Leasing an unfinished office space question...

1) Is the space currently built-out or is it a shell? Sounds like the plumbing isn't even roughed in...if not, that would likely be your responsibility. I guess you REALLY mean unfinished.

Typically landlord will offer build-out allowances to a tenant to get things like walls demised, flooring installed, painting done, etc. This varies from place to place, but the rule of thumb here is something like $30 PSF allowance with - say - a 5 year lease commitment ($6 PSF per year). Math would be $30PSF x 4,000 SF = $120k allowance. This can include all kinds of stuff...shell + architectural fees, contractor's overages, walls, paint, floors, HVAC, cabinets, doors, lighting, trim....

Most (but not all) landlords will deliver a shell and then go from there.

2) Find a contractor and an architect ... or ... let the tenant do all that. It's more convenient for a landlord to do this + you have some oversight on who is doing the work, though. Anything over and above the allowance would be billed directly to the tenant and due either upfront or spread out over a reasonable period of time during the lease.

3) You'll need to run a credit check, ask for financials and make sure you have a personal guarantee from one of the principals.

4) Be wary of leases of more than 7 years because people rarely stay that long. Keep escalations at 3%. Make sure you pass through all your expenses.

RMX

 

It's all negotiable... there is not hard and fast rules. Who pays is what you will spell out in the lease.

In my experience, its standard that the landlord provides "usable" space - i.e. floors, walls, working bathroom, doors, lights, etc. Beyond that, the client is often going to want the space designed to fit. So if you have a big square, 4k sq-ft, and the client is going to make it into offices, then walls will need built, etc. Usually the client will pay for this to be done by hiring their own contractor approved by the landlord. Or, the client will request the landlord do this and the landlord will add the costs into the lease (perhaps monthly, or perhaps up front, etc). How much of this will be paid by the lessee and how much is paid by the lessor depends on how bad the landlord wants the tenant, how bad the tenant wants the space, how extensive the work is, etc, etc.

As an example, in the office park I am in, the tenant next to me is the biggest in the part with around 8k sq-ft. They got the place built-to-suit which included building 4 or 5 offices, adding blinds to the windows, installing HID lights to the warehouse in addition to the flourescents, and building a loading dock. In return they did a 7 year lease as opposed to a 5, and they did not get much of a discount off the asking price. Also the landlord really wanted to get the tenant in, etc. We took 6k sq-ft of space, did not ask for any modifications, did a 5 year lease and got some free months up front, as well as a reduction in the asking price.

It all depends... sort of like saying "how much do you pay for a house" - thats what the negotiations are for

 

This varies depending on the type of space. In a big, multi-tenant 100% PURE office building, landlords here typically offer a build-out allowance as part of the the deal. You can bet it's charged back by being built in to the base rent. Freestanding PURELY office buildings here also offer the same, with the differences being there is usually no CORE FACTOR integrated into the lease. When we get into retail or flex space, lots of times the LL will deliver a shell with little to no build-out allowance. All depends.

I cannot tell whether the poster owns something that's part of a multi-tenant office condo, part of a much larger office building, a freestanding building or whether it's even pure office space. Mike sounds like you have flex space where you are.

RMX

 

You are, of course, right as always. Our space is what out here they call "R&D" meaning it was about 30% office (sheetrock walls, nice windows, suspended tile ceiling, carpeted floor, painted, electrical every 8 feet, etc). The rest was shop space (25' ceiling, concrete floor, exposed insulation on walls/ceilings, bare girders showing, light fixtures hanging on chains, etc). The landlord "could have"built it out but we were gonna pay for it one way or another I am not a big fan of offices so I just left it as an open layout and used partitions in the office.

We had looked at industrial space before and they were not into doing anything, except maybe moving a wall or adding a few lights. We had looked at pure office space before too and they were willing to build it out as we liked (they had a given amount they would spend per sq-ft you were renting). Weird thing is they didn't give you any credit if you didn't build it out, just charged you more if you went beyond their "free" build-out amount.

The space listed above sounds real unfinished if it hasn't got any floors or plumbing... I may go throw a few 2x4's and make a box and rent it out as unfinsihed space myself heh