By Forrest Blake, Senior Vice President of SVN Commercial – 310-850-2391 – CalBRE Lic # 01054174
Decision makers must have a clear picture of the total occupancy cost in a commercial lease to eliminate surprises and to maintain cash flow and profitability. An accurate budget with both variable and fixed expenses will help the team make the right decision between staying in the current building or relocating.
In this video, we’ll focus on annual base rent increases and all those confusing operating expenses.
By Forrest Blake, Senior Vice President of SVN Commercial – 310-850-2391 – CalBRE Lic # 01054174
Due to the many components that make up the true cost of a leased space, identifying and budgeting for it can be difficult. Factor in landlord concessions and you arrive at what’s called “effective rent.”
In this video, we’ll look at the impact of tax increases.
The rapid increase in property values and when exactly the landlord sells the building may dramatically impact the tenant’s expense. For example, a building purchased years ago will have much lower property tax valuation. When a building is sold, however, the new value is adjusted, and tenants will pay any tax increase. Currently, in Los Angeles, the tax percentage is 1.1% (1) of the current assessed value.
By Forrest Blake, Senior Vice President of SVN Commercial – 310-850-2391 – CalBRE Lic # 01054174
In our last video, we focused on the impact of property tax increases on your total occupancy cost or effective rent. Let’s now look at parking space and after-hours HVAC.
By Forrest Blake, Senior Vice President of SVN Commercial – 310-850-2391 – CalBRE Lic # 01054174
In our last video, we discussed how parking space and after-hours HVAC impact your effective rent. Let’s now look at more factors affecting your total occupancy cost.
My team works hard with the tenant to get the most concessions. These are items deducted from the total occupancy costs over time to establish an effective rent. Examples include beneficial occupancy, free rent, free parking, tenant improvements and moving allowances.
By Forrest Blake, Senior Vice President of SVN Commercial – 310-850-2391 – CalBRE Lic # 01054174
If your company expects to grow at some point during the lease term, you’ll want to negotiate a must-take provision. This lets you lock in expansion space rights upon the start of the lease.
For example, if a tenant signs a lease for 1½ floors but knows half a floor will sit empty until next year, I’ll negotiate a must-take expansion for that space in 12 months. The tenant effectively gets free rent for half a floor over the next 12 months. If you use the Space Profitability Quotient (SPQ) your numbers will stay good as you increase profitability and square footage.
If you enjoyed these videos and have further questions, please reach out.
Forrest Blake | Senior Vice President
SVN | Commercial – DTLA
800 South Figueroa Street, Suite 925, Los Angeles, CA 90017
Phone 213.618.4196 | Mobile 310.850.2381
forrest.blake@svn.com | www.svn.com
CalDRE# 01054174
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