The Leasing Process - An Overview - Part 1 - Size & Zoning Requirements
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We deal with a lot of people with various levels of experience leasing commercial property. Some people are going out on their own for the first time, others are with an existing company, but may be responsible for the leasing process for their first time, while others have been through the process and are competent in the process. Another factor at work, although rarely discussed, is how to work with commercial real estate agents. We're going to break it down to its essential elements in a series of blogs to help those people who need a little refresher.

The leasing process starts with an identified need on the part of the prospective tenant.

Identifying Space Size Requirements.  What we often find is that  the tenant may not know entirely what they need in terms of size (square footage) or zoning.  In all fairness, several different sizes can work for any given tenant depending on the floorplan.  For instance, some uses can use mezzanine storage which can be built in an existing space (if not already available) and other uses cannot adequately use mezzanine level space.  Also keep in mind that not all realtors advertise mezzanine space the same since mezzanine space is generally perceived to be of less value as is basement space.  A space may have some mezzanine available but not included in the "rentable" space calculations which will help when calculating NNNs or CAMs.

Note:  Depending on the use and location (particulary in warehouse and retail applications), mezzanine, second floor space, and basement space is not of equal value to street level space.  In office applications, the same may hold true depending on whether elevators are available.

Do You Have Flexibility On Your Floor Plan?  Also, another thing we see is a company stating a certain square footage need, but may not realize that larger spaces may be more affordable.  To restate that, too narrow a search may not reveal better values since the cost per square foot often goes down as the rentable size goes up since smaller spaces are generally less available / in higher demand and can command higher asking prices.  With that in mind, we customarily perform searches from 75% of the target size to 200% of the target size to see if there are better value spaces available within that range.

Note:  When performing searches to find "best value" remember to add in all costs of that space, not just the base rent.  For example, if the rent per square foot or per rentable square foot is significantly less after adding additional rent (e.g.; NNNs or CAMs) and utility costs, make sure that "all in rent" still represents a good deal for you.

Clear Height Implications.  In many industrial applications, users can high stack their products and the clear height is an important factor (with adequate racking, they can put more product in a smaller foot print), but make sure you know the building codes applicable to stacking.  Depending on your product and the stacking height, the local fire marshal may require the sprinkler system to be modified to provide adquate coverage or the stacking height may be limited.

Note:  Stacking Height may trigger additional sprinkler requirements - make sure you know if additional requirements are going to be imposed before signing a lease.

Zoning Requirements.  The various political entities have different zoning requirements, sorry.  We deal with this issue frequently and there is no single answer for the entire Treasure Valley.  Boise is differnt than Meridian, Nampa, Eagle, Garden City, Star, Middleton, Mountain Home, and Caldwell.  In one area, your use may be either allowed straight out, or be allowed based on administrative review, or upon application, hearing, and issuance of a conditional use permit (CUP), or straight out disallowed.

Note:  Most communities have their zoning requirements posted on their web site.  In those cases where there is any question, set up a meeting with the city's planning & zoning help desk where you can speak directly with city representatives.  Keep in mind, though, that uless it is in writing, those opinions are just that.  It doesn't happen often, but there have been instances of miscommunication between tenants and help desk personnel. 

Parking Requirements.  For call centers, above-average parking requirements limit available properties.  The same holds true for parking of delivery vehicles or parts and equipment and food service (restaurants).  Make sure you identify any special needs to your realtor.

Note:  If you are in the food service industry (restaurants) or are looking for a call center or are a retailer looking for designated parking, remember that in multi-tenant centers, most parking is in common and owners may resist designated parking out of necessity.  Be sure to address those issues early in the discussion.

Addressing Unresolved Issues.  If you've found a great location, but have a few unresolved issues, tell your commercial realtor to issue a Letter of Intent (LOI) to the building owner and ask for a limited amount of time to resolve those unresolved issues.

I know this is a lot to absorb in a (not too) short blog.  Feel free to contact us directly to discuss these issues further.


Scott Nicholson

Boise Valley Commercial Real Estate, LLC



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Posted by Scott Nicholson at 8/4/2008 7:59 AM Permalink | Trackback
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