Startup – Securing the Work Environment

24 05 2013

Kicking off a new venture? Or, outgrowing the incubator space and looking to leave the nest?

Much like developing your deck for securing capital partners, or your business plan for the big picture, the process of securing a new home for your business operations takes a lot more time than expected. See Office Relocation Guidelines for a generic rule of thumb process schedule.

Particularly important in the earlier stages of operating, prior to taking the plunge into a long-term lease or campus acquisition, there are shorter-term occupancy options that offer tremendous flexibility and synergy amongst other like-minded, or similarly positioned organizations. For instance, much of the tech industry is familiar with incubator/accelerator-type space such as TechSpace and RocketSpace, to mention a few. Taking space such as these, will allow ample time for responsible business decisions revolving around your real estate.

Social gathering area

Typical shared environment

TechSpace – Orange County location

It takes a team of experienced professionals to provide the proper advice and guidance when it comes to identifying the office right location; negotiating a fair market lease that maximizes your flexibility and minimizes your exposure; to design a functionally efficient and aesthetically appealing work environment; to layout and recommend the best furniture options; and, to the forge the environment envisioned.

Engage an experienced commercial real estate agent that will commit the time to understand your business model; one who knows the local market, understands the trends in the marketplace, will negotiate on your behalf, and is prepared to cooperate and collaborate with the architect, engineer and contractor (AEC). You’re hiring an agent, not a company; find the agent that is best suited for your team. The company that the agent works for will not interview your team to understand the culture; nor will it be negotiating your lease; nor will the company display its passion and personal experience while identifying and recommending other key players to the team.

The other key players, integral to facilitating the right work environment include the general contractor, the architect, the furniture provider, IT consultant, and legal counsel. Some real estate agents are stuck in the 90’s, not utilizing the resources until late in the lease negotiations. There are way too many moving parts related to your office occupancy, and the cost to design, build and furnish your space is no small investment. With the right team in place, common, costly mistakes may be avoided, such as assuming too small or too large a space for lease negotiations; or, agreeing to too aggressive rent commencement dates that are often negotiated when there is not an understanding of the construction schedule, IT cabling and commissioning schedule, and furniture implementation. The astute real estate agent will lock in her/his team and rely upon their expertise for lease negotiation and planning purposes. Use your operating capital to grow your business, not to spend in areas that could be avoided with proper planning and teammates in place.

Working in this market for decades, I have many recommendations for any of the desired service providers. Let me know how I can help!

Gary Wells


Scheduling Guidelines for Office Relocation

19 05 2010

Business expanding? Contracting? Lease expiring within the next two years? In the market for new office space? If so, this information could be quite useful. The following outlines the typical process and related timing expectations for planning your office relocation. There are extraordinary circumstances in most cases that tend to affect the “typical” process; so this should not be viewed as gospel, only a conceptual outline.

As an example, let’s assume that the use is a 20,000 square foot office user in an urban market with no extraordinary space or fit-out requirements. There are critical milestones to identify to achieve desired occupancy dates through the critical path method of project scheduling.


  • Programming – The process in which the design team surveys the tenant’s (often referred to from a contract perspective as the “owner”) business practices, uses of space, flexibility in growth and contraction, and desired culture in order to determine the conceptual minimum space required.
  • Identify Adequate Office Space – The owner’s real estate professional (broker or consultant) will identify the available space in the marketplace that fits within with the program, location and economic parameters.
  • Create Short-List of Real Estate Options – The total inventory of feasible options is reduced to a manageable short list in an effort to create a competitive environment for securing one of the desired short list properties.
  • Develop Test-Fit Plans – The design team will create a test fit for the short-listed properties to ensure that the program as identified will fit the available space. Often times, it’s this process that uncovers certain inefficiencies of a building’s footprint that may eliminate it from contention. On the other hand, if a footprint is extremely efficient, the resulting program may indicate the opportunity to commit to less square footage, increasing the economic desire of that location.
  • Obtain Preliminary Construction Budgets and Schedules – Once the test fit plans (or, preliminary space plans) have buy-in from the owner, the contractor will provide preliminary estimates (often referred to as “budgets”) and the associated construction schedules for owner review and compare. This practice allows the owner to gain a greater understanding of its total financial exposure for various occupancy alternatives, a key component to the lease negotiations for the owner and the broker.
  • Conduct Lease Negotiations – The information provided by the design and construction teams will arm the brokers with the data necessary for an apples-to-apples comparison of the alternatives. There are generally two elements involved in the negotiation, the financial terms and the legal terms; the process of negotiating much of the key points (mostly financial or business terms) in the letter of intent (LOI) is one that can expedite the process and reduce legal fees.
  • Pursue Final Design, Permitting and Construction – As the short list is reduced to one, the process begins to develop the construction documents (CD’s), to pursue the permit process, and for the contractor to bid the final documents to the sub-trades in an effort to maintain a competitive final estimate. This component of the process may be shortened significantly via the collaboration of the design and construction team on behalf of the owner. See the discussion about the Design Build Project Delivery for Tenant Improvements for further discussion of the benefits of working as a team.
  • Substantial Completion of Construction – The point when construction is sufficiently complete in accordance with the construction documents, that the tenant (owner) can occupy the building or space. Typically, the architect or engineer will certify that the space is deemed “substantially complete”, which date becomes the date of substantial completion. The significance of this date is that it’s often a trigger for rent or term commencement per the lease – another point of negotiation that should be considered by the broker during the pre-construction phase.
  • Installation of Furniture, Fixtures & Equipment (FF&E) – The owner’s furniture, fixtures and equipment are moved in and installed. A prudent business practice is for the design and construction team to be actively involved with the various vendors in the early stages in order to avoid potential code or installation issues, which could become costly occupancy delays.
  • Commissioning and Certification of the Premises as Pertinent – With typical office space, the commissioning and start-up procedures are minimal when compared with that of mission critical facilities. However, although the magnitude of the owner’s teledata requirements might not be that of a 500MW data center, it doesn’t do the owner any good if their server room isn’t functioning as designed. There may also be a LEED Certification process that might require off-gassing of new materials prior to occupancy, for example. The related professionals should be consulted during the pre-construction phase in order to determine the time allocated for this final phase before occupancy.
  • Occupancy – Substantial completion has been achieved; all inspections have been successfully completed and signed off, the authorized agencies have issued a certificate of occupancy where necessary, and any commissioning processes have been completed, the owner may occupy.

In order to maximize leverage in lease negotiations, and minimize the unnecessary costs of expediting design, permitting and construction, Greg Fogg, Managing Director at Jones Lang LaSalle, suggests beginning the initial process about one year prior to the target occupancy date of the new premises.

“The caveat”, Fogg states, “is if a tenant has a renewal option that is relevant, requiring exercising one year prior to expiration… in that instance, we would likely trigger the early stage of our process (vetting the market) sooner so that the tenant is ready to make an educated decision by date of exercise.”

Before the brokers are able to accurately represent the user’s requirement in the market place, and as a prudent business exercise, the tenant should engage the services of a design firm to identify the actual size of the space needed. A common mistake is for an executive committee to give early directive about space needs without consulting a design professional. As an example, a 20,000 square foot user takes their footprint, assumes growth and proceeds with the direction to their real estate consultant to find 25,000 square foot alternatives in the marketplace. This can create costly problems if the user is in late stages of negotiations when it finds through the diligence of its design team that modern design efficiencies allow for greater use of space and ultimately a reduction in required office space, such that the necessary space may remain at 20,000 square feet. Thus, engaging the design team for early programming can save time, headaches and money.  The entire team benefits from early knowledge of the actual requirement and program.

A common method used for identifying critical milestone dates by the design, construction and real estate consultants, is to determine the desired occupancy date for “butts in seats”. What good is a space that has been deemed “substantially complete” if your business is not able to function in such a space? Working backward from the day that all systems are go with butts in seats, the design and construction team prepare the critical path schedule necessary to achieve the milestones for occupancy. Referring back to our sample user, the minimum time required to effectively perform the necessary steps is 34 weeks, on average, per the table below. However, in construction more than anything, it’s best to allow for contingencies where possible, and the more time one has for lease negotiation, the higher the probability for a better deal.

Tenant Relocation Process – Conceptual Time Line
Step Avg Time Allotment Cumulative Time
Programming 3 weeks 3 weeks
Identify Adequate Office Space 5 weeks 8 weeks
Create Short-List of  Options 1 weeks 8 weeks
Develop Test-Fit Plans 2 weeks 10 weeks
Preliminary Budgets and Schedules 2 weeks 12 weeks
Initiate Proposal & Conduct Lease Negotiations 6 weeks 18 weeks
Design, Permitting and Bidding (simultaneous) 6 weeks 24 weeks
12 weeks 36 weeks
Installation/Commissioning FF&E 2 weeks 38 weeks
Systems Commissioning and Certification 1 week 39 weeks
Occupancy – The typical schedule for a 20K SF office tenant to identify, design, build and occupy new space is approximately 39 weeks from start to finish (assuming no delays). 
Assumes that there are no changes or delays in approval process. Some of these steps can easily triple in time required if the process isn’t managed effectively.

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