If you work in commercial office investment sales or leasing, there are a few different facts to watch when it comes to converting current listing stock and property improvements. Some properties are far easier to sell or lease in your town or city, and you need to know why that is so.
The answer to the equation may be locally or property oriented, so talking to the investors and tenants in the market will help keep you up to speed when it comes to ‘priorities’ in selecting a property to market and lease. There are also some specific facts you can look into in any office property.
Office Property Checklist
Here are some facts to investigate regards office property improvements, services and amenities:
- Floor plates – In an office building the size of the floor plates will have an impact on the ideal fitout design and the type of tenant that can occupy the premises. Small floor plates are only useful for small tenants with basic office configurations and needs; any floor plate under 500 m2 is not generally attractive for a corporate tenant to lease or occupy. In any high rise building it is best to lease floor plates of over 500 m2, with a particular priority focus on around 1000 m2 upwards. Most corporate businesses like to centralise business operations to one location, and not spread staff and departments over multiple floors or buildings. That is where the size of the floor plate becomes a priority. It should also be said that the commissions and fees for agents on the larger buildings are generally easier to obtain and larger by amount.
- Lettable space – Understand the lettable space coming up in the building to lease, as that space may have an impact on tenant expansion, relocation, and contraction. When you have a good tenant in a building it is best to keep them for the long term, and give them the lease alternatives that they require at the right time.
- Lease expiry profiles and dates – Leases eventually come to an end and the pressures of options, rent reviews, and renovations can also apply in the premises. All of these issues are triggers for critical dates and tenant activity. Review all leases in a property to ensure that you really understand the lease documentation and upcoming critical dates. Take action early with those dates so you do not put the tenant mix or rental income under any pressure.
- Air conditioning – Most tenants today want flexibility to operate their business for extended hours and on weekends. Seasonal conditions can put the pressure on the tenant’s use of air conditioning. Consider how a building will provide convenient air conditioning to suit tenants, and how the cost recovery for that use will occur.
- Electricity – Every tenant will need electricity however an uninterrupted power supply (UPS) is almost a standard addition to the power circuits in modern office towers. The same can be said for back-up power and electricity generators in high rise office buildings. If you have either of these systems installed in your office buildings they will be a leasing feature to talk about.
- Energy rating or efficiency – Some buildings today have an energy efficiency rating as a result of design and energy efficiencies; they achieve that rating by using outside air, natural light, and cost savings devices. The energy rating process has different names based on the property type, your location and country. If your building has energy efficiencies as a result of design and construction, use those facts in property promotion.
- Lighting – Most corporate tenancies today would want to balance the convenience of natural light with energy efficient internal lighting systems and that is where the design of the fitout becomes important. The lighting efficiency of a building is a marketing advantage to the corporate tenant with their clients. Let’s face the facts here; energy is getting more expensive and natural lighting is free promoting a clean environment. Tubes, globes, and lighting appliances will provide savings if they are carefully selected for the design of the fitout and property layout. The architect for the tenant fit out design can build efficiencies into the lighting system within the building and within the tenancy.
- Security – Internal security can be a big issue for many tenants today. That security can be provided around the perimeter of the building, at the doors of the tenancy, and internally to the tenancy. Many office buildings today offer advanced security alternatives as part of a security mainframe; that security system can be a leasing advantage with some corporate tenants. It should also be said that the provision of a security system should be a recoverable outgoing from the tenants based on usage.
- Access – How can tenants and customers access the building during office hours and outside of those hours? How convenient is the access to the property and what professional business image does the building convey? The access to a building does have an impact on market rental so take care to ensure that the correct levels of presentation apply at the access points. Added features such as directory boards, lighting, lift frontages, and common areas will also have an impact on image as part of property access.
- Outgoings – When you look at a particular lease and the particular tenant in occupancy consider the outgoings costs that apply per square metre. The types of rental in an office building vary between net rent and gross rent. The outgoings will have an impact on both rental types. It is important that the property to be leased and the outgoings that apply our within industry standards for the property type.
- Communications – Most tenants today are quite discerning when it comes to communications capabilities and systems to support business occupation. Communications in an office building will cover telephone, data, Internet, cabling, antenna systems, mobile telephone systems, and fiber optic networking. Understand what systems are available within the location and for the particular building.
- Services and Amenities – Some office buildings and particularly the newer ones will offer convenient and reliable access to services and amenities. As the levels of market rent escalate, so does the expectations of tenants when it comes to the convenience of services and amenities to use and connect into. How does your building compare to other buildings in the location when you consider this category?
- Service core areas and common areas – Both of these areas impact occupancy in an office building. The service core will usually be located central to the building (or on a back wall) and contain the supply lines, risers, and services for the tenant to tap into. Understand how the tenant can connect into the building services grid particularly when it comes to electricity, water, and gas. The communication systems for the building will also be in the service core. The common areas on each floor will also allow the tenant to move around efficiently given other tenants on the same floor in the same building. The design of the common area therefore becomes important to maximizing occupancy and improving market rentals.
- Building specifications and fit-out design – Every office building should have particular standards and specifications when it comes to fitout design. That means every tenant should follow the landlords predetermined rules and specifications when it comes to constructing fit out and maintaining presentation. Over time those standards can help with maintaining property presentation and the stability of market rentals.
- Other tenants – Most tenants today like to know who is in occupancy elsewhere and within the same building. Sometimes there are conflicts between tenancy types when it comes to tenant operations, hours of operation, presentation, and customer visitations. Remove any conflicts as soon as possible in any commercial office building through refining the tenancy mix and establishing a tenant retention plan. Understand the tenants that can improve the property over time and remove those that provide no long term benefit to the landlord or the tenant mix.
So there are plenty of things to do here and control as part of specializing in commercial Office Property. When you have all the facts relating to a particular property, it makes the leasing process and the sales strategy rather easy.