First, it’s always helpful to have the most basic parameters in mind, such as when you want to be in space, length of term, geographic area(s), and a rough budget. Second, start the process early. Refer to “WHEN SHOULD I START LOOKING FOR SPACE?” XXX . After having identified a space, it will be an appropriate time to gather your financial information. At a minimum, a landlord will require the two (2) most recent years of your firm’s audited financial information or your audited personal returns. With the space or spaces identified, an offer or offers are drafted. There will be several rounds of negotiation with the landlord. Once an agreement on basic terms has been reached, a term sheet or letter of intent (“LOI” in industry parlance) is issued. At this point, the landlord prepares an initial draft of the lease document. Your attorney and broker will both thoroughly review the drafted lease document and submit a red-lined copy of the lease document back to the landlord. There will be numerous revisions of the draft lease exchanged. Expect this process to take a couple of months, and depending upon the size of the requirement, significantly longer. Once a final lease document has been signed by both parties, if the landlord will be building the space, this is typically the time when the construction process begins. Before any construction can begin, all necessary permits must be had. Generally speaking, allow one month for permitting. Construction itself can be anywhere from three to six months, and depending upon the size of the space and complexity of the work, significantly longer.

If you will be building out a raw or white-boxed space yourself, the process is significantly different from that described above. Contact Alpha Space NYC for process steps and timelines.

YES!! Per industry standard practice, we always look to the landlord for payment of our fee. Please click here for a list of Alpha Space NYC’s tenant representation services.

In New York City, typical lease terms are 3, 5, 7 and 10 years. Generally speaking, with few exceptions, under 3 years and you’re pretty much focused on subleases. Minimum term for a pre-built is 3 to 5 years, with many landlords, especially on higher end pre-builts, having a very strong preference for 5 years. And a landlord won’t typically build a space for anything less than 5 years or sometimes a minimum of 7 years.

Building classifications are used to differentiate buildings. There is no definitive formula for building classification, though there are generally agreed upon characteristics, which may vary by market. Class B and C buildings are generally classified relative to class A buildings.

Class A: As defined by the Building Owners and Managers Association International (“BOMA”), Class A buildings are the most prestigious buildings competing for premier tenants with rents above average for the area. Buildings have high quality standard finishes, state-of-the-art building and mechanical systems, exceptional accessibility and a definite market presence. Most class A buildings tend to be located on the avenues as opposed to side streets. A sub-category of Class A buildings is “Trophy.” Trophy buildings are the best-of-the-best. The most prestigious. Views, design, luxury finishes, numerous tenant amenities, presence and prestige are all part of the package. Rents are often in the triple digits per square foot.

Class B: BOMA defines Class B buildings as competing for a wide range of tenants with rents in the average range for the area. Building finishes are fair to good for the area and building systems are adequate. The building does not compete with class A at the same price.

Class C: BOMA defines Class C buildings as those competing for tenants requiring functional space at rents below the average for the area. Restricted hours (meaning no 24/7 access), unattended lobby, minimal elevator access, no amenities, and outdated building and mechanical systems are typical characteristics.

Just what the name implies, a space that a landlord has pre-built. Pre-builts are available across a wide range of sizes and prices. And just because a unit is pre-built, does not mean that a landlord won’t modify the unit (for example, adding additional offices). Note that pre-builts are not typically furnished.

Concessions typically come in the form of free months of rent and a tenant improvement or cash allowance. Key determinants are: length of term – the longer the term, the greater the concessions; a tenant’s credit quality; leverage – if a landlord knows he or she has no competition for your tenancy, maximum concessions will not be realized. We at Alpha Space NYC help create the necessary leverage; knowing what’s important to a particular landlord – for example, some landlords place a premium on maintaining a higher “face” rent, and are more willing to negotiate on the backend, i.e., concessions; whilst another landlord may have little or no debt on an asset, and is in position to write any type of deal; overall market conditions – such as if it is a tenant’s or a landlord’s market, the average of how long it’s taking for space to lease, how much space is on the market relative to demand, a landlord’s cost of capital, and other considerations.

Typically in one of three ways:

Direct: You are billed directly through Con Edison.

Sub-metered: Landlord installs a meter monitoring your consumption and bills you for what you use, plus an administrative fee.

Rent Inclusion: Landlord charges you a fixed price. Prices can vary, but $3.50 per rentable square foot per month is typical.

Every building has “standard HVAC hours.” Some buildings have “extended HVAC hours” as a selling point. Overtime HVAC charges vary, but for class A buildings in Manhattan’s Plaza District, the general range is $300 to $1,000 per hour. And beware, buildings often have a minimum number of hours required when requesting overtime HVAC, and the minimum number of hours can increase on weekends. Sometimes a building has a two floor minimum. Overtime HVAC costs, if not acutely negotiated, can easily become an unexpected and substantial burden to a tenant. As Alpha Space NYC focuses on the alternative investment community and the buildings that cater to the industry, we are expert in knowing what’s what when it comes to overtime HVAC rates and helping you to reduce costs and avoid any unwanted surprises. Contact Alpha Space NYC for further information.

If you routinely work well past standard building hours, it may behoove you to install a supplemental HVAC system, which could cover your entire space or just designated areas. You are responsible for the purchase, installation and maintenance of the system. When using a supplemental HVAC system, you purchase chilled or condenser water from the landlord at a negotiated rate per ton. Supplemental HVAC systems are measured in tons, with one ton typically conditioning approximately 300 square feet.

On smaller spaces, in lieu of paying (building) operating expenses, a tenant will pay a fixed percentage increase each year in the base rental rate, compounded annually. Three percent escalations each year are typical. The escalated rent begins in year two of the lease term. On larger spaces, a tenant will pay its proportionate share of the increases in the building’s operating expenses over a negotiated base year. For further information on building operating expenses, contact Alpha Space NYC.

An effective 3.9% tax imposed on a tenant’s base rent for commercial office space in buildings located south of 96^th Street in Manhattan. The threshold for paying the tax was raised from $250,000 to $500,000. In addition, if the base is between $500,000 and $550,000, there is a credit applied to the next $50,000 of base rent. For further information on the NYC commercial rent tax, contact Alpha Space NYC.

Below are typical costs, beyond the base rent, that you can expect to pay. We have broken them down by recurring and onetime expenses.

Recurring

Electricity: Refer to “HOW IS ELECTRICITY BILLED?”

Operating Expenses: Refer to “WHAT ARE ESCALATIONS?”

Real Estate Taxes: A base tax year is established and then a tenant typically only pays their proportionate share of the increases only over the base year. Contact Alpha Space NYC to help you determine the most beneficial tax base year, for tax casts, and for information on PILOT programs.

Cleaning: Typically included in class A buildings. Otherwise, cleaning can run $2 to $3 per square foot.

Onetime

Security Deposit: Refer “HOW MUCH OF A SECURITY DEPOSIT SHOULD I EXPECT?”

Moving Expenses: A reasonable estimate is $3 to $5 per square foot

Furniture, Fixtures and Equipment: $20 to $30 per square foot, though could be upwards of $45 per square foot for high end requirements.

Wire and Cabling: $8 to $15 per square foot. We’ve seen this become an increasingly larger portion of occupancy costs in recent years.

Attorney Fees:

In certain parts of New York City, including in the borough of Manhattan, yes. Some are as-of-right, and some are qualifying. Contact Alpha Space NYC for further information.

Office space is likely your second largest expense after human capital, a place where you spend as much time or more than anywhere else, that brands you – whether you realize it or not, and if well planned, can and should foster employee productivity, efficiency, creativity and relations, while also acting as a tool for attracting and retaining talented employees and making the right impression on your customers, clients and investors. And depending upon size, it will take months, and in some cases, years, to locate, negotiate, secure, and if applicable, construct your space before actually being able to move in. Bottom line, it’s one of the most meaningful and impactful decisions you will make vis-à-vis your firm.

An executive is in the business of running his or her firm. They are not in the office leasing business. Over the course of a career, an executive will handle an office lease transaction just a handful of times. Across the negotiating table sits the landlord, whose daily business is working on leasing transactions. An office lease transaction is comprised of many components beyond the base rent, all of which can substantially impact a firm’s financial bottom line, both directly and indirectly. And any New York City landlord has a thoroughly comprehensive knowledge of these many other components, and will use that knowledge to extract maximum concessions from the tenant to maximize their asset’s value. The landlord has a clear and distinct advantage in the negotiation.

So what’s the best way to mitigate landlord’s advantage? By hiring an experienced tenant representative, a tenant can create leverage in the negotiation. And once engaged, natural competition is created, as a landlord knows that he or she is now dealing with a counterpart knowledgeable in alternative space options, market prices, market concessions, comparative lease comps and other relevant factors. And not to put too fine a point on it, but engaging tenant representation will not only save you money, it won’t cost you any, either. At Alpha Space NYC, we are in the market on a day-in, day-out basis, with a sole focus on representing alternative industry tenants. We understand what’s important to you and how to achieve it.

Focus: Time is a broker’s most valuable commodity, and a non-exclusive broker cannot afford to spend it on a transaction where the chances of successfully completing a deal are low. An exclusive broker is protected and is far more likely to focus on a requirement where the chance of a successful outcome is significantly higher, as compared to working on a requirement that is not exclusive.

Aligned Interests: An exclusive broker is assured of a deal, so has no bias for or against any particular space, and will drop a flawed deal, knowing that there will be another. The tenant’s best interests are always being served. A non-exclusive broker will push a tenant to get a deal done quickly on whichever space he or she represents, otherwise they make no money. In other words, a non-exclusive broker’s interests align with “owner of choice,” which may not align with a tenant’s best interests.

Control: By definition, an exclusive broker has more control over the tenant’s decisions than a non-exclusive broker. Ipso facto, a landlord or landlord’s agent have less confidence that a deal will be consummated by a non-exclusive broker; and won’t be willing to spend much time entertaining offers from a potential tenant’s non-exclusive broker, making it more difficult for a tenant to get a deal done.

Saves Time: By hiring an exclusive broker, the tenant has shifted the time consuming responsibility of qualifying space options, allowing the tenant to concentrate on their core business. And as a non-exclusive’s broker may not be aligned with the tenant, the tenant must do a greater degree of due diligence to determine whether a deal makes sense.         

Services: Transactions have become ever more complicated. Tenants typically require financial, legal, consulting and other services to complete a transaction. These services are offered at no cost, saving the tenant substantial sums of money. As compared to an exclusive broker, a non-exclusive broker is far less likely to commit the resources of its firm to a prospective tenant. Alpha Space NYC offers a complete range of tenant representation services. Please click here for a complete list of Alpha Space NYC services.

Indemnification: When dealing with multiple brokers, there is an increased risk of a lawsuit with another broker claiming a commission. No tenant wants to find themselves in a commission dispute.

Short answer…NO!!

There are no fees, there is no cost associated with tenant representation services. As the landlord pays the brokerage commissions, there is a common misperception that engaging tenant representation will increase the rent. Not true! All landlords build industry standard brokerage commissions into their asking rents. The brokerage commission is always paid out. It’s simply a matter of whether it gets paid to the landlord or landlord’s representative, or to your broker, representing your best interests and whose interests are aligned with your own.

Pros

• Typically shorter term; though long term subleases are certainly available
• Usually fully furnished and wired (“plug & play” in industry parlance)
• Normally priced at a discount to the market

Cons

• Financial risk of the sublandlord defaulting
• No privity (standing) with landlord
• Design flexibility is usually limited
• Subject to terms and conditions of the master lease

It’s a limited personal payment guaranty that began as a way for landlords to protect themselves from having a non-paying tenant in possession of the premises, which often occurs in bankruptcy cases. To the detriment of a landlord, when a tenant files for bankruptcy protection, it is very difficult to evict and sue the tenant. The key point of a good guy guaranty is that the guarantor’s liability ceases to accrue when the tenant has vacated the premises and surrendered possession to the landlord. In other words, once the tenant has vacated the premises, the guarantor has no liability for rent accruing for the remainder of the lease term. In essence, the guarantor is being a “good guy” by vacating the premises early and allowing the landlord to re-rent the premises and receive an income stream. A landlord will always require a good guy guaranty, which will be in addition to the security deposit. For further information on the good guy guaranty, contact Alpha Space NYC.

As with most things in life, it depends. The primary factors considered by a landlord are how strong a firm’s or individual’s credit is, how long of a lease term, how volatile the business is, whether or not the landlord is building the space, and the type of landlord (institutional, REIT, mom & pop, etc.). A security deposit of 3 to 12 months is standard. And keep in mind, today, many landlords require the security deposit to be in the form of a letter-of-credit from a first class bank. Alpha Space NYC can help you in reducing the security deposit. Contact us for further information.

Most leases today won’t state the square footage of the space you are leasing. This is mainly due to the “loss factor,” the commercial real estate industry’s term for the difference between a tenant’s usable square footage and the actual square footage the tenant is paying for, commonly referred to as the rentable square footage.  A tenant is not only charged for the square footage they occupy (”usable”) but also responsible for things that do not belong to any tenant exclusively, such as corridors, elevators, restrooms, stairwells, etc. To calculate the loss factor, take the difference between the rentable square footage and the usable square footage divided by the rentable square footage. The standard loss factor for a full floor in Manhattan is 27%. For a mult-tenanted floor, the loss factor is significantly higher – figure 32% – 35%, though it can easily be 40+%. There is no standard loss factor for multi-tenanted floors.  For further information on loss factors, contact Alpha Space NYC.

There are so many co-working options available, and they run the gamut from low end to high end and everything in between. And beyond co-working, there are specific spaces that cater to the alternative investment industry, known as hedge fund hotels or incubators. Contact us for further information and let Alpha Space NYC be your guide in sorting through the maze of options and determining which may be right for you. Below are the pros and cons of co-working space.

Pros

• Flexible lease term
• Plug & Play
• Full array of business services available
• Networking opportunities
• Ability to use various locations

Cons

• High cost per square foot
• Nickel and dimed for services, conference room usage, etc.
• Lack of space and privacy
• Inability to brand your space and display signage compared to leasing your own space
• Inability to design your space