1. Lease or Purchase? This question is the first decision you will have to

make, and is often best answered by your CPA and/or attorney, due to the tax and legal aspects of such a decision. However, there are other issues to consider, such as your future business growth and the flexibility, or lack thereof, which each option provides. In-depth market knowledge is also required to make the best de-cision.

2. Structure and Cost? Whether you are leasing or purchasing property,

it is important to understand the contract struc-ture and be able to compare the various options.

The basics include the lease type - A stated rent for a full service lease includes all utilities and janitorial service. A modified gross lease re-quires the tenant to pay for all utilities and janito-rial services in addition to the stated rent. A triple net (NNN) lease requires the tenant to pay for all utilities, janitorial service, property tax, insurance, and common area costs in addition to the stated rent. Market knowledge is required to properly compare lease rates when they’re quoted for different types of leases. Purchasing requires a thorough understanding of the various forms and costs of financing avail-able in the market, purchase price and owner-ship cost comparison, as well as the actual pur-chase process, all of which can vary a great deal at any given time and between various pro-jects.

3. Location and Access? Will your clients be able to locate your offices

given simple directions? Are you close enough to the freeway or public transportation so com-mute times for employees or clients is not exces-sive? Is ingress and egress convenient and safe for your employees and specific clients? The overall location and relation of the building within the City’s transportation network is essential.

4. Image? Does the building present an image to your em-

ployees and/or clients that is in line with how your company wishes to be perceived? Class A, B or C? Old or new? Modern or that “Old Pueb-lo” look?

5. Hours of Operation? Different properties can provide for a different

number of days per week, and hours per day, that the building’s services are available. For exam-ple, there is often an additional cost for air-conditioning service beyond the normal operating hours. Do you control the air-conditioning, or does the building engineer? If you own your building, you control it.

6. Zoning and Use? Does the existing zoning allow for your type of

business use? Will there be a change of use for the property that could cause local governmental review of building design, permit delays, addition-al cost? Does your use require fire sprinklers, increased floor load, or special access for the disabled? Early consideration of these needs is essential.

7. How Much Space? The space needs of certain business are fairly

stable and vary little from one year to the next. Other businesses have the potential for explosive growth and or contraction. If your business has the potential for rapidly changing space needs, you may want to consider leasing space in a large multi-tenant building. Why? Landlords will typically allow their tenants to change spaces dur-ing their lease term, if they are doing so in order to move to a different space in the same property. Given that most all buildings experience some vacancy factor, there is a greater probability of the right space becoming available during the term of your lease in a larger property. For in-stance, in a building that has 150,000 square feet of leasable space, and they typically experience a 5% to 10% vacancy rate, that means that at any given time during your lease term if you outgrew your space, you might have 7,500 to 15,000 square feet of vacant space to which you might consider expanding or relocating. Ownership of a building places major constraints on the ability to grow or contract.

POINTS TO CONSIDER WHEN LEASING OR PURCHASING OFFICE SPACE

Isaac Figueroa &Thomas Nieman Principal, Commercial Properties 1100 N. Wilmot Road, Ste. 200, Tucson, AZ 85712 520.748-7100 Office 520.546.2799 Fax ifigueroa@picor.com tnieman@picor.com

Hmmm, I

didn’t think

about that!

8. Building Load Factor? A buildings load factor refers to the percentage

of common area (atrium, hallways, bathrooms, etc.) compared to its leasable area. The higher the load factor, the more space you will have to lease to achieve the same amount of useable space. Typical load factors in Tucson for multi-tenant buildings with common areas vary from 10% to 18% - a large range. By selecting a building with a low load factor you can substan-tially reduce your lease expense. Single tenant buildings have no load factor.

9. Water? Does the space you are contemplating have

running water in it? If the bathrooms are in the common area, located elsewhere in the build-ing, it may not. To bring water into a space or more accurately, to provide drainage to a space that does not have it, can be very expensive. If you require water for a wet bar or similar use, it would be important to know that up front and focus on spaces with existing water and drain-age.

10. Operating Expenses? In all forms of office leasing and ownership, the

costs of operating the property are passed on to the tenant or owner. These costs include, but are not limited to utilities, insurance, property taxes and common area maintenance expense (landscaping, parking lot cleanup, manage-ment, repairs, etc.) and often take the form of additional rent for a tenant or association dues for an owner. It is very important to understand early on, exactly what the costs are, how they compare to the market and how they are passed on to the tenant or owner.

11. Security? Do you have Employees that work late? How

secure is their path from the office to their auto-mobile? Are there on-site security personnel? Some buildings have secured structured park-ing with elevator access into the building. In others, employees may have to hike through acres of not well illuminated asphalt to reach their car. Matching your security needs with those offered by a property is important.

POINTS TO CONSIDER WHEN LEASING OR PURCHASING OFFICE SPACE (CONTINUED)

12. Neighbors? As a tenant, or building owner, your lease gives you

the right of “quiet enjoyment”. Sometimes this is in-fringed upon, in subtle and not so subtle ways, by neighboring tenants or owners. A sales office that conducts loud motivational sales meetings could dis-turb your need for a quiet work environment. A neighbor that runs a temporary employment agency may have heavy foot traffic, possibly incompatible with your corporate law firm. Your neighbors parking usage is also worth considering. Does it swell at cer-tain peak times of the day? Are they parking inten-sive such as a call center type use? Before making a final decision on any building, it is important to un-derstand the business activities of the other neigh-boring tenants and owners.

13. Suitability of Floor Plan? Although most any floor plan can be modified to suit

your needs, all other things being equal, the less modification required of the space to meet your needs, the better off everyone is. Does the building and space comply with the Americans with Disabili-ties Act (ADA)? Money that the landlord would have otherwise spent on moving walls may be allocated to reducing the lease rate, or other concessions.

14. Parking? The parking ratio of a given building, typically quoted

as the number of spaces allowed per 1,000 SF of leased area, varies widely…by legal jurisdiction and actual need. Due to factors such as adjacent road-way expansion, original building use, or even neigh-boring development, buildings may offer parking rati-os of between 3 per 1,000 SF to 5 or more per 1,000 SF. The important thing is to understand your needs and match them with a building that can meet them.

15. Signage? The amount and type of signage allowed is con-

trolled by zoning codes and building signage criteria and can very widely, from a large sign located on the building face, to an entrance monument sign, to no exterior signage at all. It is important to understand the signage criteria of any building and that it match the needs of your business.

16. Amenities? Proximity to an assortment of restaurants, profes-

sional services, entertainment, even recreation and fitness is often an important factor in attracting and retaining quality employees.

The above information is provided in an effort to help you identify some of the issues that are important to consider when leasing or purchasing office space. There are several other issues that should be considered and will vary depending on your particular requirement.

Hmmm, I didn’t think about that!