Class A and nearly all Class B buildings offer access 24
a day, 7 days a week, year round. Not all building services
will be available outside "building hours".
Conditioning. (See also "HVAC") comes in different
forms, but the choice in any one building will either be non-existent
or very limited:
to be found in newer buildings in which air-conditioned
was installed as original equipment.
supplied during building hours during the "air
conditioning season." (see below) offers the
tenant limited control over their environment - sometimes
not even a thermostat.
included in the rent.
a payment for after-hours use. Prices vary enormously,
from a low of about $25 to a high of $300 or more
per hour. This is not dependent on the size of your
space, but on the overall area that has to be turned
on in order to cool your space. In many cases a "Supplemental
Unit" is the best choice in these circumstances
to be found in older buildings that were built
the introduction of air-conditioning.
is usually controllable by tenant, and sometimes
hours are also controllable.
requires a unit situated in the tenant's space.
be air-cooled or connected to the building's supply
of chilled or condenser water. Additional charges
may be payable for chilled or condenser water outside
building hours and these may be high if the system
has to be turned on specially.
runs off electricity paid for by the tenant in addition
to the rent.
Units. Where a tenant is supplied with
Building Central air-conditioning during business hours,
it is often more economic to install a supplemental
system for after-hours cooling. Such a unit may be air-cooled
or may be connected (for a charge) to a 24-hour cooling
tower if one exists. (Many higher-end buildings do not
permit the unsightly venting required for air-cooled
Season. The time of year during which building
air-conditioning is turned on. Approximately May 15 to October
1, but varies from building to building.
If you are doing anything other than moving into a ready-built
space or asking the landlord to move a couple of walls about,
you will probably need one. The earlier in the process that
they are brought in, the better. (See "Space
You will need one to translate the terms and conditions
of the business negotiations into legalese. Make sure that
they are knowledgeable about commercial leasing, or you could
be buying trouble.
Commissions are normally paid by the landlord on commercial
Hours refers to the hours of the day during
which full building services are provided. While you
may be able
to gain access to your space 24 hours a day, 7 days a week,
you may receive heat/air-conditioning only during Building
Hours, the lobby may be attended only during Building Hours,
and the freight elevator may only be available during
Building Hours. Typically Building Hours are 8 a.m. to 6
p.m., Monday through Friday. Some buildings open on
Standard refers to a set of specifications set forth by
the landlord. It will apply to paint, carpet, doors, light
fixtures, ceilings, window finishes, etc. (see "Workletter")
of building refers to the age, construction quality, modernity
of building systems, services and maintenance standards of
a building. In practice people's opinion of the class of a
building may differ, and landlords are naturally inclined
to inflate the class of their buildings a notch or two. (See
below for a description of classes.)
A buildings are the top tier of buildings built and maintained
to the highest standard and with the most up-to-date systems.
Think chrome and glass, modern infrastructure, computerized
elevators, etc. (See "Class of Building.")
B buildings include most pre-war buildings, however
fancy, although some have been recently so thoroughly
they are now be promoted by their owners as being lower-end
Class A. Older, less fancy, in some cases a lot more
C buildings are basically everything that doesn't make
it into Class B. Think side-street (mostly), unattended or
only partly attended lobby, and generally more basic. (See
"Class of Building.")
is provided in many office buildings (and all Class A
buildings) as a service paid for in the rent. But many Class
B buildings now being promoted as office buildings were formerly
loft buildings and do not include cleaning in the rent. The
value of cleaning is about $2.50 per rentable square foot
per year. This can make what at first sight seems to be a
bargain actually rather less of one.
Period. This is a rent-free period prior to actual occupation
of the space allowed to the tenant to build out its space.
Obviously this only applies when the tenant (as opposed to
the landlord) is organizing the construction.
is not the same as still being in business after two years.
Your creditworthiness, in the eyes of a landlord, will vary
depending on market conditions and on his needs at the time.
Meter - see "Electricity"
Operating Escalation - see "Escalations"
capacity refers to the amount of power available in the
premises and is generally expressed in terms of watts per
square foot. A typical specification would be in the range
of 4 to 7 watts per rentable square foot.
Wiring. Built space will already be wired for electricity,
but possibly not adequately for your use. If you do not negotiate
for the landlord to carry out any further wiring, it will
be your responsibility to install it. Raw space will not be
internally wired, and again the wiring of the space will be
subject to negotiation as part of any Workletter, or will
be your responsibility as tenant.
Direct Meter. This way you pay what is on the
meter direct to the utility company.
Submeter. This way you pay the landlord
what is on the meter plus a percentage "handling"
fee (typically 10%). This is not always more expensive
than a Direct Meter, as the landlord of a large building
may be able to negotiate better rates than you can on
Rent Inclusion. This way you pay a fixed
annual charge per rentable square foot. Typically
be in the range of $3.00 to $3.75.
come in two basic flavors:
Estate Taxes. Almost all
leases have these. Tenants pay their "proportionate
share" of any increase in Real Estate taxes over
a base year approximately equal to the first year of
Expenses. This is where the creativity
comes in. The theory is that as it gets more expensive
to run the building, so tenants pays their part of that
increase. Now let's see what they've come up with:
Operating Expenses. The best for the tenant in
times of low inflation. If operating expenses go up,
the tenant pays his "proportionate
If they don't, he doesn't pay. Often hard for a small
tenant to get.
Wage Formula. For every penny the porter's
hourly wage goes up, so proportionately does
the rent per
square foot - most commonly "penny-for-penny".
Thus if the porters' wages go up from $15 per hour
to $17 per hour, the rent goes up $2 per square
Not so bad in times of low wage inflation, this can
have a serious ratchet effect when the opposite
the case, out of all proportion to the actual increase
in operating costs of which the porters' wage is
only a part. The effects can be particularly grim
formula includes fringe benefits (i.e. pensions,
medical, etc.). Less punitive in percentage terms
when the original rent is
Increasingly common, and quite unpleasant. 3% compounded
over a 10 year term adds up. We have even heard of
people asking for 4%. Indeed, people have even been
known to pay it.
Price Index. Self-explanatory.
Clearly a crap-shoot, like everything apart from Direct
Operating Expenses. Tends to be attached to a straight
The landlord will require full financial and general information
about your company before agreeing to terms or drawing a lease.
You may have competition for your chosen space, so assemble
this information before you get to the stage of making
a proposal. It is in your interests to provide as much detail
as possible in order to convince the landlord that you are
a creditworthy prospective tenant or for him to assess your
likelihood of success if you are a startup. Make sure that
it is neatly presented and is fully comprehensible to someone
who knows nothing about your business, and, preferably, that
it is expressed in dollars. Audited statements carry vastly
more weight than something that you put together on Quickbooks
the day you send it in. Do not expect the landlord to spend
hours trying to understand ill-presented financials- he will
move on to the next proposal instead. And do not attempt to
conceal the true situation of your company.
Rent. Depending on market conditions, it may
be possible to negotiate a period of free rent. In a landlord's
market this may be as little as one month; in a tenant's market
as much as a year, or even more on a long lease. If it is
more than a month or two, the abatements will normally be
spread over the term of the lease. (See "Construction
Guy Clause. This is a form of personal Guarantee
whereby the guarantor undertakes to pay any unpaid rent so
long as the tenant remains in possession of the premises.
It is therefore less onerous than a full guarantee where the
guarantor undertakes to pay the rent for the full term of
the lease whether or not the tenant remains in possession.
lease. A gross lease, as distinguished from a "Net
Lease," includes real estate taxes, heating and
building services in the base rent. Office and loft leases
always of this type.
Typically office buildings provide central heat during
"building hours" in the "heating season"
and residual heat during cold weather. (See "Building
Hours;" "Heating Season;" and "HVAC")
Season typically runs from October 1 to May 14th
(the inverse of the Air-Conditioning Season).
Heating, Ventilating and Air-Conditioning. (See "Air-Conditioning"
Work describes any building or decorating work carried
out in the space by the landlord at his expense prior to the
tenant's occupation of the space. It is totally negotiable.
The agreement that governs this is called the "Workletter"
and is an integral part of the lease. It can run the gamut
from nothing at all to a full build-out of the space, depending
on market conditions. It can be set up in either of two basic
Landlord builds the space out using his own contractors.
You can elect to have more than the basic work done,
in which case you will pay the extra.
build out the space, and the landlord either gives you
a cash contribution to the work, or free rent in lieu
of the cash.
the end the tenant pays for the work, and the landlord amortizes
the cost over the term of the lease. If you ask for a lot
of work, therefore, the landlord will be less flexible when
negotiating the rent, and may look for a larger security deposit.
(See "Workletter, " "New
and "Building Standard")
Terms are typically 3, 5, 10 or 15 years, but there are
no rules. The longer the term the more time the landlord has
to amortize expenses, and the more concessions he will be
likely to concede.
Factor. This is the difference between "Rentable
Square Feet" (the area for which the tenant pays) and
"Usable Square Feet" (the carpetable area which
the tenant actually occupies) expressed as a percentage of
the Rentable Square Feet. The Loss Factor was originally intended
to represent the tenant's share of the common areas of the
building, including the lobby, elevator shafts, common corridors,
risers, freight entrance, etc. In a few buildings it still
does this fairly accurately. But in New York there is no law
laying down the criteria for calculating the Loss Factor,
so many landlords have been unable to resist the temptation
to be creative and are constrained only by the pressures of
the market. You cannot negotiate the Loss Factor.
Lease. A Net Lease is one where the tenant takes on the
entire responsibility for the payment of all the expenses
of running a property in addition to the payment of
rent, including maintenance costs, real-estate and other taxes,
wages, etc. The opposite of a Net Lease is a "Gross
and Net Leases are generally only encountered in cases that
involve the renting of entire buildings or of condominium
Building Installation describes the building out of a
piece of space to "Building Standard." In
general it is implied that this will be carried out by the
at his expense, before the commencement date of the lease.
New York City has always been a market in which it
has been more difficult for tenants to negotiate options and
other rights to renew and/or expand than in other markets
around the country.
Wage Formula - See "Escalations."
Prebuilt spaces have been built out speculatively with generic
layouts and are ready for immediate occupancy. Can be a good
quick solution if your needs are fairly standard.
Share generally refers to your space's area expressed
as a percentage of the total rentable square feet in the building.
In practice, sadly, if you add up all the proportionate shares
in a building you are unlikely to arrive at a total equal
to or less than 100%. What a surprise.
When you wish to make an offer on a space we, as your brokers,
will draw up a non-binding proposal, which we will submit
on your behalf. As a minimum it will specify the following:
Per Square Foot
way the electricity will be paid for
Estate Taxes. All Real Estate Taxes are included
in the base rent at the start of the lease. In almost all
cases, leases include an escalation clause stipulating that
the tenant will pay its proportionate share of Real Estate
Tax increases in future years. (See "Escalations").
-- See "Financials."
- Rent is expressed in dollars per rentable square foot per
annum (See "Rentable Square Feet.") At the beginning
of the term it will normally include all real estate taxes
and the operating costs of the building. In many office buildings
it will also include cleaning, which is worth $2.50 to $3
per square foot per year. It will almost invariably include
heat in the winter, and may or may not include Air conditioning
in the summer. It will probably not include electricity. In
loft buildings sprinkler and garbage removal charges may be
additional. Rent will be subject to escalations, which will
normally kick in one year after commencement. Where the term
is longer than 5 years, there are likely also to be one or
more "Rent Bumps" during the course of the term.
(See "Air Conditioning," "Electricity"
Bump - describes an increase in the rent which is
built in to the lease. For example a ten year lease may have
a rent of $40 for years 1 through 5, and $45 for years 6 through
Reviews - See "Escalations."
Square Feet - is the area on which your rental
payment is based. What you actually get is "Usable
Square Feet." The difference between the two is called the "Loss
Factor" and is expressed as a percentage of the "Rentable
Square Feet." (See also "Loss Factor")
Deposit. Unless you are a long-established, rock solid,
profitable company with significant assets and a long history
of paying rent on time, you will almost certainly have to
provide one. Landlords are inconsistent on this, and may ask
for as little as three months' rent, or as much as a year's.
Maybe we can negotiate a "burn down" whereby it
is reduced over a period of years after an initial period,
but don't rely on it. Deposits can be in the form of a Letter
of Credit, which are more attractive to the sophisticated
landlord as they do not constitute assets in the event the
tenant declares bankruptcy.
Planners earn their crust by helping you get the maximum
possible use out of your space as built.
Footage - comes in two varieties: "Rentable
Square Feet" and "Usable
Square Feet." The difference
between them is called the "Loss
Factor" and can
be over 30%. See the separate entries for details.
You will want your lease to contain as liberal a sublease
provision as possible. Generally landlords retain the right
to turn down subtenants if they think that they are insufficiently
financially sound or if their use is inappropriate to the
building. Often they will include provisions allowing them
to "recapture" the premises if the tenant approaches
them for permission to sublet, or to take all or part of any
profit that may result from an increase in the rent. Clearly
a landlord is more likely to recapture during a period of
rising rents, and consequently sublet spaces are much less
frequently available during such periods.
- see "Electricity"
Square Feet - What you actually occupy. (See
"Rentable Square Feet" and "Loss
and data wiring. Generally speaking
the tenant is responsible for this, although in some cases
outlets may have already been installed (but not necessarily
The Workletter is the part of the lease describing in greater
or lesser detail the work that the landlord will carry out
in the space prior to its occupation by the tenant. It's value
is expressed in terms of $ per rentable square foot . This
must be negotiated at the stage of the initial proposal. The
value of the Workletter will rise and fall depending on the
strength of the market and the creditworthiness of the tenant.
(See "Landlord's Work")