UNICORN WORKPLACE
LEASING PITFALLS GUIDE
August 15, 2024
Shane Minnis
Unfortunately, the leasing process usually takes longer than many expect…
I’ve mentioned secrets your landlord doesn’t want you to know… well… this is another one of those “gotcha” areas.
Landlords know these pitfalls well and they’ll use them against you – even call your “bluffs” at the negotiation table.
Be sure to give yourself plenty of time to negotiate your next lease. Like unicorns… your unicorn workplace doesn’t exist in the wild, it will take time to bring it to life.
As a general rule of thumb – Nine (9) to Twelve (12) Months is considered a healthy timeline to give yourself to negotiate your next lease and here’s why:
1) Finding Space
Your situation and how you define your unicorn workplace is unique…
Even when it appears there’s lots of space available – available signs can be deceiving… many times signs are left up simply to generate leads or can become outdated. Also, be prepared to come up empty handed because many spaces won’t be suitable for your needs… for a variety of reasons.
Whether it’s a “Landlord” or “Tenant” market… the market is fluid. Although leases typically expire at the end of the month, so new space usually makes its way to market accordingly.
Finding exactly what you want takes time – especially if you prefer keeping costs low and minimizing leasing timelines by sourcing “as-is”, move-in ready space…
The more time you give yourself here, the better – Two (2) to Four (4) Months will provide you a decent window to explore options.
2) Due Diligence
It’s highly recommended that you do your due diligence once you’ve identified your unicorn workplace(s)…
Why? To uncover opportunities and mitigate risks – avoid costly items by evaluating the condition of the roof and HVAC, verify critical infrastructure (power, clear height, data/com, etc.), determine the condition of delivery, and any needed tenant improvements.
Depending on the scope – having One (1) to Four (4) Weeks is advisable so you’re not rushed.
3) Lease Negotiations
Lease negotiations in commercial real estate are typically broken up into two parts:
Part 1 – LOI: Non-binding letters of intent are negotiated first and focus on the business terms of a lease to save time and money for all parties before engaging an attorney to review the actual lease document – the legally binding agreement. Depending on the motivation and urgency of both parties this usually takes One (1) to Two (2) Months to negotiate.
Part 2 – LEASE: Once a LOI is mutually agreed to then the actual lease document gets drafted and reviewed. Again, depending on the motivation and urgency of the parties involved this usually takes One (1) to Two (2) Months to finalize. Although delays are common during holidays…
4) Construction
Finding the perfect unicorn workplace that’s move-in ready is like finding a needle in a haystack…
It’s possible but it’s safer to assume custom improvements will be needed. Depending on the scope of work required to customize space to fit your business the construction process consists of:
- Planning – Designing and producing construction drawings. This usually involves an architect. Selecting vendors, subcontractors, etc. to check the plans and produce competitive bids.
- Permitting – Once construction drawings are produced then they’re submitted to the city for construction permits. You’re at the mercy of the city and any existing backlogs here…
- Construction – Construction typically kicks off once construction permits are approved. Delays commonly occur due to availability of subcontractors, supplies, errors & miscommunication, permit inspections, encountering surprises/unknowns and change orders.
Keep in mind none of the above will start until there’s a signed lease. As you can imagine there’s a lot of moving parts and parties involved in the construction phase which can easily range from One (1) Month to Twelve (12) Months or more – especially if there are unique or specialized needs.
5) Specialized Needs
Specialized needs and requirements can greatly impact the number of opportunities you may have in the market and ultimately how much leverage you have when negotiating your next lease.
The following list is meant as a quick reference, but we recommend discussing your unique situation and specific needs for more tailored insights.
- Power – Many buildings have around 2,000 amps of power (total to the building). Which is then divided and distributed to the spaces that make up the building. If you require 1,000+ amps then you’ll likely fall within the “specialized” category with fewer options in the market.
- Clear Height – Many buildings have clear heights between 12’ to 17’. Anything outside of this will be more difficult to find.
- Specific Location – The narrower the geographic location you’re willing to consider, the fewer options you’ll have.
- Zoning – If you have a unique use that’s very specialized or uncommon then this could cause difficulty finding zoning that will allow or conditionally allow your use.
- Lease Term – Many landlords prefer 3-to-5-year terms for small and midsize leases. For large leases 5-to-10-year terms are usually preferred. Not to say shorter or longer leases can’t be negotiated, but there will be fewer opportunities.
- Specialized Equipment & Infrastructure – If you have specialized equipment or infrastructure needs such as custom labs, wet labs, clean rooms, vivarium, SCIF, etc. then there could be a combination of high construction & installation costs, long lead times, complex government inspections & approvals required that will greatly impact available options and opportunities.
If you want to get a great deal and maximize ROI on your next lease… be sure to give yourself plenty of time!
Nine (9) to Twelve (12) Months is generally considered a healthy timeline to give yourself unless you have unique or specialized needs.
Dedicated To Helping You Get A Great Deal + Maximize ROI On Your Next Lease,
– Shane Minnis
P.S. It’s FREE but space is limited to ensure 5-Star quality service – we recommend joining ASAP!
Not Ready To Get Started Now…
It’s OK.
We’ve had plenty of clients that needed some time…
If that’s you, then get Free Tips, Insider Insights & Updates on Silicon Valley CRE via email through our MinnisCRE Newsletter:
