Entering into a new commercial lease can be simultaneously exciting and scary. Ideally, start looking for space one year before you plan to move in because if a remodel is necessary, the process could take anywhere from about six months to a year. Most landlords will want rent payments to begin shortly after the lease execution, so a compromise may be necessary. A real estate broker and/or project manager can facilitate this negotiation on your behalf.
Once you’ve identified one or more spaces you’re interested in, you’ll develop a program to identify your ideal workflow that maximizes functionality.
Adding any new walls or changes in the electrical or mechanical infrastructure will require a permit. The permit process usually takes about three months including the time for architectural services required for the permit for an interior remodel. Construction can begin once a permit is obtained. Construction on a relatively small interior project (approximately 4,000 square feet) may take anywhere from one month to six months, depending on the scope of work. If everything within the space is demolished and re-built from scratch, the construction timeframe may total nine months for a space this size.
When permitting a project, most municipalities will require that existing code violations be corrected which may add cost. The architect or designer will be able to estimate construction costs at the beginning of the project before you commit to a lease. Once the design is partially complete, the architect may ask a general contractor to provide a more accurate cost estimate of the project, which most will do for free in the hopes of being hired for the project. When the construction drawings are complete and submitted to the building department, they are given to one or more general contractors to provide a hard bid, a process the architect and project manager help facilitate. Additional costs, called change orders, may arise, so it is recommended to add a 10% cushion to the original bid.
Landlords often provide a tenant improvement (T.I.) allowance which can be applied to your remodel costs as an incentive for you to lease their space. This allowance is actually more like a loan, as the money fronted to you at the beginning is tacked onto your monthly rent. It is not uncommon for landlords to offer an allowance anywhere from $10 to $25 per square foot for second generation space, or as much as $50 per square foot for shell space in which much of the allowance must go towards mechanical and electrical infrastructure. An allowance is more common when it is obvious a space requires a remodel, however, if a space is in “move-in” condition, then an allowance may not be offered.
|ACTION CHECKLIST FOR SELECTING AND
PREPARING THE NEW FACILITY
|✔ Develop facility / site criteria.||12 months|
|✔ Select a commercial real estate broker (in most cases).||10 months|
|✔ Identify properties that best meet your requirements.||8-10 months|
|✔ Tour buildings.||8-10 months|
|✔ Narrow the alternatives||8-10 months|
|✔ Begin the space planning process.||8-10 months|
|✔ Develop a Request for Proposal(s) and distribute to landlord(s) and architect(s)||6-8 months|
|✔ Select property and request leases.||4-6 months|
|✔ Architect performs test fit to ensure space program and workflow is consistent with requirements||4-6 months|
|✔ Analyze and evaluate proposal responses.||4-6 months|
|✔ Ensure any negotiated lease changes have been incorporated into document, sign leases||4-6 months|
|✔ Check lease for accuracy, send to attorney for review.||4-6 months|
|✔ Contact your insurance company to add the space to your policy.||3-6 months|
|✔ Finalize space plan and interior color selections||3-6 months|