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Commercial Real Estate FAQs

Organized by each milestone after the tour

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1. PLAN FAQs

What expert can help me with the Plan process?

An architect or space planner can assist you with the creation of a space plan and final plan. A designer can provide help when it comes to selecting construction finishes (e.g., wall treatments, floor coverings, color selections). However, this range of skills can sometimes be found in the same person or the same company.

What is an as-built plan?


The as-built plan (also known as an as-built drawing, current configuration or vacancy drawing) is a drawing that shows how an office space is laid out today as occupied by the current tenant or vacated by the prior tenant. It may exist in hard copy form or be built in specialized CAD software.

Will an as-built plan be provided to me?

Yes. Crelow requires the owner rep to provide a basic as-built plan as part of every bid. When it comes time to tour a space, make sure you have a copy of the as-built plan with you.

What do I do if the as-built plan isn’t accurate?

The initial tour is good time to confirm that the as-built plan is accurate. If the as-built plan provided to you does not match the way the space is configured today (e.g., walls and offices are in different locations), ask the owner rep to update the as-built for you. This is a very basic – and reasonable – expectation as a prospective tenant.

What is a space plan?

A space plan (also known as a fit plan, programming or blocking) reflects your ideal configuration for the office space including the placement of offices, conference rooms, reception area, etc. It can be as simple as a rough sketch (e.g., cocktail napkin) or may be professionally drafted by an architect or space planner. The owner rep will usually hire a professional to convert your notes into a formal space plan. If not, a space planner or architect could help you do it.

Who creates the space plan?


The process of creating a space plan begins with you, the tenant. Using the as-built plan as your starting point, you need to sketch or describe your needs. After that, most owners will hire a professional to create a formal space plan.

What should a space plan include?

The space plan should be an accurate description of how you want the space laid out. Major features like hallways, offices, kitchens, etc., should all be shown. You should also include furniture placement to make sure the space will fit all of your employees comfortably. However, a space plan generally does not include mechanical systems of the building (plumbing, electrical, HVAC) or the types of finishes you will want (paint, carpet, fixtures, etc.).

Why do I need a space plan?

The space plan is your opportunity to communicate to the owner rep in more detail how the space should be configured to ensure a perfect fit for your business. It also helps the owner rep begin to understand how much the tenant improvements (TI) will cost, a key factor in determining how much rent you will pay for the space.

How precise does a space plan need to be?

Space plans come in all shapes and sizes from pencil sketches to precise CAD drawings. The most important thing is that the space plan communicate how you would like the space configured to meet needs of your business (wall placement, offices, furniture, etc.). Generally speaking, details like electrical, plumbing, HVAC and finishing details (flooring selections, wall finishes, etc.) can wait until the final plan.

Should I consider furniture when creating a space plan?


Absolutely. The dimensions and placement of furniture can significantly impact your space plan. A professional space planner or furniture dealer can help if you have questions.

What is the difference between a space planner and an architect?

An architect has additional licensing and generally brings a higher level of knowledge regarding structural decisions and code requirements. For example, an architect is usually required to sign off on construction plans while a space planner cannot. That said, space planners are generally very knowledgeable about code requirements and can likely guide you through the Space Plan and Final Plan with confidence.

What is a final plan?


A final plan (also knows as a pricing set, bid set or construction drawing (“CD”)) is the space plan plus all of the finer details (electrical, plumbing, HVAC, flooring, wall finishes, etc.) necessary to obtain precise construction bids. The final plan drives the construction bids that determine the cost of the tenant improvements. Specificity is critical for the final plan. The more specific you can be on a final plan, the tighter the construction bids and the smoother the “build-out” will be later on.

Who creates the final plan?

Generally speaking, the owner rep team creates the final plan, often using the same professional who created the detailed space plan. Most owner rep teams engage a space planner or architect to help market and lease the property. However, you could create the final plan, too, with the help of your own space planner or architect.

How do I know the final plan meets building codes?

The final plan is usually drafted by a professional who is familiar with all current building codes. If a professional architect or space planner is engaged for the final plan, this is not something you need to worry about.

Who will construct the space (i.e., tenant improvements)?

Most often, the owner rep team will identify, hire and manage the construction contractors necessary to build out the space. This should be a reputable commercial contractor, ideally someone who has done work in that particular building before. In some cases, you may have the option to use your own contractor to build out the space. However, if you do, the owner will be less inclined to stand behind the work (since it was your contractor) and it may be more difficult to hold the owner accountable for unforeseen issues down the line. There is also generally a building supervision fee (typically 3-5% of the TI estimate) collected by the owner to oversee work done by tenant-sourced contractors.

Who can help me select the finishing details (paint colors, carpet styles, millwork) for my space?

Space planners, architects and designers are all accustomed to helping tenants select finishes. All three skillsets are often attached to the same professional firm. The owner rep’s property manager may also be able to help you. Find an occupied or finished space in the building you like and ask who helped that tenant select finishing details.

Who collects the construction bids/estimates?

Generally speaking, the owner rep team will manage the bidding process. Of course, if you are managing construction yourself, you or your general contractor will be responsible.

Are construction permits required?

That depends. A simple “carpet and paint job” may not require any permits whereas moving walls, plumbing and/or electrical components likely will. Whether or not permits are required will depend on the scope of the work being done and the local building ordinances. This will be determined and managed by the contractor doing the work. Since permit requirements vary by city, it is often helpful if the contractor has managed other projects in that city.

Who determines the cost of tenant improvements?

You do. No different than when building a house, the cost of your tenant improvements are driven by the size of the space and the features and finishes you specify. The more extensive the construction and the more luxurious the finishes, the higher the TI costs. Beware of the architect or designer who wants to design a portfolio piece at any cost; make sure they know what budget assumptions were made by the owner/rep on the original bid.

Will the owner rep guide me through this Plan process?

Generally speaking, yes. Leasing office space is their business and they want to see you occupy the space. It’s in their best interests to answer your questions and help you in any way possible.

Will the owner rep pay for the creation of an as-built plan, space plan and final plan?

The owner rep team usually pays for the as-built, space and final plans. However, it may depend on how interested they perceive you to be in the property. At times, the owner rep may ask the tenant to cover the cost of creating the plans out of pocket, money which can often be reimbursed later if a lease deal results.

What is CAD?

CAD is an acronym for “Computer Aided Design.” In this context, it refers to computerized floor planning and space rendering tools used by space planners, architects and most furniture vendors.

What is ADA?

ADA is an acronym for the Americans With Disabilities Act, which establishes standards for accessibility (e.g., door width, wheelchair ramps, counter heights, door hardware) that factor into all commercial construction plans. See the ADA website for more information.

2. SIGN FAQs

What expert can help me with the Sign process?

An attorney, preferably one experienced with commercial real estate transactions, is your ideal partner for the Sign process.

What is a letter of Intent (LOI)?

An LOI is a non-binding, “good faith” outline of the lease to make sure you and the owner rep are on the same page. All of the critical terms of your lease – improvements, renewal rights, expansion opportunities, your share of taxes, utilities and maintenance, and more – are listed in detail. Are all the “Must Have” items from your Bid Request accounted for? If not, speak up. Though your signature is not binding, the terms of the LOI should be considered final – negotiation of the basics stops here. Ask the owner rep to create the LOI or you can do it, too.

How detailed is a letter of intent?

Very. It will cover details regarding square footage, move-in dates, tenant improvement assumptions, etc., as well as a detailed breakdown of your gross rent as a combination of base rent plus the other factors (tax, utilities, maintenance, etc.) commonly known as either tax & ops, tax & CAM, or additional rent. The LOI may also include the basic rights you will have as a tenant regarding renewals and expansions.

Is a letter of intent legally binding?

No. Similar to a marriage engagement, the LOI is a “good faith” understanding that a lease will eventually be signed but the LOI itself is not binding on either party.

Who creates a letter of intent?

The LOI can be drafted by either party but the owner rep team usually creates the LOI.

Can I continue to negotiate before a letter of intent is signed?

Yes. You should always discuss and finalize the important terms of your lease before you put pen to paper and sign the LOI.

Can I continue to negotiate after a letter of intent is signed?

Negotiation of terms previously included in the LOI after the LOI has been signed is generally frowned upon, whether done by the owner or the tenant. Though you are not legally bound, the purpose of the LOI is to define all of the key terms of the lease as early as possible in the Sign process so both parties can efficiently move to the next step of a formal lease agreement.

Should the letter of intent include all tenant improvement and construction considerations?

Ideally, yes. This is your opportunity to spell out exactly what you are looking for in your office space. The more detailed and complete the LOI, the easier it will be to “get to done” on the lease.

What should I watch out for on a letter of intent?

Before signing the LOI, review the basic terms carefully such as the amount of space being leased, your move-in date, your rent, provisions for rent increases, and all of the things you will pay for as tax & ops (a.k.a. tax & CAM or additional rent). Tenant improvements should be spelled out clearly and well as any specific “rights” that may be important to you such as future expansion plans or lease renewals. You may be asked to demonstrate your credit worthiness and pay a security deposit at this time. This is also the ideal time to review your original Crelow Bid Request. Are all of your Must Have’s accounted for in this deal? If not, can the LOI be modified to include them or are you willing to make that trade-off?

What is a lease?

This is the real deal, literally. The lease is closely based on the LOI and is the final, binding agreement between you and the owner rep. It’s the outcome of the entire process to this point; once you sign it, you’re committed and so are they. Expect to provide proof of insurance, a security deposit and your first month’s rent. If you haven’t already, you may also be asked to prove your credit worthiness.

How is a lease different from a letter of intent?

The biggest difference is that the lease is binding while a letter of intent is not. The lease will also likely go into greater detail about the rights and obligations of both parties to the deal. Any detail that was not covered in the LOI should be spelled out in the lease.

How detailed is a lease?

Very. This is literally the last word on the business relationship you and owner will have over the length of the lease term. Every foreseeable question that could arise about the space you will occupy, how it will be maintained, what you will pay to occupy it, and your relationship with the owner, their property management team and your neighboring tenants should be covered. An attorney can help you remove any ambiguity.

Is a lease legally binding?

Yes. Once it has been signed, “executed” and delivered, it is binding. You and the owner are both legally bound to the terms outlined in the lease document.

Who creates a lease?

Leases are almost always drafted by the owner rep team and submitted to you for review, often based on a standard lease template used for all tenants in that building. You may want an experienced real estate attorney to help you with the review.

Can I continue to negotiate before a lease is signed?

Yes and no. The basic terms for the LOI (square footage, rent, tenant improvements, move-in date, renewal rights, etc.) are set and should not be opened up to negotiation. However, many of the finer details that go into most leases (insurance, what happens if either party defaults, etc.) can still be discussed. An attorney can help you.

Can I continue to negotiate after a lease is signed?

No. Once you sign the lease, the deal is done. That said, you can always approach the owner to discuss things you would like to change in your lease. However, this is a new conversation and will require an amendment to the original lease.

What should I watch out for on a lease?

Though most leases are filed away and rarely consulted, it’s important to remember that it is legally binding on both parties. For that reason, it’s difficult to point out things to watch for. Every detail, no matter how obscure it might seem at the time, matters. Read the lease carefully and engage an attorney if there is anything you do not understand. In the event of a dispute or conflict later on, the lease will govern.

What is a credit enhancement?

Building owners have a lot at stake anytime they sign a lease with a new tenant, especially if they are investing cash up front to make tenant improvements. A credit enhancement is any guarantee or security (sometimes called an “inducement”) you can provide to encourage the owner to invest in the tenant improvements or any other concessions you are requesting. Security deposits, prepaid rent, letters of credit, and personal and corporate guarantees are all examples of credit enhancements that can help an owner feel more comfortable making that investment in you as a tenant.

3. BUILD FAQs

What expert can help me with the Build process?

A project manager who has experience with construction and is knowledgeable about the build process can be an invaluable partner to you during the Build process.

What is an “all-hands-on-deck” build meeting?

The documentation and pricing of tenant improvements is usually the most complex part of the entire leasing process. For this reason, it is important that you communicate with all of your partners early and often. The build meeting is a final check-in where all of the parties come together to walk the space with the final plan in hand. As a group, you will clarify any ambiguities regarding scope, re-confirm pricing and who is paying for it, review the schedule one last time, and exchange contact information. Remember, tenants are usually focused on fit while owners focus on price. Are your expectations of fit and the owner’s expectation of price in synch with each other? Don’t leave the build meeting until you are sure. As the saying goes, measure twice, cut once.

Who should attend a build meeting?

Everyone who has a role in the build-out of your tenant improvements should attend the build meeting. You, the general contractor, the property manager, the owner’s rep and (if possible) the building owner should all be there. If you have chosen to hire a project manager for your move, be sure to include them as well. The build meeting is the perfect time for the project manager of your move to walk the space, meet the players and form a mental picture of what you will move into.

What does it mean to occupy a space “as is?”

An “as-is” lease means the owner rep team has no responsibility to improve or update the space. What you see is what you get on move-in day, all the way down to worn carpeting and holes in the walls. Any improvements you want to make to the space will be your responsibility, which also means anything that drives up the cost of construction is on you. The owner’s responsibilities will be limited to providing basic services outlined in the lease such as utilities, heating, cooling, landscaping, etc.

What does “as is with allowance” mean?

In an “allowance” deal, the tenant is responsible for making necessary tenant improvements but the owner provides a stated cash dollar amount to do the work. The owner defines and limits their financial contribution to your improvement of the space and writes these terms into the LOI and lease. Here again, any unforeseen issues that drive up the cost of construction are on you. The allowance will generally be released to you as a reimbursement after you have paid the contractor; it is less common for an owner to release funds directly to a contractor. Either way, be sure to know what the process is for obtaining the allowance and what it applies to. Owners usually require that allowance dollars be spent on construction instead of “soft” costs like phone/data wiring, etc.

What does “turnkey” mean?

In a “turnkey” lease deal, the owner agrees to build out the space and make all tenant improvements specified by the tenant to the tenant’s exact specification, based on a mutually agreeable final plan. In a turnkey situation, unforeseen cost overruns are the responsibility of the owner. That said, both parties “live and die by the plan.” If you want to add something that wasn’t specified in the final plan (e.g., a higher grade of carpet, granite instead of laminate countertops), the owner will not do the work unless you agree to cover the cost via change order. There is also a common misperception that a turnkey deal results in a “move-in ready” space. This is not true. You, the tenant, will still be accountable for many things required to make the space usable including furniture, telephones, internet connections and low-voltage wiring.

Who pays for the build-out of my office space?

That depends on how the lease deal is structured. If it’s an as-is lease, you will pay for all tenant improvements. If the owner is providing an allowance, you can use that allowance for the improvements but must pay for anything above and beyond. If it’s a turnkey deal, the owner is paying for the tenant improvements. However, it is important to note that, in all leases, you are ultimately paying for the improvements. Whatever investment the owner makes in the form of an allowance or turnkey build-out is amortized and built in to the base rent you will pay for the life term of the lease.

What types of things are not included in tenant improvement construction?

Anything not listed in your final plan or the work letter signed by the general contractor will not be addressed in the tenant improvements. Generally speaking, phones, furniture, low voltage/data wiring, intercom systems, security systems, and any other specific technologies you may need for your business will be your responsibility to specify, bid and install. Most forms of exterior signage, including getting power to the signage location, may be outside the scope of a work letter. Be aware, window treatments (e.g., blinds, shades) can sometimes be a point of contention and are often not discussed until later. Ask about window treatments early on so you know whose responsibility they are.

Can I make adjustments to the final plan after construction has started?

Yes, but it will impact the cost and possibly timing. Any changes to the agreed upon final plan for construction must be documented and addressed as a change order. The general contractor will likely require approval from the owner before proceeding with the change order.

What is a change order?

Anytime you request an improvement to the space that was not documented in and/or is beyond the scope of the final plan, a change order is required. Generally speaking, there will be a cost associated with the change and you will be accountable for paying that extra cost. A change order is essentially an amendment to the final plan.

What is a work letter?

A work letter is the construction contract that formalizes the agreement with the contractor. Though typically agreed to as a separate matter apart from the lease, the work letter closely references the final plan and serves to define the scope of work that will be done and at what price. It is a common misconception that the owner signs a work letter with the contractor. In reality, the work letter is an agreement between the general contractor and whoever is responsible for paying them. Unless it’s a “turnkey” deal where the owner takes full responsibility for readying the space to your exact specification, you, the tenant, will sign the work letter. Whether it’s an as-is lease where you take full responsibility for tenant improvements or an allowance situation where the owner is providing a stated dollar amount for the improvements, you will generally manage the flow of invoices from, and payments to, the general contractor.

Will a construction schedule/timeline be provided?

Yes, if you ask for it. All reputable contractors will provide a schedule/timeline upon request. Do not expect them to offer it, however, and beware of any contractor who is not willing to provide a detailed schedule/timeline when asked.

What happens if construction is not completed on time?

This will most likely be addressed in your lease under “tenant improvements” or “possession.” Most often, the commencement date of the lease will be pushed out and the lease expiration date extended by the same amount of time. However, you have an opportunity to negotiate more tenant-friendly terms into the lease. Common options include X days of free rent for every day of delay, the ability to terminate the lease after a mutually agreed upon “drop dead” date, and the right to step in and take over construction at the owner’s expense.

What is a walkthrough?

When construction is substantially complete, you and the entire owner rep team (i.e., the same people who participated in the all-hands build meeting) should walk through the space with the final plan in hand and verify that the work that has been done to your mutual satisfaction. Any exceptions should be noted on a punch list.

What is a punch list?

A punch list summarizes all of the remaining “to dos” that must be completed by the contractor before the space meets your expectations and complies with the terms of the lease. Punch list items are usually easily corrected “loose ends” such as dings in the walls, loose carpet, poorly fitted doors, etc. A well-written lease generally stipulates that a walkthrough and punch list should be completed within 10 days of the construction being substantially completed.

Are building permits required and, if so, who needs to obtain them?

That depends. A simple “carpet and paint job” may not require any permits whereas moving walls, plumbing and/or electrical components likely will. Whether or not permits are required will depend on the scope of the work being done and the local building ordinances. This will be determined and managed by the contractor doing the work. Since permit requirements vary by city, it is often helpful if the contractor has managed other projects in that city.

How long does it take to obtain building permits?

This varies widely by city. It can take anywhere from a few days to as much as eight weeks to obtain a building permit. Whoever is managing the construction should get on this right away, as soon as the lease is signed. Generally speaking, a contractor will not submit plans to the city for permits until the lease has been signed and formal approval for the project has been given by the owner/broker team.

What is a certificate of occupancy?

After the construction work has passed its final inspection, the city will issue a “CO” to whoever holds the construction permit. The building is then ready to be occupied.

Do contractors have licenses and insurance?

Though licensing requirements can vary by city, subcontractors are almost certainly licensed and insured or bonded. However, general contractors are not necessarily required to be licensed.

4 MOVE FAQs

What is a project manager?


A project manager is a third-party consultant who helps manage commercial construction projects and/or the process of moving companies into new spaces.

Who hires/pays for a project manager?


Since it’s your construction project and your move, you will hire and pay for the project manager. The only exception would be in the case of a turnkey deal where the owner’s team is managing all components of the construction process. Even then, you will benefit from having an experienced project manager on your team to lead the moving process. Project managers specializing in moves are sometimes referred to as “relocation professionals” or “move coordinators.”

Is a move planning kick-off meeting a good idea?


Absolutely. The meeting itself is free and will save you time and countless headaches along the way.

Who is involved in a move?

Reference the move checklist provided to make sure you have identified everyone who should participate in the move kick-off meeting. The “dream team” for a move kick-off meeting usually includes:

  • You, the tenant
  • Your project manager or relocation professional
  • The owner team’s property manager
  • The contractors involved in the construction (TI) process
  • The vendors you have hired to provide furniture, low voltage wiring, security systems, office equipment, etc.
  • The moving company itself
Can a tenant improvement allowance be applied toward my relocation costs?


Yes, if you negotiate that into the lease deal with the owner up front. Owners generally prefer that their tenant improvement dollars be invested in lasting improvements to the building. However, on request, the owner may permit a portion of the tenant improvement allowance to be applied to your out-of-pocket costs related to moving into and setting up the space.

What things should I watch out for with a move?

Though no two moves are exactly alike, the move checklist is an excellent starting point. There are also a few common-sense rules to live by when planning any move:

  • Start early. You should kick off the planning process the minute you know the date and location of your move.
  • Hire a project manager or other relocation professional to help you. This may be the best money you will ever spend!
  • Communicate, communicate, communicate. From the kick-off meeting to move-in day, meet with your project manager regularly to ensure timelines and deadlines are being met every step of the way

 

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