- Total Rental Amount – prior to signing a new lease, the total rental amount will be negotiated.
- Operating Expenses (pass throughs or NNN’s) – The new lease will be either Fully Serviced or NNN. In a Fully Serviced lease, the tenant will be charged operating expense pass throughs. In a NNN lease the tenant pays for OPEX and RE taxes separately from the base rental rate.
- Tenant Improvements/Construction Manager – In a new lease the tenant should negotiate for a tenant improvement allowance so the owner pays for most (if not all) of the buildout costs. Space plans should be close to finalized and a construction cost estimate should be solicited in order to understand potential buildout costs prior to lease execution. In addition to the construction costs, factor in any potential overages or construction manager fees. Often the building will charge a 5% construction management fee. Finally, costs of architects, permitting and a contingency should be incorporated to understand the total construction budget.
- Voice/Data Cabling – I’ve heard that voice/data cabling costs close to $300/drop and each workstation will need 2-3 drops depending. Also server room relocation costs should be considered.
- Audio Visual/Security – costs differ for every company, but costs for TV’s, projectors, drop down projector screens, paging systems, alarm systems, keycard access, etc can add up.
- Furniture – whether a company decides to re-use or buy new, there will always be some furniture costs
- Architecture/Design Fees – these costs should be paid with the negotiated tenant improvement allowance, but for a space plan and work letter the fees are $0.15-$0.20/sf and construction drawings are $2.00-$3.00/sf. Design fees vary but will be in addition to the space plan, work letter, and construction drawings.
- Movers – I build in a $2.00/sf moving allowance to my analysis
- Attorney/Consultants – to review and provide advice on lease language attorneys generally cost $1,500-$2,500.
- Downtime – the time value of money can be the most expensive cost!
You might notice that I didn’t include brokerage fees :). The landlord should pay your tenant representative and if they don’t, it will still be worth having one.