I run a website that lists office space. So I end up seeing a lot of office space. One thing I know about San Francisco is that finding quality space in an amazing location that is move-in ready and at discount to market rents is very hard to come by.
I came across this space today (actually it came to my inbox). If we didn’t have our own nice below market space I’d be hopping on this one.
Here’s the description I received:
We are marketing that 4,052 square foot space for sublease. This is a great space with north-facing views. Furniture can be included. Current layout is 18 low-height work stations, 5 private offices and a kitchen/break room. This is a stand-alone, non-shared space; our client’s other space is on separate floors.
The remaining lease term is through May 2014. The asking rent is $39 per square foot per year, fully serviced, or about $13,000 per month – well below the landlord’s $50+ asking rent.
Floor plan and pics:
Team Spaces at 590 Madison – Midtown Area
590 Madison Avenue, New York, NY 10022
750 sqft | Per Person Pricing
Listing ID: 265016
Great for businesses seeking plug and play office space to occupy quickly. Flexible leasing terms available.
-AV equipment, high-speed internet access, photocopiers and printers.
-All reception and admin services.
-Customized signage and internal office branding.
-Meeting rooms, breakout areas, lounges, cafes and kitchens.
-Grade A working environment.
Powered by Rofo
A very common question with a simple answer: between $500 and $1000 per person.
I know it doesn’t sound very scientific but this is based on renting spaces for Rofo for the last 5 years, 5 years as an office leasing broker, and reviewing thousands of lease comps over the years. I know too much about office space rents.
As with any expense in life, some will pay a little more and some will pay a little less. Some rents will include everything and some rents won’t include a thing besides the space.
And I realize office rents in New York City are not the same as Pittsburgh. That said, all markets offer a choice to tenants in terms of quality and price.
The more important question to ask is what you do in your space? We’re all doing some kind of work. The type of work will influence your choices and rent.
Here are some basic questions to ask (you and your colleagues):
Do you meet with customers?
If yes, then you want to be in a presentable space with easy access.
Do you drive to work or take public transit? Or both?
Typically, spaces near public transit mean higher parking costs.
Do you work normal business hours or round the clock?
If you’re a night owl you may want to consider a more secure space. That often means building security which means a fully serviced building with slightly higher rents.
Are you a sales team or are you an engineering team? Or both?
This dictates whether you need your own space, if you can share space, and whether or not you can get along in a open space or need private offices. The more a space is built out the more the rent (usually).
Does your business have a history?
If you’ve leased space before there’s a good chance this means you have some future visibility. It also means you have a little financial credit. Credit will influence the kind of deal you can negotiate and how much money you must sink into a deposit. The deposit is also a function of how much, if any, a landlord has to spend to get you into a space. The more it costs the higher the deposit. One month of rent or less is great. Anyone who asks for 3 or more months is being unreasonable (unless they are spending a bunch on improvements and commissions to get you in).
How do you know what is right for you and your business?
At the end of the day, your rent shouldn’t exceed 10% of your overall business expenses (that includes payroll). If it does, you may want to think about finding cheaper space.
Share your thoughts with us.
Recently we’ve been getting a lot of questions related to integrating property listings on a corporate website. Rofo offers many built-in tools to help our customers publish their commercial real estate listings wherever and whenever you’d like. And a flexible, light weight, listings widget is one of those tools. Our widget offers a clean, simple design that integrates well with any site and, more importantly, it keeps your website visitors on your website.
Here’s a sample widget from a commercial property owner in San Francisco:
The size of the widget is easily customized and we offer a few versions depending on how you want to filter and display the data.
We can also provide you with the raw data if you’re interested in creating your own app. Our friends at World Business Chicago are doing some really innovative things with commercial property data, enterprise zone data, and other tax credit data.
Over the last couple of weeks, we’ve been rolling out an entirely new way for commercial real estate companies (and teams) to control their data, market themselves, their listings, and their real estate activity.
Companies (brokerage firms, property managers, commercial landlords, developers) can now create a home on Rofo that promotes their portfolio of buildings, their latest news and activity, and their team.
Company pages also serve as a listings management platform. Once a portfolio of listings has been added you’re able to easily manage and share both online and offline. Quickly print a professionally designed flyer for a tour handout. Power your own website with a listings widget. Export your listings in multiple formats to easily share with partners, executives, and other systems and websites that require listing data. Take full control of ‘building pages’ on Rofo with photos, video, amenity info, tenants, and descriptions.
With company pages you can easily manage your listing updates, add/remove/reassign team members to properties/listings, and invite other team members to join.
Team pages work the same as company pages. Most commercial real estate brokers work in teams and now Rofo provides a flexible platform to market your team’s expertise, activity, and latest news. Your network can keep up with your team’s updates by following your page (and eliminating the need to email blast your contacts with attachments).
And with team and company pages you can share listings and updates with anyone (they do not need to be subscribers to Rofo).
Please contact us anytime to learn more about promoting your company or team and taking control of your real estate.
Besides the massive amounts of rent and commissions generated by these social media giants for a few brokers and landlords, how else is the CRE industry benefiting?
I was asked this question by an institutional landlord yesterday who is no stranger to signing really big tech deals (Dropbox was one of their recent deals which started at 40,000 sqft during the first tour and ended up being 85,000 sqft – that is rapid growth).
But as we dove into this topic the question was less about why should they participate and more about defining a strategy to be active participants. How do you make it consistent, local and relevant? I’m pretty neutral on the whole social media ROI debate. Like anything in life, the returns are usually good when you commit and not do it half-assed. And, up front, you need to define the expected return and goal.
The role of Rofo, as I told him, is to help make it just a little more efficient. And provide a platform that enables professionals to organize and promote what they do. We link accounts so when you add an update on Rofo it also appears on Twitter, Linkedin, and wherever else those accounts are connected (usually Facebook). So for this landlord I asked what they do a lot of on a week to week to basis. The answer, of course, was update listings, tour brokers and tenants, and sign leases. All of those activities are marketable events on Rofo and really good Tweets. It’s similar to how the local restaurant utilizes their changing menu to add followers.
To the extent you can leverage your professional real estate activity as a reliable source of Tweets and updates you not only save a bit of time but hopefully answer the question “What the hell am I supposed to Twee?”
Sort of but not exactly. We got a call today from a brokerage customer today in New York City saying that they just picked up an exclusive for an amazing apartment near Union Square. They wanted to add the listing to their profile and have it automatically syndicated to Linkedin and Twitter. The problem was that we didn’t support this type of listing on Rofo or within our app for Linkedin.
We discussed it for about a minute, decided to just do it, and voila, you can now add your apartment listings to your Linkedin profile and Twitter. Here’s a shot of the new listing type on Linkedin:
And here’s a picture of this luxury pad:
We have some more serious product announcements coming next week (hint – we just signed our first customer in Spain).
No, I’m not talking about our company or website. I’m referring to the leasing term that inspired our company name. This article was published today on Pepper Hamilton, LLP’s site. If you’re in the market to lease commercial space (and you’re lucky enough to be working for a growth company that is actually growing) then you should get familiar with this concept as it can be really help you plan accordingly for future expansion. And make sure you hire a broker that knows how this works and how to structure an offer. And hire a good real estate attorney:
A right of first offer (ROFO) to lease is a contractual provision granting a tenant a preemptive right to lease additional space during its lease term. A ROFO is particularly useful in cases in which a tenant expects to grow during its lease term. When carefully negotiated, a ROFO can be beneficial to a tenant and not detrimental to a landlord.
A ROFO should require a landlord to present a tenant with an offer to lease any vacant space before it offers to lease the space to third parties. In some instances the parties agree that the ROFO will only apply to certain spaces (such as space that is contiguous to the tenant’s existing premises) or will not apply to space that is vacant at the time of lease signing (at least until it is leased and becomes vacant again). Once presented with the offer, the tenant has a set time in which to accept or reject it. The landlord may only offer the space for lease to third parties after the tenant rejects the offer or fails to respond to the offer during the period of time provided in the ROFO provision. The time period the tenant has to consider the offer is a point of negotiation. Landlords typically desire a shorter review period to avoid any delay in dealing with third parties. Tenants usually desire a longer period since the decision to take additional space is not always easy to make.
The terms of the actual offer will also be negotiated by the landlord and the tenant. For example, the landlord and the tenant may agree that, if additional space becomes available for lease, the landlord must offer that space (the ROFO Space) to the tenant on the same terms and conditions as the tenant’s current lease. Tenants usually desire this arrangement since they have already approved the terms of their existing lease. In addition, this would mean that the term of the lease for the ROFO Space would be coterminous with its existing premises. Generally landlords do not like to be bound to the current lease terms for ROFO Space because as time passes, the existing lease terms may be more favorable to the tenant than what the landlord could get from a third party. Likewise, if the term for the ROFO Space will be coterminous with the existing lease term, then the landlord could have to forego a longer-term lease with a third party in exchange for a shorter (coterminous) term with the existing tenant.
If the parties are going to use the existing lease terms as the basis for any ROFO, the landlord should insist that those terms will only apply if the tenant exercises its ROFO right in the early part of its existing term or, alternatively, that the existing term and the term for the ROFO Space will both be extended for some minimal term. Other adjustments to existing terms of a lease with respect to the ROFO Space are also warranted. For instance, if the term of the lease for the ROFO Space is going to be shorter than the term for the existing premises, the landlord has a shorter period of time to recover concessions (such as tenant improvement costs). Accordingly, if the ROFO Space term is going to be shorter than the original term those concessions should be reduced to account for the shorter term.
In the alternative, landlord and tenant may agree that the landlord’s offer of ROFO Space to the tenant will be same as that offered to a third party. Generally this arrangement is preferred by the landlord as it prevents the existing tenant from taking the space at what the landlord might believe is a below-market rate. In this case, the landlord gets the same deal as it was willing to do with a third party. However, this may not be acceptable to a tenant because it will then likely have two or more separate spaces with different lease expiration dates. The tenant should insist on making the terms of the lease for the ROFO Space and the existing premises the same. As such, the tenant should be willing to adjust the economic factors with respect to the ROFO Space to account for the shorter term. The tenant should also be willing to agree to extend its existing term, if needed, to ensure the landlord has an agreed to minimum term for the entire space if the ROFO Space is being added to the existing premises later in the existing lease term.
A third alternative for the parties is to provide that the ROFO Space will be leased at the fair market terms. There are many ways to arrive at fair market terms, such as using appraisers and arbitration. However, a properly drafted ROFO avoids the need to use this alternative because a landlord should not be permitted to offer terms to the tenant which are then materially improved when offered to a third party following the tenant’s rejection of the offer. Once the tenant rejects an offer made by the landlord, the landlord should have to re-offer the ROFO Space to the tenant if the landlord concludes it has to make the terms more favorable to a prospective tenant, for example because it is asking for a rental rate that is too high. This procedure should effectively determine the fair market terms. Accordingly, a tenant should insist that the landlord be obligated to re-offer ROFO Space to the tenant if the terms change significantly. The parties need to consider the entire economic package, such as allowances and base years not just the rental rate, in order to be able to compare one offer to another. Typically, the parties agree that if the terms of a landlord’s offer to a third party are materially more favorable to the third party than those terms offered to the tenant, then the ROFO Space has to be re-offered to the tenant on such more favorable terms. The parties usually agree in the ROFO what is “materially more favorable” in terms of a percentage change in the economic package. In this case the tenant should expect to have a shorter period of time to accept those more favorable terms than it had when it received the first offer since at this point the tenant should have already determined the terms upon which it might be willing to lease the ROFO Space. This process should continue until the space is leased to the third party or to the tenant.
A ROFO should not be confused with a Right of First Refusal (ROFR), which permits the landlord to market the building/space to third parties during the lease term, without first offering it to the tenant. Typically, with a ROFR the landlord finalizes its deal with the third-party tenant before it has to offer the same deal to the tenant. The tenant is then given a set time in which to accept or reject the offer. Landlords prefer ROFOs over ROFRs because ROFRs deter third-party interest as they leave open the possibility that a third party might spend valuable time and money negotiating a deal only to have the tenant swoop in at the last minute and take it.
ROFOs can be mutually beneficial to landlords and tenants, if drafted carefully. When negotiating a ROFO, it is important for both parties to understand what is important to the other party and to be flexible so that each party’s goals can be achieved.