Articles About Commercial Real Estate

I have to say when I was looking for a space in San Francisco to open up my business, it was a bit overwhelming. I felt like little red riding hood battling the big bad wolf. Every space I drove by had a big bad realtors sign on the property. Most of whom never called me back so I could view the spaces listed. I knew exactly what I wanted, it was a matter of "getting in" the space and into the circuit of agents to find the proper location. I was actually very lucky when I did get a hold of an agent because he was great. I know this is not the norm, I have heard some horror stories. Even though my agent was extremely helpful, I did most of the leg work on my own.

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I am one of the former co-owners of Flicka Boutique on Fillmore Street in San Francisco.  We opened our boutique in 2004 and at the time it was quite difficult to find a space. We decided to use a few different brokers to make sure that we saw all the available properties in our target neighborhoods and once we determined the one neighborhood we were interested in, we worked exclusively with one broker.

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Oftentimes, the first item I coordinate when a client hires me to help them move into their new space is their Internet connectivity.  Lead times varies from 4-6 weeks depending on whether you're signing up for DSL or T1 line.  To be sure, there are multiple vendors to choose from but I always advise them to sign-up with someone who's recommended by their peers.  When I call a vendor I can more or less tell if they're going to provide good customer service by how fast they respond either via email or a phone call.  We're all "connected" in so many ways & forms that a quick email or phone call should be a no-brainer. 

You hear a lot about new high rises and their green construction practices but it was refreshing to read this article in the SF Business Times that details existing buidings that are making an effort to be LEED certified.

Existing buildings the next item on green agenda
San Francisco Business Times - by J.K. Dineen
Spencer Brown


As developers market their glassy new towers to attract tenants with greener-than-thou credentials, owners of downtown's
aging office highrises are looking at how to jump on the sustainable-is-sexy bandwagon.

This week the first of those buildings, 100 Pine St., was blessed with "existing building" certification from the U.S.
Green Building Council's Leader in Energy and Environmental Design. It marked the first multi-tenant existing building
in California to receive the LEED certification.

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I was inspired after reading this article in the SF Chronicle. So many times I saw an old office get gutted with all materials getting hauled off to the dump. Now many of those materials, including the carpet, can be recycled or donated. This article suggests some great resources.

Ellen Raynor doesn't have a problem getting 100,000 pounds of used carpet in the door of her warehouse each week.

It's getting it out the door that's the challenge.

Raynor is owner of San Francisco Carpet Recycling, an 8-month-old company that collects, sorts and finds buyers
for used carpeting. With carpet recycling still in its infancy, Raynor's is one of about 50 such businesses
throughout the country and the only one in the Bay Area.

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This newsletter can be found under the "Articles" tab at this URL - http://sfcommercial.com/paul-l.-picciani.html.  Call me at 415-834-3542 if you'd like to further discuss the current office leasing market for San Francisco tenants, which landlords are/are not flexible on rent & terms, and key items & timelines a prospective SF office tenant should keep in mind prior to starting a search process. 

This article from the San Francisco Chronicle gave a great overview of how to take the first steps in Greening your business. Hope you enjoy it!

Leah Oblinger had managed the San Francisco office of Barkley Court Reporters for two years when, in 2006,
she decided to turn it green.

Oblinger convinced her bosses to switch to recycled paper for the 10 million sheets they use each year.
When the landlord wouldn't pay for new, low-flow toilets, she had the company buy them. She arranged for
the firm's computers to be put on timers, so they turn off automatically at 7 p.m.

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This article can be found at http://www.urbansolutionssf.org/green/simple_steps.html but we liked it so much we thought we would post it here as well.  These are great things to consider for your current office location or if you're searching for a new commercial real estate space.

Simple Steps to Green Your Business

There are many ways to green your business. Here are some ideas to get you started:

1. Reduce, reuse, recycle and compost your waste. Reduce waste by purchasing products with less packaging

and using resources as efficiently as possible. Not sure what can be recycled and composted? Check out our

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25 terms you will likely encounter when going through the commercial real estate leasing process.

1. NNN (Triple Net) Lease: In additon to the monthly rent, the tenant is responsible for paying for their share of property taxes, insurance, common area maintenance, utilities, and janitorial service.

2. Industrial Gross Lease: In addition to the monthly rent, the tenant is responsible for paying for their utilities and janitorial service.

3. Modified Gross Lease: In addition to the monthly rent, the tenant is responsible for janitorial service in their space.

4. Full Service Lease: This is common in most muti-tenant office buildings.  In this type of lease all expenses (including utilities and janitorial service) are included in the monthly rent.  This is also common for most subleases and shared spaces.  However, it is common for the landlord to pass on any annual increases in expenses (as well as annual savings).

5. Rent Escalations: The amount a tenant's rent increases year to year. The most common escalation is based on CPI (Consumer Price Index) or a percentage of annual rent.

6. Tenant Improvements (TI’s): The interior improvements built within the space (premises).  Furniture, fixtures and equipment (FF&E) are considered separate from TI's.
   
7. Amortization: This relates to costs incurred by a Landlord that are passed on to the tenant in the form of additional rent during the term of the lease. This is very common with tenant improvements. The landlord may offer to amortize the cost of improving the space into the tenant's rental payments.

8. Plug and Play: Typically refers to a space that comes with furniture and telco wiring in place.  Very common with subleases and shared spaces.

9. Turnkey Build Out: Turnkey tenant improvements are typically provided by the landlord. The landlord and tenant establish the budget.  The landlord pays for the improvements and contracts with the builders directly.  The costs of the improvements are then included in the monthly rent.  This is different from a Tenant Improvement Allowance in which the landlord provides an allowance (loan) to the tenant and the tenant is responsible for the contracts and managing the buildout.

10. Work Letter: The work letter defines the specifications and estimates for tenant improvements (build out) in the space and is usually defined before a lease is signed and attached as an exhibit to the lease.

11. Load Factor: Also known as the Loss Factor, the Load Factor is the percentage difference between the usable square feet of a tenant's space and the rentable square feet.  For example, the building lobby and common areas are not part of a tenant's space however a tenant is typically responsible for paying their pro-rata share of these spaces.  A tenant's rent is based on the rentable square feet.  If a space is 3,000 rentable square feet and the Load Factor is 15%, then the actual space that the tenant occupies (premises) is equal to 2,550 usable square feet.

12. Common Area: The common area is the area of the building that is allocated to each tenant but is not directly
controlled by any one tenant. Some examples include the lobby, elevator, bathrooms, supply closets, and mechanical
rooms.

13. Usable Square Feet: The amount of square feet measured within a tenant’s space.

14. Rentable Square Feet: The amount of square feet that a tenant pays for.  It is the usable square feet times the building's load factor. 

15. Common Area Maintenance (CAM): Amount charged to tenants for expenses related to the maintain and upkeep of hallways, restrooms, parking lots, landscaping, etc.  It is always good to understand what is included in the CAM.

16. Base Year: A Base Year is established in most leases except triple net (NNN) leases. The Base Year (typically the first year) of the lease, establishes the base line for building expenses.  The tenant is then typically responsible for paying their pro-rata share of expense increases for each subsequent year.  These are typically minor expense increases.  It is good to understand the history of a building's expense increases.

17. Holdover Rent: This is the amount of additional rent a tenant must pay if they remain in their space after the lease term expires. Holdover Rent is typically between 150% and 200% of the normal monthly rent and is a negotiable term in the lease.

18. Sublease: Subleasing rights are determined in a lease and is something to consider carefully.  These rights establish the rules for renting a tenant's space to a third party (subtenant).  This is an important term and one that should be reviewed carefully by a professional (your lawyer or broker).

19. Assignment: This relates to assigning your lease to a 3rd party with the landlord’s consent.  This is an important term of the lease because it applies to a tenant's potential merger, acquisition and change of ownership.

20. Non-Disturbance: This relates to a tenant's right to occupy a space without risk of losing the space so long as they are not in default of the lease terms.

21. Right of First Offer (ROFO):  A tenant's right to make the first offer on a space to lease or buy.  With a ROFO, the Landlord must approach the tenant first with the particular opportunity.  The tenant has the right for an established period of time to make an offer.

22. Right of First Refusal (ROFR): A right, usually given by an owner to a tenant, which gives the tenant a first chance to
buy the property or lease a portion of the property if the owner decides to sell or lease. The owner must have a
legitimate offer which the tenant can match or refuse. If the tenant refuses, the property can then be sold or leased
to the offeror.
   
23. Renewal Option: The right of a tenant to renew (extend the term of) a lease for a stated period of time at a rent
to be determined (i.e. 9.5% of "fair market rent").

24. Relocation Clause:  This is any clause in the lease giving the landlord the right to move the tenant during the
lease period.

25. Pro-Rata Share:  Percentage of a building that is occupied by the tenant. It is usually based on the rentable or
leasable square footage measurement of your space compared to the rentable or leasable square footage of the building.