insight into the marketplace, your
organization and act as a springboard for
                                                 low vacancy gives landlords the upper hand                                                          alternative options and the financial implica-
improved productivity and operational cost                                                         The period required to conduct a lease
                                                 in negotiations. Contact your Colliers                                                              tions of the stay or go scenarios. A skilled
savings. Additionally, market conditions may                                                       negotiation and relocate is three to six
                                                 professional for the market trends in your                                                          workplace strategist and design profes-
support the business case for relocation.                                                          months at a minimum. Depending on the
                                                 location.                                                                                           sional will complete the team by providing
                                                                                                   size of your organization and current
Brand Value Enhancement                                                                                                                              knowledge of productivity-enhancing tenant
                                                 Tenant Improvement and                            market conditions, you should begin this
The quality of your building and the tenant                                                                                                          improvements.
                                                 “Make Good” Costs                                 process 18 to 24 months prior to your
improvements in your office space speak
                                                 Your entry and exit strategy to a lease           lease expiration. It can take two years or
volumes about your organization. A new
                                                 can greatly affect the real cost of your          more to complete the lease and relocation
building can strengthen your employees’
                                                 commitment. Workplace design and tenant           process for large or complex assignments.




Colliers International                                                                                                                                                      Office Leasing Guide P. 5
Top 10
MOST COMMON MISTAKES MADE BY TENANTS




>1        Beginning the negotiation of a renewal     >5   Making inaccurate estimations of the           >8     Agreeing to terms prior to obtaining
          or new lease too late                           company’s space requirements                          a space planning perspective


>2        Lacking clearly defined business or real   >6   Failing to leave enough time at the end of     >9     Failing to allow for expansion space
          estate objectives                               the lease to fulfill “make good” obligations
                                                                                                         > 10   Lacking the knowledge of future
>3        Focusing exclusively on financial costs    >7   Acting too slowly once a decision is made,            opportunities; often, the best deals
                                                          and consequently missing out on                       are secured well in advance of space
>4        Failing to appoint a project leader as          opportunities                                         becoming available
          the internal single point of contact




P. 6 Office Leasing Guide                                                                                                                  Colliers International
The Office Leasing Process
  THREE STEPS TO BUSINESS PRODUCTIVITY




                                                                                  STEP TWO: Relocate
                                                                                  Confirm real estate requirement evaluation


                                                                                  Brief preferred lessors


                                                                                  Confirm development sites/existing building options and assess via inspections


                                                                                  Begin offer/counter-offer process


                                                                                  Short-list options, work with design consultant to evaluate space plan
              STEP ONE                                                   Choose


               Understand your business needs
                                                                                                                                                                   STEP THREE
   Fact
               Determine your property needs
Finding
                                                                                                                                                                   Commit to new (or existing) premises
               Identify decision makers and confirm critical time path
                                                                                  STEP TWO: Renew                                                                  Complete new (or variation of) lease documentation
               Conduct requirement evaluation
                                                                                  Confirm existing premises as most desirable opportunity
                                                                                                                                                                   Complete tenant improvement design and project management
               Produce real estate brief
                                                                                  Brief existing lessor

               Evaluate market alternatives: Relocate or renew
                                                                                  Confirm real estate requirement evaluation


                                                                                  Work with design consultant to evaluate space efficiency


                                                                                  Begin offer/counter-offer process




  Colliers International                                                                                                                                                                            Office Leasing Guide P. 7
Step One
                            DETERMINE YOUR PROPERTY NEEDS




                            TAKE YOUR REQUIREMENT                       – Is your business growing              If the workplace design happens solely
                            FROM NOTION TO MOTION                         or shrinking?                         during the design and construction
                                                                                                                phase, only minimal gains are possible.
                            Skipping the planning stage triggers a      – What are your brand values?
                            number of the Top 10 mistakes most
                                                                        – What are your preferred
                            commonly made by office tenants. It                                                 INVOLVE KEY INTERNAL
                                                                          work settings?
                            is crucial to understand your property                                              DECISION-MAKERS
                            requirements through the process of         – What types of employees will
                                                                                                                Assemble a team with the breadth
                            evaluation and forecasting.                   you have in the future?
                                                                                                                of skills to drive the project. Involve
                                                                        – What will your technology             your experts in information technology,
                            DETERMINE FUTURE NEEDS                        requirements be in three years?       human resources and finance. They will
                                                                                                                be familiar with specific future trends
                            Commercial leasing decisions should         – Are you considering acquiring
                                                                                                                that may influence your requirements
                            consider medium- to long-range business       or merging with other firms?
                                                                                                                and decisions. Their involvement from
                            goals for leases running three years or
                                                                        – What effect will moving have          the outset will help clarify and focus
                            more. Guided by professional workplace
                                                                          on your customers and staff?          your brief and achieve internal buy-in.
                            strategists and space planners, the
                            process of constructing a real estate       By working through this concept         Be sure to appoint a project leader to
                            brief to achieve your business objectives   planning phase, you will achieve the    connect with your internal stakeholders
                            will consider questions including:          maximum benefit—both financial          as well as with your broker and
                                                                        and strategic—in the relocation or      consultants.
                                                                        reconfiguration of your office space.


P. 8 Office Leasing Guide                                                                                                               Colliers International
CREATE A REAL ESTATE BRIEF                   An important element in developing this       –   Technical requirements                KNOW YOUR LOCAL MARKET
                                             brief is to audit your existing premises—     –   Timing                                AND COMMITMENTS
The briefing process begins with the
                                             creating a clear understanding of what’s      –   Communications infrastructure
documentation of your workplace                                                                                                      During this phase, you should familiar-
                                             working, and what’s not.                      –   Budget
requirements.                                                                                                                        ize yourself with local office market
                                                                                           –   Environmental considerations
                                                                                                                                     conditions and existing lease commit-
  –   Growth projections                                                                   –   Other unique needs
                                             WHAT SHOULD BE IN YOUR BRIEF?                                                           ments. By knowing the market vacancy
  –   Office space size                                                                    –   Signage/naming rights
                                                                                                                                     rates, supply projections, current rental
  –   Space configuration                    Your real estate brief should consider        –   Term/renewals
                                                                                                                                     rates and tenant incentives, you will be
  –   Organizational vision                  a wide range of criteria:
                                                                                         Consider ranking each factor in terms       in a better position to evaluate various
  –   Cost parameters
                                               – Size of space                           of importance, as you may have to           proposals.
  –   Timing
                                               – Tenant improvement needs                compromise on some items, depending
                                                                                                                                     Your Colliers International leasing
A well-prepared real estate brief will         – Number of employees                     on the options available. You can also
                                                                                                                                     professional can provide you with
synthesise these elements and translate          (maximum and minimum)                   assign a point value to each factor, with
                                                                                                                                     an office market presentation that
them into your property requirements.          – Image/quality/aesthetics                more points possible for the factors
                                                                                                                                     describes these factors, both in your
The brief will expedite your decision-         – Location                                with greater importance. Your Colliers
                                                                                                                                     local market and in the specific sub-
making process. You will save considerable     – Parking                                 professional can help guide you through
                                                                                                                                     markets you identify as most desirable.
time by inspecting and reviewing only          – Building services                       this evaluation process.
suitable properties.                           – Office hours
                                               – Security and access
Your brief also creates a framework
                                               – Lease structure preferences
to evaluate and compare your options.



Colliers International                                                                                                                                   Office Leasing Guide P. 9
Step Two
                             EVALUATE MARKET ALTERNATIVES.
                             INSPECT AND EVALUATE YOUR OPTIONS.




                             RELEASE YOUR BRIEF                            your stated business objectives. Colliers
                             TO THE MARKET                                 has developed a range of decision-
                                                                           making models and matrices. These
                             To avoid dealing with multiple agents,
                                                                           tools dramatically improve efficiency
                             you can request that your Colliers
                                                                           in the evaluation process.
                             professional approach the market on
                             your behalf. With an intimate knowledge
                             of the market and a well-established          FINANCIAL ANALYSIS
                             network of agents and owners, Colliers
                                                                           There are several ways to compare the
                             will act as a single point of contact to
                                                                           financial aspects of leasing, including:
                             uncover all suitable space opportunities.
                             Your real estate broker will also assist in   –   Gross effective rent per square foot
                             discussions with your existing landlord       –   Gross stated rent per square foot
                             regarding lease renewal options.              –   Gross and net rent per square foot
                                                                           –   Total occupancy cost per employee

                             EVALUATE AND PREPARE                          Further detail on these measurements
                             A SHORT LIST                                  is provided in the Frequently Asked
                                                                           Questions portion of this guide.
                             When analyzing alternative premises,
                             consider timing, financial and other          Look beyond the square foot rate offered.
                             incentives that may be offered. A lease       Some office space is highly efficient,
                             renewal option should include expansion       enabling you to accommodate your
                             and contraction costs, as well as the         employees in less space. For example,
                             cost of reconfiguring or completely           you may require 5,000 square feet to
                             refurbishing your work space. Aim for         accommodate your staff in one building
                             a short list of three or four properties.     while another may be able to house
                                                                           them comfortably in 4,000 square feet.
                             Evaluate options against your brief,
                                                                           In this instance, it does not make sense
                             ensuring the property’s benefits match
                                                                           to compare the two options based on




P. 10 Office Leasing Guide                                                                           Colliers International
It is now a fundamental requirement
                                                                                                                                        that the office architecture supports the
                                                                                                                                        intellectual work demanded of employees
                                                                                                                                        and facilitates your organization’s
                                                                                                                                        continuous improvement strategies.


their rate per square foot. It is more        WORKPLACE DESIGN AND TENANT                    DETERMINE WORK SPACE                       – Conduct building services audits
effective to use a cost per employee          IMPROVEMENTS                                   EFFICIENCIES
                                                                                                                                        – Provide an opinion of likely tenant
lease analysis model.
                                              It’s not all about cost. When evaluating       By conducting a design site audit of         improvement costs
Lease conditions such as “make good”          your property options, don’t forget to         the short-listed options, your workplace
requirements can also impact on the           consider the intangible costs and              designer will determine the work space
                                                                                                                                        TENANT IMPROVEMENT COSTS
attractiveness of a particular option.        benefits for each property option.             efficiencies for each property. This
(For more information on “make good”                                                         process also produces sample tenant        Attaining a tenant improvement that is
                                              Your workplace designer can help you
costs, please refer to page 14.)                                                             improvement designs prior to your          aligned with your organization’s ideal
                                              evaluate each option’s impact on staff
                                                                                             agreement on terms enabling you to         outcome depends on which components
                                              productivity and communication, corporate
                                                                                             compare your options based on financial    are viewed as necessary and what is
COMPARE YOUR OPTIONS USING                    identity, information technology, commu-
                                                                                             and non-financial criteria.                discarded during the design phase. It is
A LEASE ANALYSIS MODEL                        nications performance and your customer
                                                                                                                                        critical that all aspects to be included in
                                              base. If appropriately engaged at step         Your workplace designer will provide the
Colliers International has developed                                                                                                    the tenant improvement are assessed
                                              one, your workplace designer will have         following services during this critical
a lease analysis model designed to                                                                                                      to determine their contribution to the
                                              the maximum positive influence on your         evaluation phase:
compare leasing options on a financial                                                                                                  overall objectives.
                                              workplace brief.
basis, using an “apples to apples”                                                           – Prepare a detailed existing tenant
                                                                                                                                        Equally important is the identification and
approach. The model allows the com-           In today’s challenging business environ-         improvement audit
                                                                                                                                        evaluation of the potential components
parison of proposals from multiple            ment, it is critical that organizations look
                                                                                             – Assess items suitable for re-use         that are excluded. The identification of
lessors, demonstrating the cost of the        beyond the traditional view of office
                                                                                               in the improved office space             positive and negative components through
financial offer over the life of the lease.   accommodation and the measurement
                                                                                                                                        the audit process provides the opportu-
                                              standards normally applied.                    – Manage the pre-design process
This financial modeling takes into                                                                                                      nity to maximize the effectiveness of the
                                                                                               including a review of local authority
account lease incentives, such as free        Your work space must also contribute                                                      final result and minimize the cost of the
                                                                                               approvals and code requirements
rent or a greater allowance for tenant        to the development of team networks                                                       tenant improvement.
improvements, the total rent over the life    and organizational learning systems.           – Prepare selected site audits
of the lease including rent hikes, and the    In addition, the office systems must
                                                                                             – Prepare a “stacking and blocking” plan
term of the lease including extension         support organizational change effi-
provisions.                                   ciently, and with minimal redundancy.          – Prepare preliminary concept designs




Colliers International                                                                                                                                      Office Leasing Guide P. 11
Step Three
                             COMMIT TO PREMISES




                             Completing or varying your lease              process begins immediately. At this
                             documentation; commencing the                 stage, you should have completed:
                             full design process                             – Needs analysis
                                                                             – Space plan
                             LETTER OF INTENT                                – Test fit

                             Once the particulars of a lease agree-        This will enable you to engage a
                             ment are negotiated, both parties will        designer, who may be the workplace
                             sign a letter of intent. This document is     designer, with accurate information
                             generally not legally binding but is a        regarding your requirements. The
                             gesture of good faith that terms have         sooner a designer is engaged, the
                             been agreed. When signed, this document       better the outcome.
                             will be used to brief attorneys so that the
                                                                           It is vital that this stage is viewed as an
                             final lease documents can be prepared.
                                                                           investment in the organization’s future
                                                                           and not merely a tenant improvement.
                             WORKPLACE DESIGN ISSUES                       The development of work space should
                                                                           be directly linked with your organiza-
                             When a lease agreement is complete,
                                                                           tional strategy.
                             the workplace tenant improvement




P. 12 Office Leasing Guide                                                                                               Colliers International
Step Four
DESIGN AND PROJECT MANAGEMENT




The final stage of the process provides      – Detailed construction timeline     BID REVIEW PHASE                          – Project manage delivery program
the perfect opportunity to re-think office     preparation
                                                                                  – Determine agreed bid review panel       – Project completion/occupation
imperatives and promote organizational
                                             – Documentation for building owner
effectiveness, community, communication                                           – Review and assess bid responses         – Oversee practical completion
                                               and authorities
and productivity.
                                                                                  – Bid management and analysis             – Timely issue of the Code
                                             – Stakeholder coordination
                                                                                                                              of Compliance certificate
DESIGN DEVELOPMENT AND
                                                                                  CONTRACT ADMINISTRATION                   – Inspection and sign-off
CONSTRUCTION APPROVAL                        DETAILED DESIGN AND
                                             DOCUMENTATION PHASE                  – Manage the delivery process             – Manage the identification and
– Engagement and full briefing of all
                                                                                    and administer contracts                  completion of all outstanding
  other specialists and consultants          – Preparation of documentation
                                                                                                                              and defective works
                                               for a construction bid             – Appoint all approved contractors
– Commencement of detailed design
                                                                                    and suppliers including head tenant     – Cost reporting and final accounts
                                             – Finalize furniture selection
– Development of finishes selection                                                 improvement contractor
                                                                                                                            – As-built drawings, operating manuals,
                                             – Finalize the selection of tenant
– Short list of furniture options                                                 – Coordination of all required meetings     guarantees and warranties
                                               improvement finishes
– Review of likely tenant                                                         – Coordination of quality control         – Final inspection and completion
                                             – Obtain building and construction
  improvement costs                                                                 inspections                               of works at the end of the defects
                                               permitting
                                                                                                                              liability period
                                                                                  – Cost and variation management




Colliers International                                                                                                                        Office Leasing Guide P. 13
Translating the Lingo
GLOSSARY OF TERMS




BUILDING CONSENT                                be offered in a variety of ways, such as        areas dedicated as public spaces or thor-           who occupy a floor. Average occupancy
Approval from the relevant authorities for      through a period of free rent, provision of a   oughfares such as building service areas.           ratios vary between 1:12 and 1:18 square
carrying out building work on the premises,     tenant improvement allowance, or moving                                                             feet per person.
                                                                                                Gross Leasable Area (GLA)
usually for tenant improvements.                assistance.
                                                                                                GLA (measured in square feet) is the floor
                                                                                                space contained within each tenancy at each         RATCHET CLAUSE
CAP AND COLLAR                                  LESSEE                                          floor level by measuring from the dominant          A ratchet clause is the mechanism by which
A term and method used in some market           That legal entity, company or person whose      portion of the outside faces of walls, to the       the rent cannot decrease on review. There
review clauses. It is a mechanism that puts a   name appears as the occupier or user of         center line of the internal common area or          are variations of ratchet clause (“full” or
“cap” or maximum amount by which the rent       space on the formal lease document, binding     inter-tenancy walls.                                “hard” ratchet and “soft” ratchet). Under a
can be increased, or a “collar,” the maximum    the lessee to the terms and conditions stated                                                       soft ratchet, the rent can not fall below the
the rent can decrease, on the rental rate       therein. Also known as the tenant.                                                                  commencement rental. Under a full ratchet,
                                                                                                MAKE GOOD
review date. As the office leasing markets                                                                                                          it can not fall below the current rental.
                                                                                                The lessee’s obligation to return the premises
strengthen, these review methods are more
                                                LESSOR                                          to their original condition prior to expiration
difficult to negotiate.
                                                The party whose name appears as lessor on       of the lease.                                       RENT REVIEW
                                                the formal lease document. The lessor is the                                                        The method by which your rent can vary
GROSS EFFECTIVE RENT                            landlord or owner of the property.                                                                  during the term of the lease. This can be a
                                                                                                NET, GROSS RENT
The rent payable under the lease accounting                                                                                                         market rate review, a predetermined figure
                                                                                                Net rent is also referred to as “Triple Net”
for all incentives and including all building                                                                                                       (such as 3 percent) or a rate fixed to an
                                                LEASABLE AREA                                   or “NNN.” It is the rental rate excluding net
expenses.                                                                                                                                           index such as the CPI. The review structure
                                                Net Leasable Area (NLA)                         taxes, insurance and maintenance. Gross
                                                                                                                                                    is agreed prior to lease commencement.
                                                NLA (measured in square feet) is the            rent includes these expenses. Most leases
GROSS FACE RENT                                 floor space contained within each tenancy       are based on net rents plus each tenant’s
The rent payable under the lease excluding      between the internal finished surfaces of       proportionate share of building expenses.           RESOURCE CONSENT
any incentives but including all building       permanent internal walls and the internal                                                           Approval from the local governing authority
expenses.                                       finished surfaces of dominant portions of the                                                       with regard to zoning or changes in the
                                                                                                OCCUPANCY RATIOS
                                                permanent outer building walls. It generally                                                        permitted use of the premises.
                                                                                                A common ratio used to measure the tenant
                                                includes window frames and structural
INCENTIVE                                                                                       efficiency of individual building’s floor plates.
                                                columns, toilets, kitchens, cupboards and
An inducement offered by the landlord to                                                        This ratio is calculated by dividing the total
                                                excludes plant/motor rooms. It excludes
attract tenants to the building. This can                                                       net leasable area by the number of people


P. 14 Office Leasing Guide                                                                                                                                                      Colliers International
RIGHT OF RENEWAL
The lessee’s right to renew a lease for an
agreed period of time prior to expiration of
the initial lease.


SECONDARY EXPENSES
All other costs beside rent associated
with insurance, operation, upkeep and/or
maintenance of the building, including air
conditioning, elevator maintenance, common
area cleaning, security and electricity.


STATUTORY EXPENSES
Statutory expenses include costs such as
municipal rates, water and sewer rates and
usage charges.


SUBLEASE/ASSIGNMENT
The mechanism under the provisions of the
lease allowing the lessee to find a suitable
replacement tenant. This is subject to lessor
approval and unless specifically stated, does
not limit your legal responsibilities during the
term of the lease.




Colliers International                             Office Leasing Guide P. 15
P. 16 Office Leasing Guide   Colliers International
Frequently Asked
Questions
HOW CAN I NEGOTIATE THE BEST DEAL?                building and grounds maintenance, taxes,            if it could potentially compromise their          ensures that the reviewed rental can be no
                                                  common area maintenance and cleaning,               financial position or security.                   less than either the previous year’s rental or
By carefully selecting the right properties on
                                                  utilities and other expenses incurred by the                                                          commencement rental. The Consumer Price
your short list, you can create a competitive
                                                  landlord.                                                                                             Index (CPI), or a margin over CPI, is another
environment to achieve the most favorable                                                             WHAT ADDITIONAL COSTS AM I
                                                                                                                                                        common structure. Often, review clauses
lease agreement. Your Colliers International                                                          RESPONSIBLE FOR OVER AND ABOVE
                                                                                                                                                        include a combination of these during the term
broker can assist you throughout this process.    WHAT ARE THE DIFFERENCES BETWEEN                    NET RENT AND OPERATING EXPENSES?
                                                                                                                                                        of a lease.
                                                  GROSS RENT, NET RENT, EFFECTIVE
                                                                                                      In addition to a pro-rata share of building
                                                  RENT AND FACE RENT?                                                                                   Lessees will typically request a right of
HOW MUCH SPACE WILL I NEED?                                                                           operating expenses, you will generally be
                                                                                                                                                        renewal as part of the lease negotiation,
                                                  GROSS RENT is the rent calculated inclusive         responsible for electricity and other utility
The amount of space you require will vary                                                                                                               allowing them to extend their occupation
                                                  of all building costs, whereas NET RENT is          charges, light bulb replacement and cleaning
depending on the nature of your business                                                                                                                beyond the initial lease term. It is normal to
                                                  the rent calculated excluding building costs.       your own premises.
and the efficient use of space you select.                                                                                                              set out the rent review pattern for this term
                                                  FACE RENT is the quoted rental rate before
As a rule you will require roughly 12 to                                                                                                                in the original lease document.
                                                  taking into account incentives or increases,
18 square feet of space per employee.                                                                 WHAT ARE THE RENT REVIEW PATTERNS
                                                  whereas EFFECTIVE RENT is the rental rate
                                                                                                      FOR THE TERM AS WELL AS THE
                                                  averaged out over the term of the lease,                                                              WHAT IS A “MAKE GOOD” AND HOW
                                                                                                      RENEWAL PERIOD?
ARE AMENITIES INCLUDED IN THE                     including consideration of rent-free periods                                                          MUCH WILL IT COST?
NET LEASABLE AREA?                                or up-front incentives.                             Most lessors have a standardized lease
                                                                                                                                                        A “Make Good” is your (the lessee’s) obliga-
                                                                                                      document for their buildings, including a
Yes, assuming you occupy a whole floor. The                                                                                                             tion to return the premises to its original
                                                                                                      prearranged rental review schedule in light
amenities within the floor, such as restrooms     WILL I BE ABLE TO SUBLEASE OR                                                                         state upon completion of your lease, usually
                                                                                                      of the lessor’s own objectives and current
and kitchens, are incorporated within the net     ASSIGN MY LEASE?                                                                                      excepting fair wear and tear of floor coverings
                                                                                                      market conditions.
leasable area measured.
                                                  Most commercial leases allow the lessee to                                                            If you are relocating, your workplace designer
                                                                                                      Typically, the two most significant influencing
                                                  sublease or assign their premises. Typically,                                                         will usually be able to conduct the “make
                                                                                                      factors on rent review patterns are lease term
WHAT ARE MY TOTAL REAL                            the lessor is unable to unreasonably withhold                                                         good” on your previous premises as well
                                                                                                      and the commencing rental. Rent review meth-
ESTATE COSTS?                                     consent to the sublease/assignment. A prudent                                                         as design and tenant improvement your
                                                                                                      ods may include fixed increases, structured
                                                  lessor will consider the strength of the contract                                                     new premises.
In addition to your net rental rate, you may                                                          increases or reviews to market levels (with
                                                  being offered by the incoming tenant and will
also pay for operating costs such as insurance,                                                       or without a ratchet clause). A ratchet clause
                                                  be reluctant to accept a sublease/assignment




Colliers International                                                                                                                                                        Office Leasing Guide P. 17
WHEN DOES THE AGREEMENT BECOME                     various conditions are satisfied. The Letter
LEGALLY BINDING?                                   of Intent document provides a framework by
                                                   which the agreement becomes unconditional
During a typical lease negotiation, leasing
                                                   and both parties are legally bound.
proposals are used as a medium to determine
terms and conditions acceptable to both lessor
and lessee. This will lead to a Letter of Intent   HOW MUCH WILL MY TENANT
document or Memorandum of Understanding            IMPROVEMENT COST?
outlining the final position of both parties. It
                                                   This depends on the quality of tenant
is accompanied by a leasing deposit, generally
                                                   improvements you require. Factors in the
equivalent to two months’ gross rent as a
                                                   cost include the existing tenant improve-
security deposit. This deposit is typically
                                                   ments from the prior tenant, the quality of
held in the leasing agent’s trust account to
                                                   finishes selected, infrastructure needs such
be passed over when the lease becomes
                                                   as plumbing and wiring, and the complex-
unconditional.
                                                   ity of the requested build-out. Typically,
At this stage, the agreement may be condi-         landlords provide a tenant improvement
tional. In some cases it may be conditional        allowance and tenants are expected to pay
on lessee and/or lessor board approval,            the difference between that allowance and
together with other approval conditions.           the actual cost of improvements.

The lessee and/or lessor may not be legally
bound to commit to the premises until the




P. 18 Office Leasing Guide                                                                        Colliers International
Relocation Checklist
A STEP-BY-STEP GUIDE




PRELIMINARY                                      r	 	 moving notices
                                                    Mail                                             Schedule and prepare agenda for your
                                                                                                  r	 	                                                 r	 	 an emergency contact list for vendors
                                                                                                                                                          Draft
                                                                                                     employee move orientation meeting                    such as elevator maintenance, building
r	 Finalize lease for new location               	    r	 Banks and financial institutions
                                                         	
                                                                                                                                                          management, utilities, telecommunications
                                                                                                     Finalize seating plan and identify
                                                                                                  r	 	
   Notify present landlord of termination date
r	 	                                             	    r	 Clients and customers
                                                         	                                                                                                and moving company
                                                                                                     each location
   Advise staff of date and location of move
r	 	                                             	    r	 Professional organizations
                                                         	
                                                                                                     Prepare labels for moving furniture
                                                                                                  r	 	                                                 POST-MOVE
r	 Engage designer for new premises              	    r	 Credit accounts and credit cards
                                                         	                                           and boxes to new locations
                                                                                                                                                          Install and test telephone system
                                                                                                                                                       r	 	
r	 Create a master change-of-address list        	    r	 Insurance companies
                                                         	                                           Assign move supervisors in each
                                                                                                  r	 	
                                                                                                     department                                           Distribute new phone list and map showing
                                                                                                                                                       r	 	
                                                 	    r	 Accounts receivable and payable
PRE-MOVE—GENERAL                                                                                                                                          the locations of departments
                                                                                                     Develop a master relocation project schedule
                                                                                                  r	 	
                                                 	    r	 Newspaper and magazine subscriptions
                                                         	
                                                                                                                                                          Install and test all computers
                                                                                                                                                       r	 	
   Reserve elevators and loading docks
r	 	                                                                                                 Schedule and implement a clean-up program
                                                                                                  r	 	
                                                 	    r	 Telephone company and internet
                                                         	
   for moving day                                                                                    (purge files, dispose of trash)                   r	 	 a detailed walk-through of the premises
                                                                                                                                                          Do
                                                         service provider
                                                                                                                                                          and report any damage to moving company
r	 Bid and award moving contract                                                                     Schedule staff for unpacking, including
                                                                                                  r	 	
                                                 	    r	 Prospects and special services
                                                                                                     stocking supply cabinets, storerooms, file           Transfer your insurance to the new location
                                                                                                                                                       r	 	
r	 	 and award telephone and
   Bid
                                                 r	 	 a meeting at new premises three
                                                    Hold                                             rooms, and removing tags from all furniture
   computer cabling                                                                                                                                       Obtain Certificates of Insurance from your
                                                                                                                                                       r	 	
                                                    weeks prior to move. Bring in all parties        and equipment to ensure your company will be         insurance company
   Inventory existing furniture
r	 	                                                involved (design/construction/mover/cabling      operational as rapidly as possible after move
                                                    company/information technology specialist)                                                         r	 Confirm termination of old leases
r	 	 furniture and equipment on a color-
   Code                                                                                              Arrange for off-site storage of old files
                                                                                                  r	 	
                                                    to ensure all details are covered and all
   coded floor plan                                                                                                                                       Collect parking passes, security cards and
                                                                                                                                                       r	 	
                                                    responsibilities clear                        r	 	 contents of all filing cabinets and desks,
                                                                                                     Pack                                                 keys for the old facility. Confirm the return
r	 Audit keys                                                                                        ensuring everything is properly labeled
                                                    Change locks/access codes on new
                                                 r	 	                                                                                                     of any deposits held by the landlord for
   Order any new office furniture
r	 	                                                premises as close to moving day as possible      Arrange for staff to tour new premises a few
                                                                                                  r	 	                                                    these items
   and equipment                                    to secure access                                 weeks prior to move                               r	 	 final invoices against contracts
                                                                                                                                                          Audit
   Order new stationery
r	 	                                                Schedule public relations effort, including
                                                 r	 	                                                Schedule post-move training for security, fire,
                                                                                                  r	 	                                                    Complete and file all warranty information
                                                                                                                                                       r	 	
r	 	 change-of-address forms with post
   File                                             plans for news releases and an “office           and life safety procedures at the new facility       for all new furniture and equipment
   office and forward mail                          warming” party
                                                                                                     Distribute access cards and keys
                                                                                                  r	 	                                                    Update fixed asset accounting system for
                                                                                                                                                       r	 	
   Check your insurance coverage for the move
r	 	                                                Arrange for listing on lobby directory
                                                 r	 	                                                for new premises                                     any new furniture and equipment purchased
                                                    of new building
   Obtain the Certificate of Occupancy
r	 	                                                                                                                                                      Confirm the change-of-address
                                                                                                                                                       r	 	
                                                 r	 Arrange for post-move cleaning                MOVING DAY
   and any other required permits or licenses                                                                                                             corrections made
                                                                                                     Arrange with the building manager to have
                                                                                                  r	 	
   Advise suppliers (telephone, bottled water,
r	 	                                                                                                                                                      Schedule press release and client
                                                                                                                                                       r	 	
                                                 PRE-MOVE—INTERNAL                                   the air conditioning on during the move
   coffee service) of new address                                                                                                                         announcement
                                                    Organize a “staff moving committee” if
                                                 r	 	                                                Remove computer equipment (server) and
                                                                                                  r	 	
r	 	 photocopier contractor
   Alert
                                                    appropriate and delegate responsibilities        phone system prior to arrival of movers and
   Decide on security procedures for the move
r	 	                                                                                                 commence reinstallation at new site



Colliers International                                                                                                                                                        Office Leasing Guide P. 19
www.colliers.com




Accelerating success.

This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content,
accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and
damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s). ©2010. All rights reserved.
P. 20 Office Leasing Guide                                                                                                                                                                                                                                                     Colliers International

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Office Leasing Guide

  • 1. Office Leasing Guide WHAT YOU NEED TO KNOW BEFORE YOU SIGN Colliers International Office Leasing Guide P. 1
  • 2. THE OFFICE LEASING GUIDE This step-by-step guide has been assembled to reflect Colliers International’s knowledge of the leasing process. You’ll find information on tenant improvements, common pitfalls, timelines and frequently asked questions. The knowledge in this handbook will help you make a major business transition with minimum disruption. P. 2 Office Leasing Guide Colliers International
  • 3. Contents >4 ALLOW US TO INTRODUCE >7 THE OFFICE LEASING PROCESS > 13 DESIGN AND PROJECT OURSELVES Four steps to business productivity MANAGEMENT About Colliers International Create the space to meet your visitor >8 DETERMINE YOUR PROPERTY NEEDS >5 GETTING STARTED Take your requirement from notion to motion > 14 TRANSLATING THE LINGO Making educated decisions about Glossary of terms and frequently your business space asked questions > 10 EVALUATE MARKET ALTERNATIVES Inspect and compare your options >6 TOP 10 TENANT MISTAKES > 19 RELOCATION CHECKLIST Avoid these common blunders Your step-by-step guide in your leasing process > 12 COMMIT TO PREMISES Completing or varying your lease documentation; commencing the full design process Colliers International Office Leasing Guide P. 3
  • 4. Allow Us to Introduce Ourselves ABOUT COLLIERS INTERNATIONAL WHO IS COLLIERS INTERNATIONAL? WHY ENGAGE OUR SERVICES? We are an award-winning team of office leasing Colliers International professionals are equipped with Working with Colliers professionals saves you the professionals with intimate knowledge of the local, the skills, knowledge and tools to intelligently assess time and confusion of dealing with multiple agents, regional and global leasing markets. We bring an your space requirements. We ensure that your leasing landlords or consultants. in-depth understanding of business needs and the decision—whether to stay or relocate—is informed by Our comprehensive database contains information leasing process. both your business needs and a thorough market on every office listing, agent and landlord, providing evaluation. We are committed to creating a business solution exhaustive data about every opportunity that fits that meets your organization’s needs—now, and in Colliers International’s culture of knowledge-sharing your requirements. the future. Your office space is more than just an gives you access to experts in real estate management Our market knowledge provides forward-looking address; it is where you make business objectives services, project management, appraisal and valuation, analysis to help you take advantage of trends, and we a reality. and capital markets. offer a single point of accountability for your project to connect all of the specialists available to serve you. We are committed to accelerating your success. P. 4 Office Leasing Guide Colliers International
  • 5. Getting Started MAKING EDUCATED DECISIONS ABOUT YOUR BUSINESS SPACE WHAT ARE MY OPTIONS? perception of your core values and elevate improvement costs should be viewed as an WHOM SHOULD I INVOLVE? your brand in the minds of customers and organizational opportunity—a well-planned Stay put Your internal steering committee should be other stakeholders. and executed office will adapt to your If your current space satisfies your business led by a senior employee, and supported by organization’s growth and changing needs needs, but you are approaching the end of Employee Retention decision-makers and influencers including and minimize churn costs. your lease, consider renewing your lease. With an improved work space, you will boost human resources, IT, divisional heads and We can help you ensure the space is avail- staff morale and productivity. Our market Balancing your tenant improvement costs and staff. A single point of contact from your able, and negotiate a new lease with the research shows that even subtle changes in their benefit to your organization is critical. organization, matched with a single point building owner. the work environment create substantial In addition, “make good” commitments will of contact at Colliers International, is ideal gains in productivity, resulting in improved affect your cash flow when exiting a lease. to make the process run smoothly. Relocate bottom-line financial performance. These costs are covered in more detail later. The expiration of your lease offers you an You may wish to conduct a survey of your opportunity to transform your business and staff to determine their needs, preferred create new efficiencies by relocating. HOW MUCH WILL IT COST? WHEN SHOULD I START? work space amenities and location. Colliers can survey your staff to determine the impact Operational Costs Plan, Plan, Plan of relocation on commute times and employee WHY SHOULD I RELOCATE? The negotiation of rent and tenant incen- Whether you decide to stay or go, knowledge retention. tives depends on the dynamics of your local is key. Understand your current situation, Business Needs market. In markets where over development review other options, assess the marketplace Professional real estate advice is a critical If your current space is too small, too large, or economic conditions have created higher context and negotiate with your current part of the project team. This will arm you or inflexible, a new office can energize your vacancy, this favors tenants. In other markets, landlord to optimize the end result. with insight into the marketplace, your organization and act as a springboard for low vacancy gives landlords the upper hand alternative options and the financial implica- improved productivity and operational cost The period required to conduct a lease in negotiations. Contact your Colliers tions of the stay or go scenarios. A skilled savings. Additionally, market conditions may negotiation and relocate is three to six professional for the market trends in your workplace strategist and design profes- support the business case for relocation. months at a minimum. Depending on the location. sional will complete the team by providing size of your organization and current Brand Value Enhancement knowledge of productivity-enhancing tenant Tenant Improvement and market conditions, you should begin this The quality of your building and the tenant improvements. “Make Good” Costs process 18 to 24 months prior to your improvements in your office space speak Your entry and exit strategy to a lease lease expiration. It can take two years or volumes about your organization. A new can greatly affect the real cost of your more to complete the lease and relocation building can strengthen your employees’ commitment. Workplace design and tenant process for large or complex assignments. Colliers International Office Leasing Guide P. 5
  • 6. Top 10 MOST COMMON MISTAKES MADE BY TENANTS >1 Beginning the negotiation of a renewal >5 Making inaccurate estimations of the >8 Agreeing to terms prior to obtaining or new lease too late company’s space requirements a space planning perspective >2 Lacking clearly defined business or real >6 Failing to leave enough time at the end of >9 Failing to allow for expansion space estate objectives the lease to fulfill “make good” obligations > 10 Lacking the knowledge of future >3 Focusing exclusively on financial costs >7 Acting too slowly once a decision is made, opportunities; often, the best deals and consequently missing out on are secured well in advance of space >4 Failing to appoint a project leader as opportunities becoming available the internal single point of contact P. 6 Office Leasing Guide Colliers International
  • 7. The Office Leasing Process THREE STEPS TO BUSINESS PRODUCTIVITY STEP TWO: Relocate Confirm real estate requirement evaluation Brief preferred lessors Confirm development sites/existing building options and assess via inspections Begin offer/counter-offer process Short-list options, work with design consultant to evaluate space plan STEP ONE Choose Understand your business needs STEP THREE Fact Determine your property needs Finding Commit to new (or existing) premises Identify decision makers and confirm critical time path STEP TWO: Renew Complete new (or variation of) lease documentation Conduct requirement evaluation Confirm existing premises as most desirable opportunity Complete tenant improvement design and project management Produce real estate brief Brief existing lessor Evaluate market alternatives: Relocate or renew Confirm real estate requirement evaluation Work with design consultant to evaluate space efficiency Begin offer/counter-offer process Colliers International Office Leasing Guide P. 7
  • 8. Step One DETERMINE YOUR PROPERTY NEEDS TAKE YOUR REQUIREMENT – Is your business growing If the workplace design happens solely FROM NOTION TO MOTION or shrinking? during the design and construction phase, only minimal gains are possible. Skipping the planning stage triggers a – What are your brand values? number of the Top 10 mistakes most – What are your preferred commonly made by office tenants. It INVOLVE KEY INTERNAL work settings? is crucial to understand your property DECISION-MAKERS requirements through the process of – What types of employees will Assemble a team with the breadth evaluation and forecasting. you have in the future? of skills to drive the project. Involve – What will your technology your experts in information technology, DETERMINE FUTURE NEEDS requirements be in three years? human resources and finance. They will be familiar with specific future trends Commercial leasing decisions should – Are you considering acquiring that may influence your requirements consider medium- to long-range business or merging with other firms? and decisions. Their involvement from goals for leases running three years or – What effect will moving have the outset will help clarify and focus more. Guided by professional workplace on your customers and staff? your brief and achieve internal buy-in. strategists and space planners, the process of constructing a real estate By working through this concept Be sure to appoint a project leader to brief to achieve your business objectives planning phase, you will achieve the connect with your internal stakeholders will consider questions including: maximum benefit—both financial as well as with your broker and and strategic—in the relocation or consultants. reconfiguration of your office space. P. 8 Office Leasing Guide Colliers International
  • 9. CREATE A REAL ESTATE BRIEF An important element in developing this – Technical requirements KNOW YOUR LOCAL MARKET brief is to audit your existing premises— – Timing AND COMMITMENTS The briefing process begins with the creating a clear understanding of what’s – Communications infrastructure documentation of your workplace During this phase, you should familiar- working, and what’s not. – Budget requirements. ize yourself with local office market – Environmental considerations conditions and existing lease commit- – Growth projections – Other unique needs WHAT SHOULD BE IN YOUR BRIEF? ments. By knowing the market vacancy – Office space size – Signage/naming rights rates, supply projections, current rental – Space configuration Your real estate brief should consider – Term/renewals rates and tenant incentives, you will be – Organizational vision a wide range of criteria: Consider ranking each factor in terms in a better position to evaluate various – Cost parameters – Size of space of importance, as you may have to proposals. – Timing – Tenant improvement needs compromise on some items, depending Your Colliers International leasing A well-prepared real estate brief will – Number of employees on the options available. You can also professional can provide you with synthesise these elements and translate (maximum and minimum) assign a point value to each factor, with an office market presentation that them into your property requirements. – Image/quality/aesthetics more points possible for the factors describes these factors, both in your The brief will expedite your decision- – Location with greater importance. Your Colliers local market and in the specific sub- making process. You will save considerable – Parking professional can help guide you through markets you identify as most desirable. time by inspecting and reviewing only – Building services this evaluation process. suitable properties. – Office hours – Security and access Your brief also creates a framework – Lease structure preferences to evaluate and compare your options. Colliers International Office Leasing Guide P. 9
  • 10. Step Two EVALUATE MARKET ALTERNATIVES. INSPECT AND EVALUATE YOUR OPTIONS. RELEASE YOUR BRIEF your stated business objectives. Colliers TO THE MARKET has developed a range of decision- making models and matrices. These To avoid dealing with multiple agents, tools dramatically improve efficiency you can request that your Colliers in the evaluation process. professional approach the market on your behalf. With an intimate knowledge of the market and a well-established FINANCIAL ANALYSIS network of agents and owners, Colliers There are several ways to compare the will act as a single point of contact to financial aspects of leasing, including: uncover all suitable space opportunities. Your real estate broker will also assist in – Gross effective rent per square foot discussions with your existing landlord – Gross stated rent per square foot regarding lease renewal options. – Gross and net rent per square foot – Total occupancy cost per employee EVALUATE AND PREPARE Further detail on these measurements A SHORT LIST is provided in the Frequently Asked Questions portion of this guide. When analyzing alternative premises, consider timing, financial and other Look beyond the square foot rate offered. incentives that may be offered. A lease Some office space is highly efficient, renewal option should include expansion enabling you to accommodate your and contraction costs, as well as the employees in less space. For example, cost of reconfiguring or completely you may require 5,000 square feet to refurbishing your work space. Aim for accommodate your staff in one building a short list of three or four properties. while another may be able to house them comfortably in 4,000 square feet. Evaluate options against your brief, In this instance, it does not make sense ensuring the property’s benefits match to compare the two options based on P. 10 Office Leasing Guide Colliers International
  • 11. It is now a fundamental requirement that the office architecture supports the intellectual work demanded of employees and facilitates your organization’s continuous improvement strategies. their rate per square foot. It is more WORKPLACE DESIGN AND TENANT DETERMINE WORK SPACE – Conduct building services audits effective to use a cost per employee IMPROVEMENTS EFFICIENCIES – Provide an opinion of likely tenant lease analysis model. It’s not all about cost. When evaluating By conducting a design site audit of improvement costs Lease conditions such as “make good” your property options, don’t forget to the short-listed options, your workplace requirements can also impact on the consider the intangible costs and designer will determine the work space TENANT IMPROVEMENT COSTS attractiveness of a particular option. benefits for each property option. efficiencies for each property. This (For more information on “make good” process also produces sample tenant Attaining a tenant improvement that is Your workplace designer can help you costs, please refer to page 14.) improvement designs prior to your aligned with your organization’s ideal evaluate each option’s impact on staff agreement on terms enabling you to outcome depends on which components productivity and communication, corporate compare your options based on financial are viewed as necessary and what is COMPARE YOUR OPTIONS USING identity, information technology, commu- and non-financial criteria. discarded during the design phase. It is A LEASE ANALYSIS MODEL nications performance and your customer critical that all aspects to be included in base. If appropriately engaged at step Your workplace designer will provide the Colliers International has developed the tenant improvement are assessed one, your workplace designer will have following services during this critical a lease analysis model designed to to determine their contribution to the the maximum positive influence on your evaluation phase: compare leasing options on a financial overall objectives. workplace brief. basis, using an “apples to apples” – Prepare a detailed existing tenant Equally important is the identification and approach. The model allows the com- In today’s challenging business environ- improvement audit evaluation of the potential components parison of proposals from multiple ment, it is critical that organizations look – Assess items suitable for re-use that are excluded. The identification of lessors, demonstrating the cost of the beyond the traditional view of office in the improved office space positive and negative components through financial offer over the life of the lease. accommodation and the measurement the audit process provides the opportu- standards normally applied. – Manage the pre-design process This financial modeling takes into nity to maximize the effectiveness of the including a review of local authority account lease incentives, such as free Your work space must also contribute final result and minimize the cost of the approvals and code requirements rent or a greater allowance for tenant to the development of team networks tenant improvement. improvements, the total rent over the life and organizational learning systems. – Prepare selected site audits of the lease including rent hikes, and the In addition, the office systems must – Prepare a “stacking and blocking” plan term of the lease including extension support organizational change effi- provisions. ciently, and with minimal redundancy. – Prepare preliminary concept designs Colliers International Office Leasing Guide P. 11
  • 12. Step Three COMMIT TO PREMISES Completing or varying your lease process begins immediately. At this documentation; commencing the stage, you should have completed: full design process – Needs analysis – Space plan LETTER OF INTENT – Test fit Once the particulars of a lease agree- This will enable you to engage a ment are negotiated, both parties will designer, who may be the workplace sign a letter of intent. This document is designer, with accurate information generally not legally binding but is a regarding your requirements. The gesture of good faith that terms have sooner a designer is engaged, the been agreed. When signed, this document better the outcome. will be used to brief attorneys so that the It is vital that this stage is viewed as an final lease documents can be prepared. investment in the organization’s future and not merely a tenant improvement. WORKPLACE DESIGN ISSUES The development of work space should be directly linked with your organiza- When a lease agreement is complete, tional strategy. the workplace tenant improvement P. 12 Office Leasing Guide Colliers International
  • 13. Step Four DESIGN AND PROJECT MANAGEMENT The final stage of the process provides – Detailed construction timeline BID REVIEW PHASE – Project manage delivery program the perfect opportunity to re-think office preparation – Determine agreed bid review panel – Project completion/occupation imperatives and promote organizational – Documentation for building owner effectiveness, community, communication – Review and assess bid responses – Oversee practical completion and authorities and productivity. – Bid management and analysis – Timely issue of the Code – Stakeholder coordination of Compliance certificate DESIGN DEVELOPMENT AND CONTRACT ADMINISTRATION – Inspection and sign-off CONSTRUCTION APPROVAL DETAILED DESIGN AND DOCUMENTATION PHASE – Manage the delivery process – Manage the identification and – Engagement and full briefing of all and administer contracts completion of all outstanding other specialists and consultants – Preparation of documentation and defective works for a construction bid – Appoint all approved contractors – Commencement of detailed design and suppliers including head tenant – Cost reporting and final accounts – Finalize furniture selection – Development of finishes selection improvement contractor – As-built drawings, operating manuals, – Finalize the selection of tenant – Short list of furniture options – Coordination of all required meetings guarantees and warranties improvement finishes – Review of likely tenant – Coordination of quality control – Final inspection and completion – Obtain building and construction improvement costs inspections of works at the end of the defects permitting liability period – Cost and variation management Colliers International Office Leasing Guide P. 13
  • 14. Translating the Lingo GLOSSARY OF TERMS BUILDING CONSENT be offered in a variety of ways, such as areas dedicated as public spaces or thor- who occupy a floor. Average occupancy Approval from the relevant authorities for through a period of free rent, provision of a oughfares such as building service areas. ratios vary between 1:12 and 1:18 square carrying out building work on the premises, tenant improvement allowance, or moving feet per person. Gross Leasable Area (GLA) usually for tenant improvements. assistance. GLA (measured in square feet) is the floor space contained within each tenancy at each RATCHET CLAUSE CAP AND COLLAR LESSEE floor level by measuring from the dominant A ratchet clause is the mechanism by which A term and method used in some market That legal entity, company or person whose portion of the outside faces of walls, to the the rent cannot decrease on review. There review clauses. It is a mechanism that puts a name appears as the occupier or user of center line of the internal common area or are variations of ratchet clause (“full” or “cap” or maximum amount by which the rent space on the formal lease document, binding inter-tenancy walls. “hard” ratchet and “soft” ratchet). Under a can be increased, or a “collar,” the maximum the lessee to the terms and conditions stated soft ratchet, the rent can not fall below the the rent can decrease, on the rental rate therein. Also known as the tenant. commencement rental. Under a full ratchet, MAKE GOOD review date. As the office leasing markets it can not fall below the current rental. The lessee’s obligation to return the premises strengthen, these review methods are more LESSOR to their original condition prior to expiration difficult to negotiate. The party whose name appears as lessor on of the lease. RENT REVIEW the formal lease document. The lessor is the The method by which your rent can vary GROSS EFFECTIVE RENT landlord or owner of the property. during the term of the lease. This can be a NET, GROSS RENT The rent payable under the lease accounting market rate review, a predetermined figure Net rent is also referred to as “Triple Net” for all incentives and including all building (such as 3 percent) or a rate fixed to an LEASABLE AREA or “NNN.” It is the rental rate excluding net expenses. index such as the CPI. The review structure Net Leasable Area (NLA) taxes, insurance and maintenance. Gross is agreed prior to lease commencement. NLA (measured in square feet) is the rent includes these expenses. Most leases GROSS FACE RENT floor space contained within each tenancy are based on net rents plus each tenant’s The rent payable under the lease excluding between the internal finished surfaces of proportionate share of building expenses. RESOURCE CONSENT any incentives but including all building permanent internal walls and the internal Approval from the local governing authority expenses. finished surfaces of dominant portions of the with regard to zoning or changes in the OCCUPANCY RATIOS permanent outer building walls. It generally permitted use of the premises. A common ratio used to measure the tenant includes window frames and structural INCENTIVE efficiency of individual building’s floor plates. columns, toilets, kitchens, cupboards and An inducement offered by the landlord to This ratio is calculated by dividing the total excludes plant/motor rooms. It excludes attract tenants to the building. This can net leasable area by the number of people P. 14 Office Leasing Guide Colliers International
  • 15. RIGHT OF RENEWAL The lessee’s right to renew a lease for an agreed period of time prior to expiration of the initial lease. SECONDARY EXPENSES All other costs beside rent associated with insurance, operation, upkeep and/or maintenance of the building, including air conditioning, elevator maintenance, common area cleaning, security and electricity. STATUTORY EXPENSES Statutory expenses include costs such as municipal rates, water and sewer rates and usage charges. SUBLEASE/ASSIGNMENT The mechanism under the provisions of the lease allowing the lessee to find a suitable replacement tenant. This is subject to lessor approval and unless specifically stated, does not limit your legal responsibilities during the term of the lease. Colliers International Office Leasing Guide P. 15
  • 16. P. 16 Office Leasing Guide Colliers International
  • 17. Frequently Asked Questions HOW CAN I NEGOTIATE THE BEST DEAL? building and grounds maintenance, taxes, if it could potentially compromise their ensures that the reviewed rental can be no common area maintenance and cleaning, financial position or security. less than either the previous year’s rental or By carefully selecting the right properties on utilities and other expenses incurred by the commencement rental. The Consumer Price your short list, you can create a competitive landlord. Index (CPI), or a margin over CPI, is another environment to achieve the most favorable WHAT ADDITIONAL COSTS AM I common structure. Often, review clauses lease agreement. Your Colliers International RESPONSIBLE FOR OVER AND ABOVE include a combination of these during the term broker can assist you throughout this process. WHAT ARE THE DIFFERENCES BETWEEN NET RENT AND OPERATING EXPENSES? of a lease. GROSS RENT, NET RENT, EFFECTIVE In addition to a pro-rata share of building RENT AND FACE RENT? Lessees will typically request a right of HOW MUCH SPACE WILL I NEED? operating expenses, you will generally be renewal as part of the lease negotiation, GROSS RENT is the rent calculated inclusive responsible for electricity and other utility The amount of space you require will vary allowing them to extend their occupation of all building costs, whereas NET RENT is charges, light bulb replacement and cleaning depending on the nature of your business beyond the initial lease term. It is normal to the rent calculated excluding building costs. your own premises. and the efficient use of space you select. set out the rent review pattern for this term FACE RENT is the quoted rental rate before As a rule you will require roughly 12 to in the original lease document. taking into account incentives or increases, 18 square feet of space per employee. WHAT ARE THE RENT REVIEW PATTERNS whereas EFFECTIVE RENT is the rental rate FOR THE TERM AS WELL AS THE averaged out over the term of the lease, WHAT IS A “MAKE GOOD” AND HOW RENEWAL PERIOD? ARE AMENITIES INCLUDED IN THE including consideration of rent-free periods MUCH WILL IT COST? NET LEASABLE AREA? or up-front incentives. Most lessors have a standardized lease A “Make Good” is your (the lessee’s) obliga- document for their buildings, including a Yes, assuming you occupy a whole floor. The tion to return the premises to its original prearranged rental review schedule in light amenities within the floor, such as restrooms WILL I BE ABLE TO SUBLEASE OR state upon completion of your lease, usually of the lessor’s own objectives and current and kitchens, are incorporated within the net ASSIGN MY LEASE? excepting fair wear and tear of floor coverings market conditions. leasable area measured. Most commercial leases allow the lessee to If you are relocating, your workplace designer Typically, the two most significant influencing sublease or assign their premises. Typically, will usually be able to conduct the “make factors on rent review patterns are lease term WHAT ARE MY TOTAL REAL the lessor is unable to unreasonably withhold good” on your previous premises as well and the commencing rental. Rent review meth- ESTATE COSTS? consent to the sublease/assignment. A prudent as design and tenant improvement your ods may include fixed increases, structured lessor will consider the strength of the contract new premises. In addition to your net rental rate, you may increases or reviews to market levels (with being offered by the incoming tenant and will also pay for operating costs such as insurance, or without a ratchet clause). A ratchet clause be reluctant to accept a sublease/assignment Colliers International Office Leasing Guide P. 17
  • 18. WHEN DOES THE AGREEMENT BECOME various conditions are satisfied. The Letter LEGALLY BINDING? of Intent document provides a framework by which the agreement becomes unconditional During a typical lease negotiation, leasing and both parties are legally bound. proposals are used as a medium to determine terms and conditions acceptable to both lessor and lessee. This will lead to a Letter of Intent HOW MUCH WILL MY TENANT document or Memorandum of Understanding IMPROVEMENT COST? outlining the final position of both parties. It This depends on the quality of tenant is accompanied by a leasing deposit, generally improvements you require. Factors in the equivalent to two months’ gross rent as a cost include the existing tenant improve- security deposit. This deposit is typically ments from the prior tenant, the quality of held in the leasing agent’s trust account to finishes selected, infrastructure needs such be passed over when the lease becomes as plumbing and wiring, and the complex- unconditional. ity of the requested build-out. Typically, At this stage, the agreement may be condi- landlords provide a tenant improvement tional. In some cases it may be conditional allowance and tenants are expected to pay on lessee and/or lessor board approval, the difference between that allowance and together with other approval conditions. the actual cost of improvements. The lessee and/or lessor may not be legally bound to commit to the premises until the P. 18 Office Leasing Guide Colliers International
  • 19. Relocation Checklist A STEP-BY-STEP GUIDE PRELIMINARY r moving notices Mail Schedule and prepare agenda for your r r an emergency contact list for vendors Draft employee move orientation meeting such as elevator maintenance, building r Finalize lease for new location r Banks and financial institutions management, utilities, telecommunications Finalize seating plan and identify r Notify present landlord of termination date r r Clients and customers and moving company each location Advise staff of date and location of move r r Professional organizations Prepare labels for moving furniture r POST-MOVE r Engage designer for new premises r Credit accounts and credit cards and boxes to new locations Install and test telephone system r r Create a master change-of-address list r Insurance companies Assign move supervisors in each r department Distribute new phone list and map showing r r Accounts receivable and payable PRE-MOVE—GENERAL the locations of departments Develop a master relocation project schedule r r Newspaper and magazine subscriptions Install and test all computers r Reserve elevators and loading docks r Schedule and implement a clean-up program r r Telephone company and internet for moving day (purge files, dispose of trash) r a detailed walk-through of the premises Do service provider and report any damage to moving company r Bid and award moving contract Schedule staff for unpacking, including r r Prospects and special services stocking supply cabinets, storerooms, file Transfer your insurance to the new location r r and award telephone and Bid r a meeting at new premises three Hold rooms, and removing tags from all furniture computer cabling Obtain Certificates of Insurance from your r weeks prior to move. Bring in all parties and equipment to ensure your company will be insurance company Inventory existing furniture r involved (design/construction/mover/cabling operational as rapidly as possible after move company/information technology specialist) r Confirm termination of old leases r furniture and equipment on a color- Code Arrange for off-site storage of old files r to ensure all details are covered and all coded floor plan Collect parking passes, security cards and r responsibilities clear r contents of all filing cabinets and desks, Pack keys for the old facility. Confirm the return r Audit keys ensuring everything is properly labeled Change locks/access codes on new r of any deposits held by the landlord for Order any new office furniture r premises as close to moving day as possible Arrange for staff to tour new premises a few r these items and equipment to secure access weeks prior to move r final invoices against contracts Audit Order new stationery r Schedule public relations effort, including r Schedule post-move training for security, fire, r Complete and file all warranty information r r change-of-address forms with post File plans for news releases and an “office and life safety procedures at the new facility for all new furniture and equipment office and forward mail warming” party Distribute access cards and keys r Update fixed asset accounting system for r Check your insurance coverage for the move r Arrange for listing on lobby directory r for new premises any new furniture and equipment purchased of new building Obtain the Certificate of Occupancy r Confirm the change-of-address r r Arrange for post-move cleaning MOVING DAY and any other required permits or licenses corrections made Arrange with the building manager to have r Advise suppliers (telephone, bottled water, r Schedule press release and client r PRE-MOVE—INTERNAL the air conditioning on during the move coffee service) of new address announcement Organize a “staff moving committee” if r Remove computer equipment (server) and r r photocopier contractor Alert appropriate and delegate responsibilities phone system prior to arrival of movers and Decide on security procedures for the move r commence reinstallation at new site Colliers International Office Leasing Guide P. 19
  • 20. www.colliers.com Accelerating success. This document has been prepared by Colliers International for advertising and general information only. Colliers International makes no guarantees, representations or warranties of any kind, expressed or implied, regarding the information including, but not limited to, warranties of content, accuracy and reliability. Any interested party should undertake their own inquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damages arising there from. This publication is the copyrighted property of Colliers International and/or its licensor(s). ©2010. All rights reserved. P. 20 Office Leasing Guide Colliers International