by George Pino

Lease is Expiring

I receive calls like this almost every week…. “Hello, my lease is expiring and I need a new office space” or “Hi, we’re moving our company to Los Angeles and we need new office space.” 

Inevitably, when I inquire about their timing they say they’re in need of a new space in one or two months. Although that time frame is possible it brings difficulties. A big misunderstanding among first-time commercial lessees, as well as many experienced lessees is that a commercial space can be found, negotiated, and leased within a couple of weeks.

The reality of a commercial lease is that it can take much longer. Even if the agent was to find the perfect space the next day, it can take one to two weeks just to setup basic terms and get a draft lease out for review. A lease for a commercial space can be anywhere from 25 to over 100 pages in length.

A tenant’s attorney will first have to review the document and make any necessary changes over 2-5 days. The lease will then have to go back to the landlord’s attorney for review, which will take a few days, and if they accept everything then a finalized lease will be drafted (another day or two).  So even if you find the perfect space immediately, it will take upwards of 3 to 4 weeks to get the lease finalized. 

The Perfect Space

However, rarely does a prospective tenant find “the perfect” space.  What typically happens is that an agent and the tenant will spend a couple of weeks touring potential spaces, find one that is suitable in size and location, then negotiate the lease. Tenant improvements are common, adjustments that a tenant will make either to personalize or optimize the space for their use. These improvements can take anywhere from one week (carpet and paint), to 6 months or more, especially if the tenant’s use is specialized (medical, dental, therapy, call center, etc…). 

Some things for a tenant to keep in mind when conducting tenant improvements are:

1) High rises typically take longer due to fire/life safety systems and review/approval;

2) Most reputable landlords will pull permits, so even a small change can take weeks;

3) The cost can be substantially higher than comparable residential upgrades; for instance, commercial grade carpeting is designed to withstand high traffic, and even standard commercial carpeting is as expensive as high-end residential carpeting.

4) Although it may look easy on the surface, sometimes a minor change can complicate the timing and/or cost of a tenant improvement. For instance, although removing a non-bearing wall in an office may seem easy, it may trigger having to redo the suspended ceiling, new carpeting, moving ceiling lights, re-configuring the A/C vents, and if there are sprinklers, re-configuring the sprinklers. What one thought was a quick wall removal, can snowball into weeks of work (including inspections), and may costs tens of thousands of dollars.

So, what is a tenant to do. First, find an agent that is familiar with the local market and can guide you in finding the right space for your needs. Begin your search at least 4 months, preferable 6 months out, and if you have a larger space (over 10,000 sq. ft.) you may want to begin your search 9-12 months out, especially in tight markets.  

Finally, have all of your ducks in a row: financials, attorneys ready for review, a construction manager if you will require tenant improvements etc….

With this time frame and the right team behind you a tenant can alleviate much of the stress of finding a new space for their business.