Common Commercial Real Estate
Questions

Choosing the Right Tenant Representative

The process of finding the right office space, obligating yourself contractually, determining how to expand or contract, or relocate, can feel overwhelming and should be handled by a close and trusted advisor..and friend.

Likewise, selecting your tenant representative is as important a decision as selecting your lawyer, therapist, or wedding planner. It is a process we respect and appreciate as much as you do and we encourage you to select the tenant representative with whom you feel most comfortable. So trust your instincts. Please make sure to contemplate these questions as you make your decision:

The Genau Group will never seek a commission or fee from our clients for our tenant representation services. Our commission is paid by the building owner. This is a cost that is already factored in to each tenants rent, regardless of whether they are using a broker.

This is simple: The Genau Group works for tenants. While others in our industry choose to maximize revenue by working for both sides, we are only loyal, devoted, and committed to the Tenant. We only represent tenants.

There is no right answer to this question. If your company is a multinational enterprise (MNE) that wants to put all your eggs in one basket and rely entirely on one global real estate organization, then yes, you should work with one of the big 5. Likewise, if you care about vanity and want to tell your friends that you work with the “largest real estate company on Earth,” then by all means, work with that conglomerate. We encourage you to recognize; the larger the shop, the greater the likelihood that the broker is doing business with your Landlord somewhere else…and therefore will have a conflict of interest when it comes time to fight for you.

The Genau Group is committed to excellence in tenant representation so you never have to wonder whose interests are foremost in our thinking. Because the average commercial lease has a term of 5 10 years, we spend time with each client helping them to clearly define their goals and objectives. We want to do more than help you with your current commercial real estate needs; we want to be your real estate partners far into the future.

The Genau Group has many testimonials from small companies and larger organizations. In every case, our clients have recognized the Genau Group as a business partner who puts the client’s interests first. Our clients recognize that we are as concerned about their budget as they are. And that we fully understand the business need to reduce and better manager rent expense as a line item on the balance sheet.

The Genau Group has a long list of satisfied clients throughout the Washington DC, Maryland, Virginia marketplace. We pride ourselves on our reputation of being tactful, diplomatic, and respectful representatives. We represent our group as well as our clients and we do it with a level of class and sophistication. If our clients have anything to say about us, it is that we are professional in our approach and we get the job done.

Be mindful that the person who calls you for your business is seldom the person who shows up to sell you as your new broker. And your “new broker” is seldom the person who actually performs your office searches, lease abstracts, pass-through audits, or lease renewal negotiations. Ultimately, like so many service oriented business, the real work is passed down to the lowest man on the totem pole. This is systematic amongst the larger brokerage houses. Most large commercial real estate companies have the same team structure: Cold caller nags you constantly for a meeting, He then sends his broker. His broker gives you the pitch and sale. And when it comes time to do the work, you end up with the college intern…Don’t be surprised when your broker and their support staff spend 80% of their time developing new business and 20% of their time servicing your needs.

At The Genau Group, we have a saying, “we eat what we kill.” Each of our brokers is responsible for their clients. We spend 80% of our time working on our clients, and 20% of our time developing new clients. We believe this is a better approach to client service and long term client retention.

Unless your transaction is a simple lease renewal, there will be several complicated moving parts. And even if you just want to renew your lease, a good broker will get you some free rent and some new paint and carpet and there will ultimately be several other people involved.

More often than not, your broker will need to act much like a “general contractor” organizing and orchestrating all these moving parts to include architects, space planners, lawyers, building engineers, relocation companies, and maybe even permits and appraisal specialists. Remember: a good broker will take care of all of these moving parts. A good broker “makes it look easy.”

The Genau Group executive team has been in Washington for their entire lives. The Genau Group has over 50 combined years of experience and we have worked hard to develop a comprehensive rolodex of the most reliable contacts to assist with every stage of the process. We are, of course, happy to work with referrals from our clients, but also happy to offer our network of contacts as needed to create the best team for your project.

We hope to be your trusted advisor for life. Once we’ve found your new office, brokered, the deal, monitored the build out, and helped you move in, our ongoing “lease management” efforts begin. Remember, your broker only gets paid when they broker a lease, so the time between leases should be spent keeping your business and fostering the long term relationship.

Between lease renewals/relocations, we will monitor your lease, provide regular updates and check-ups with you, review and audit the buildings charges (pass-throughs and real estate taxes), and provide market updates showing you rent and vacancy trends in your building and submarket.

Commercial Leasing

When considering how much space you need, first, you need to think about what your space will need to service. Before you even begin the process of trying to find a lease, you should know how much space you are looking for. A general rule of thumb in the industry would be 100-200 sq.ft. per office and 20-30 sq.ft. per cubicle, or 150-300 sq.ft. per person. However, the most reliable way to find size requirements would be to hire a space planner who would sit down with you and provide insight geared specifically at your company’s unique needs. Those rules vary depending on the type of company you are dealing with (law office, medical office, sales office, etc.) and the projected growth your company is expected to experience in the term of the lease. It is important to consider your growth variant, especially, if you are considering a lease with a longer term. If no growth is expected, don’t get a bigger space than you need; however, if you have plans to hire in the future, you should take those plans into consideration. Not all landlords will agree to subletting, so you want to make sure your space will work for you during your term or that your lease has language outlining your ability to find a sublet.

There is no magic number for how long it will take to find a space. Sometimes, there are complications that turn an easy, straightforward lease into something difficult and frustrating. However, when everything goes as planned and transitions between spaces move smoothly, the amount of time needed to find a new space depends mostly on the size you are looking for and its availability in the market.

After touring spaces and receiving space evaluations and test fits, if you are still interested in a property you will enter the negotiation process. This process can be easily segmented into approximately 4-5 steps: (1) letter of intent, (2) request for proposal, (3) evaluate proposals, (4) counterproposals, and (5) lease execution.

Letter of Intent (optional): a letter of intent is a document sent by either an prospective tenant or landlord to the other party after key terms have been discussed but before an official request for proposal is sent. It reiterates the key terms that have already been discussed. Depending on the language, this letter can be legally binding or not, so you should consult a lawyer and your agent before sending any letters of intent. Not all lease negotiations require a letter of intent, if the deal is expected to be very straightforward, there is really no need. As a matter of fact, most small business deals do not require a letter of intent and move straight into requests for proposals.

Request for Proposal: a proposal is often composed as a formal letter that outlines the terms of the lease. The first proposal marks the beginning of negotiations. Both the landlord and tenant will want to negotiate the best deal in their own interest. You do not need to accept this proposal, most landlords expect to receive a few counterproposals. Some terms are negotiable and some are not, but you will not know until you ask in the form of a counterproposal.

Evaluate your proposals: ideally, for leverage purposes, you would want to request proposals from a few different buildings. You want to have multiple options. Even if there is one you are particularly interested in, it is wise to have a back up or two; not only to pressure your desired building but, also, in case, that lease falls through. Plus, it never hurts to see what you can get from other buildings. You want have a decent understanding of the market and what your budget can really get for you in different spaces.

Counterproposals: a counterproposal should be sent to those spaces that you, as the prospective tenant, are truly interested in pursuing. They are, usually, sent to the landlord’s broker and they will discuss it with the landlord. A first counter should be the best deal for you within reason. You don’t want to go so low that the landlord does not take you seriously. The landlord will, also, most likely not accept your first counter. It will likely take a few counterproposals sent back and forth until you and the landlord can come to an agreement on terms. Once there is a meeting somewhere in the middle that both sides can agree on, it is time to send the lease to the lawyers to make sure that all the terms that were negotiated are covered in the language of the lease.

Execution of the Lease: an executed lease is one that has been signed by all the required parties. The execution of the lease marks when the lease is legally binding. The execution date is the date on which these signatures are completed, not to be confused with the commencement date which is the date on which the lease term begins.

Construction

During the proposal stage a prospective tenant should have test fits made outlining a simple floor plan that is uniquely created to their business. If your space program states that you need 10 work stations and 1 executive office, a test fit will tell you if all those aspects can “fit” into the space efficiently.

Test fits are, normally, put together by the building’s architect and consist of two meetings. In the first meeting, you will sit down with the architect and create the initial test fit according to your space program.

A test fit is a tool to help you narrow down your search further and only focus on the spaces that you believe will aesthetically accomodate your space program. You will then go to those buildings for a second meeting and make minor revisions.

During the leasing process, you are likely to see both a test fit and a floor plan; therefore, it is necessary to understand their differences. A floor plan is a much better representation of how the office will look and feel. Floor plans are created by space planners or architects and outline work flows, furniture layout, equipment placement, intended atmosphere, etc. The level of detail and the purpose are the greatest differentiating factors between the two plans. A test fit is a simple representation that shows that the space program can be accomodated. A floor plan is a far more complex representation that shows how the office can meet the tenants’ aesthetic and atmospheric needs, as well as; provide details, such as image and materials, and efficiencies, such as circulation patterns.

There are many factors that effect the timeline of a construction project. These factors can include, but are not limited to, permitting, general contracting bids, build out characteristics, viable communication between parties, and the condition of the existing space (shell condition or a renovation).

The buildout of a space is the tenant’s opportunity to create an office that is unique to their company’s image and needs. At the right price, so many aspects of a space can be constructed upon. However, buildouts can be limited by building policies, budgeting, timing and architectural limits. Before construction can begin, all of these limitations will be taken into consideration and assimilated into the blueprints. Beyond these limitations, a tenant is free to shape their space as they see fit. The following are a few projects that can be included in a buildout:

  • Walls- construction/destruction of walls, reception areas, work rooms, break rooms, executive offices
  • Partitions- suite perimeters, demising partitions, glass partitions
  • Floors- raised/lower floor areas (building permitted), tiling, carpeting
  • Ceilings- ceiling tiles, lighting, fans
  • Doors- entrances, secondary exits, work/storage rooms
  • Window treatments- tinting
  • Furnishing considerations- storage, shelving
  • Plumbing- coffee bar, private restrooms, kitchens
  • HVAC- server cooling, thermostat controls, air distribution systems (air supply, exhaust air)
  • Fire Protection- smoke detectors, fire alarms, fire suppression/sprinkler systems
  • Electrical- electrical outlets, telephone/communication outlets, lighting
  • Signage- company signage, individual office/room signage

A valid permit must be procured before any construction can begin. To determine whether or not your buildout will require a permit, you should consult with an architect. It might, also, be useful to speak with a general contractor who will be able to provide insight into the types of construction that you are looking to implement into your space. If a permit is required, the first step is to have the construction documents finalized and prepared for the DCRA (Department of Consumer and Regulatory Affairs) Permit Center.

Once the construction documents are ready, go to the DCRA, submit your documents and you will receive what is called a Q-Matic ticket. This ticket should be processed within 48 hours. Once a Q-Matic ticket is processed, your permit moves into a review period. During this period, the DCRA reviews the aspects of the construction project and ensures that they are in accordance with any outstanding laws and building requirements. A review period can take anywhere from 30 to 60 days, depending on the size and complexity of the project. Ensure that a permit is given enough time to go through the system before construction is forecasted to begin. No permit, no construction.

When a permit is approved, the permit holder will receive documentation confirming so. It is the law to display this documentation at the construction site. The DCRA states that the permit should be displayed so that it can be seen relatively easily from outside the construction zone.
When a permit is awarded, it is only awarded for the projects outlined in the construction documents. Any construction not included in the documentation, will have to be put through the permitting process separately and will, likely, be a serious setback to the construction timeline. Therefore, it is very important for the tenant to ensure that their desires for the space are reflected in the construction documents.