Final Assessment: Space Searches, Moving, and Space Relocation

S.I.P. (“SIP”) stands for search, identify, and plan.

The S.I.P. (“SIP”) process should take at least 9 months.

If your lease is expiring in roughly nine (9) to twelve (12) months (or less) and you have no intention to renew, you should believe that it’s too early to start looking for new space that is suitable for your business and financial needs.

From a tenant’s perspective, the preference would be for a tenant to hire a broker who has a “goal line-to-goal line” mentality, with the ability to take you through the dizzying process of securing the perfect space, steer you away from bad buildings and less than desirable landlords, operationally speaking, and relentlessly pound the pavement for you.

If you are a retail tenant, the tenant advisor you select should be cognizant of every location in the market with good retail mixes and appropriate foot traffic and have the perfect blend of demographics suitable to your business.   

Once the space search has been accomplished, a tenant should prepare a matrix or spreadsheet comparing the various costs, amenities, locations, pros and cons of the spaces searched by the broker on behalf of the tenant.

Many landlords will do a test fit for a tenant at little or no cost, although others might not depending on the context of the deal and the market. A number of furniture vendors, with the hope that the prospective tenant will ultimately use their services, will prepare a space fit design plan for a tenant at little or no cost as well.

Tenant advocates should consider submitting only one proposal to create an “air of competition” around their leasing process.

The “E” in the “ACNE” principle refers to Emancipation.

In the “ACNE” principle, the “A” refers to analyzing the counter-proposals or RFP’s.

In the “ACNE” principle, the “C” refers to counter-propose. After analyzing the proposals and RFP’s, tenant representatives should not prepare counter-proposals to submit back to the landlord.

According to the “ACNE” principle, the “N” stands for negotiate and refers to negotiating the counter proposals or RFP’s, and later on in this stage, the lease itself.

In the “ACNE” principle, the “E” targets the landlord, among other things, to evaluate the tenant responses, engineer the potential space layout and ultimately execute the letter of intent for the space selected.

Budgeting and the preparation of design and/or construction documents for the space are paramount in the “ACNE” principle.

With regards to the construction build-out and move-in stage, one of the first steps and top priorities for tenants is to review and approve construction drawings, regardless of whether the drawings are prepared by the landlord’s or tenant’s architect.

As part of the construction build-out and move-in stage, one of the steps for tenants is to order any long lead items, and new equipment or furniture, and given that the majority of landlords will want to be involved with your telephone and internet wiring, let the landlord handle the work with tenant’s telephone and internet wiring.

If the landlord is building out the space, tenants should make sure, if the context of the deal so dictates, it will be on the hook financially for all of the build-out cost.

One of The Lease Guru’s Six Pack Program of Steps for the construction build-out and move-in stage is to have a kickoff meeting with all parties who will be part of the construction and build-out process in order to set expectations and get on the same page.

One of The Lease Guru’s Six Pack Program of Steps for the construction build-out and move-in stage notes that during the construction process, the parties involved should have weekly or bi-weekly periodic meetings – whether by phone, video conference or at the job site.

When the construction is deemed “substantially completed” by either the landlord or tenant’s contractor, tenants should arrange an inspection of the space and make sure that only minor punch list items (e.g., those which do not impact the tenant’s ability to move in and enjoy the space but for minor inconvenience) which the contractor cannot complete within 30 days remain.

A landlord will never have “substitute space language” first appear in their initial draft of the lease without also including the language in the term sheet.

It is common for a landlord’s “substitute space language” to first appear in their initial draft of the lease without including the language in the term sheet.

By incorporating space relocation language into the lease, it provides a tenant with a greater amount of flexibility.

A landlord’s right to relocate a tenant’s space allows the landlord the flexibility to (i) provide a current tenant the ability to expand its space by combining with an existing tenant’s space on the same floor, and/or (ii) attract a “big fish” tenant by being able to relocate a “small fish” tenant.

Whenever there is space relocation language in the lease, a tenant should either strike the language in its entirety, or heavily negotiate the language so as to share in some of the benefits that inure to the landlord when exercising its relocation right.

Generally speaking, a smaller tenant has greater negotiating power than a larger tenant with regards to a space relocation clause.

If a tenant does not possess enough negotiating power to entirely strike the space relocation language from the lease, the tenant should attempt to make it so that the landlord can’t exercise the relocation right until at least 24 to 36 months after the lease commencement date.

If a tenant is unsuccessful in entirely striking a relocation provision, the tenant should try to include language that the relocation space must be comparable to its existing space in terms of finishes, the amount of overall windows, bullpen space, windowed offices, useable square feet; and if in a high rise building, the location of the space in terms of the view; and if retail space, in a still visible and well trafficked location.

If a tenant is required by its landlord to have relocation language in the lease, the tenant should secure language stating that the tenant shall be reimbursed for any and all costs associated with the move, including but not limited to, wiring, cabling, data, moving, stationery and other out-of-pocket costs.

If a tenant is unsuccessful in entirely striking a relocation provision, the tenant should seek to include language that if the rentable square feet of the substitute space is bigger than its existing space, the base rent, additional rent, electricity inclusion factor and tenant’s pro-rata share of CAM and/or real estate taxes will be increased.

It is imperative that tenants include language in the relocation clause that it shall have no obligation to remove or restore any improvements made to the space from which it is relocating.

If a tenant is unsuccessful in entirely striking a relocation provision, the tenant should add language that the substitute space can’t be greater than 5% rentable square feet smaller than the initial premises.