Industial Leasing Guide What you need to know befoe you sign Collies Intenational Industial Leasing Guide P. 1
THE INDUSTRIAL LEASING GUIDE This step-by-step guide has been assembled to eflect Collies Intenational s knowledge of the leasing pocess. You ll find infomation on tenant impovements, common pitfalls, timelines and fequently asked questions. The infomation in this handbook will assist you in making a moe knowledgeable decision while minimizing disuption to you business. P. 2 Industial Leasing Guide Collies Intenational
Contents > 4 Allow us to intoduce ouselves About Collies Intenational > 5 Getting stated Make educated decisions about you business space > 6 Top 10 Tenant mistakes Avoid these common blundes in you leasing pocess > 7 The Industial leasing pocess Fou steps to business poductivity > 8 DETERmine you popety needs Take you equiement fom notion to motion > 10 Evaluate maket altenatives Inspect and compae you options > 12 commit to pemises Complete you lease documentation; commence the full design pocess > 13 design and poject management Rethink you facility > 14 tanslating the lingo Glossay of tems and fequently asked questions > 19 Relocation checklist You step-by-step guide Collies Intenational Industial Leasing Guide P. 3
Allow Us to Intoduce Ouselves About Collies Intenational Who is Collies Intenational? Collies Intenational is the leade in global eal estate sevices, defined by ou spiit of entepise. Though a cultue of sevice excellence and a shaed sense of initiative, we have integated the esouces of eal estate specialists woldwide to acceleate the success of ou clients. The foundation of ou sevice is the stength and depth of ou specialists. Ou clients depend on ou yeas of diect expeience in the local maket. Whethe you ae a local fim o a global oganization, ou industial specialists ae ideal business patnes to povide ceative, stategic solutions fo all you eal estate needs. Why engage ou sevices? Ou industial pofessionals give you the expetise to navigate complex sales o leasing tansactions and make stategically sound, long-tem decisions. Collies is uniquely positioned to help you find innovative and pactical ways of achieving a business advantage fom you commecial eal estate tansactions. You eal estate decisions today will affect you company s bottom line long into the futue. Each mile that sepaates you facility fom a supplie o custome ceates a ipple effect in time and cost. That s why location is citical. Combining the knowledge of locally-based analysts with the shaed expetise and esouces of a global platfom, you Collies pofessional can help you undestand and take advantage of cuent maket tends. Capabilities > Tenant Repesentation > Sale vs. Lease Analysis > Lease Negotiation & Renewals > Lease Administation > Site Selection > Build-to-Suit > Reposition/Retofit > Constuction Management > Popety Due Diligence > Highest & Best Use Studies > Appaisal/Valuation > Relocation > Consolidation > Logistics Consulting > Tend Analysis > Sale/Leaseback P. 4 Industial Leasing Guide Collies Intenational
Getting Stated Making Educated Decisions About You Business Space WHAT ARE MY OPTIONS? WHY SHOULD I RELOCATE? HOW MUCH WILL IT COST? WHOM SHOULD I INVOLVE? Examine all you options caefully. Do you stay in you cuent location o elocate? At fist, elocating may seem like moe touble than it s woth, but don t ule it out ight away. Often the status quo isn t the best financial altenative. Think about what you want to achieve and then decide if you existing location suppots that objective. You Collies industial specialist can sit down with you and map out the most impotant financial and pesonal factos in you decision. Stay put If you existing space satisfies you cuent and long-tem business needs, but you ae appoaching the end of you lease, conside enewing. We can help negotiate a new lease with the building owne. Relocate The expiation of you lease can offe you an oppotunity to tansfom you business by elocating. Business Needs If you cuent space is o will become too small, too lage, outdated, o pooly configued, a new facility can be an oppotunity to incease you labo pool, stengthen poductivity, steamline opeations, incease wokfoce moale, o educe tanspotation costs. Additionally, maket conditions o municipal business development incentives may suppot the business case fo elocation. Collies industial pofessionals have a long tack ecod seving clients in the manufactuing, waehousing and distibution secto, so they can undestand you business needs and help you weigh these factos stategically. The negotiation of ent and tenant incentives depends on the dynamics of you local maket. Contact you Collies pofessional fo the maket tends in you location. This should also be viewed as an oppotunity to ethink the ways in which you existing facility affects opeational costs. Can you opeation be econfigued, upgaded, expanded? Ae thee opeational decisions you ve been putting off because of an avesion to moving. WHEN SHOULD I START? Plan, Plan, Plan Whethe you decide to stay o go, knowledge is key. Undestand you cuent situation, eview othe options, and assess the maketplace context to optimize the end esult. The peiod equied to conduct a lease negotiation and elocation is six to nine months at a minimum. Depending on the size of you oganization and cuent maket conditions, you should begin this pocess 12 to 18 months pio to you lease expiation. It can take two yeas o moe to complete the elocation pocess fo lage o complex assignments. You intenal steeing committee should be led by a senio employee, and suppoted by decision-makes and influences, including divisional heads and key staff. A pofessional eal estate adviso is a citical pat of the poject team, aming you with insight into the maketplace, you altenatives and the financial implications of stay-o-go scenaios. A single point of contact fom you oganization, matched with a single point of contact at Collies Intenational, can ensue the pocess uns smoothly. Collies Intenational Industial Leasing Guide P. 5
Top 10 Most Common Mistakes Made by OCCUPIERS > 1 Putting youself at a disadvantage by beginning enewal o new lease negotiations too late > 2 Lacking clealy defined business o eal estate objectives > 3 Focusing exclusively on financial costs > 4 Failing to appoint a poject leade as the intenal single point of contact > 5 Making inaccuate estimations of the company s space equiements > 6 Acting too slowly once a decision is made, and consequently missing out on oppotunities > 7 Ageeing to tems pio to obtaining a logistics consultant > 8 Failing to allow fo futue expansion o contaction > 9 Lacking the knowledge of futue oppotunities; often, the best deals ae secued well in advance of space becoming available > 10 Failing to leave enough time at the end of the lease to fulfill make good obligations, o failing to undestand the exact tems of you tenant impovement allowance. P. 6 Industial Leasing Guide Collies Intenational
The Industial Leasing Pocess Thee Steps to Business Poductivity STEP TWO: Relocate Confim eal estate equiement evaluation Bief pefeed lessos Confim development sites/existing building options and assess via inspections Begin RFP pocess STEP ONE Choose Shot-list options, wok with logistics consultant/achitect to evaluate new facility Fact Finding Undestand you business needs Detemine you popety needs Identify decision makes and confim citical time path Conduct equiement evaluation Poduce eal estate bief Evaluate maket altenatives: elocate o enew STEP TWO: Renew Confim existing pemises as most desiable oppotunity Bief existing lessos Confim eal estate equiement evaluation STEP THREE Commit to new (o existing) pemises Complete new (o vaiation of) lease documentation Complete tenant impovement design and poject management Engage a logistics/supply chain consultant (if applicable) Wok with logistics consultant to evaluate space efficiency Begin RFP pocess Collies Intenational Industial Leasing Guide P. 7
Step One Detemine You Popety Needs TAKE YOUR REQUIREMENT FROM NOTION TO MOTION Skipping the planning stage leads to many of the Top 10 mistakes most commonly made by occupies. It is cucial to undestand you popety equiements though evaluation and foecasting. DETERMINE FUTURE SPACE NEEDS You should conside medium- to long-ange business goals fo leases unning thee yeas o moe. Guided by you eal estate adviso, the pocess of constucting a eal estate bief to achieve you business objectives will conside questions including: > Is you business gowing o shinking? > What ae you band values? > What will you facility equiements be in thee yeas? > Ae you consideing acquiing o meging with othe fims? > What effect will moving have on you customes and staff? > How will moving impact logistics and tanspotation costs? > What ae the long-tem pospects fo the quality of you existing labo pool? By woking though this concept planning phase, you will achieve the maximum benefit both financial and stategic in the elocation o econfiguation of you facility. If the wokplace design happens solely duing the design and constuction phase, only minimal gains ae possible. Involve key intenal decision-makes Assemble a team with the beadth of skills to dive the poject. Involve you expets in human esouces and finance who will be familia with specific tends that may influence you equiements and decisions. Thei involvement fom the outset will help claify and focus you bief and achieve intenal buy-in. Collaboation with you plant/facilities P. 8 Industial Leasing Guide Collies Intenational
manages, manufactuing enginees, opeations manage, etc. will ensue you plan base you plan on the best infomation. If you e elocating, the planning stage should include any vendos who supply and maintain you majo machiney, so you can facto in the expense of upgading powe, tanspoting and ecalibating equipment, availability of technicians, etc. Be sue to appoint a poject leade to connect with you intenal stakeholdes as well as with you boke and consultants. Ceate a eal estate bief The biefing pocess begins with the documentation of you wokplace equiements. > Gowth pojections > Space size > Space configuation > Specifications and equiements (clea height, powe, etc.) > Oganizational vision > Cost paametes > Timing A well-pepaed eal estate bief will cystalize these elements and tanslate them into you popety equiements. The bief will expedite you decisionmaking pocess, and save time by focusing you inspection and eview on only suitable popeties. You bief will also ceate a famewok to evaluate and compae you options. An impotant element in developing this bief is to audit you existing pemises ceating a clea undestanding of what s woking and what s not. WHAT SHOULD BE IN YOUR BRIEF? You eal estate bief should conside a wide ange of citeia: > Size of space > Size of wokfoce (maximum and minimum) > Image/quality/aesthetics > Location > Paking (cas and tucks) > Clea height > Loading Doos > Poximity to majo highways > Office hous > Secuity and access > Lease stuctue pefeences > Technical equiements > Timing > Communications infastuctue > Budget > Envionmental consideations > Local incentives > Othe unique needs > Tem/enewals Conside constucting a matix that anks each facto in tems of impotance, as you may have to compomise on some items, depending on the options available. You can also assign a point value to each facto, with moe points attibuted to the factos with geate impotance. You Collies pofessional can guide you though this evaluation pocess. Know you local maket and commitments Duing this phase, you should familiaize youself with local maket conditions and picing. By knowing the maket vacancy ates, popety values, inventoy pojections, cuent ental ates and tenant incentives, you will be in a bette position to evaluate poposals. You Collies industial pofessional can povide you with a maket pesentation that descibes these factos in you local maket and in specific submakets you identify as most desiable. Collies Intenational Industial Leasing Guide P. 9
Step Two Evaluate Maket Altenatives. Inspect and evaluate you options. Release You Bief to The Maket To avoid dealing with multiple agents, you can equest that you Collies pofessional appoach the maket on you behalf. Though maket knowledge and a well-established netwok of agents and ownes, Collies will act as a single point of contact to uncove all suitable space oppotunities. You boke will also assist in discussions with you existing landlod egading lease enewal options. Evaluate and Pepae a Shot List When analyzing altenative pemises, conside timing, financial and othe incentives that may be offeed. A lease enewal option should include expansion and contaction costs, as well as the cost of econfiguing o completely efubishing you wok space. Aim fo a shot list of thee o fou popeties. Evaluate options against you bief, ensuing the popety s benefits match you stated business objectives. Collies has developed a ange of decisionmaking models and matices that damatically impove efficiency in the evaluation pocess. FINANCIAL ANALYSIS Thee ae seveal ways to compae the financial aspects of leasing, including: > Goss effective ent pe squae foot > Goss stated ent pe squae foot > Goss and net ent pe squae foot > Total occupancy cost pe employee Futhe detail on these measuements is povided in the Fequently Asked Questions potion of this guide. P. 10 Industial Leasing Guide Collies Intenational
COMPARE YOUR OPTIONS When evaluating lease tems, take into account lease incentives (such as fee ent o a geate allowance fo tenant impovements), the total ent ove the life of the lease including ent hikes, and the tem of the lease including extension povisions. Ou pofessionals can help you undestand the eal estate maket cycle, suppoted by tens of thousands of lease compaables in ou popietay database to give you the edge in negotiations. DETERMINE WORK SPACE EFFICIENCIES By conducting a design site audit of the shot-listed options, you achitect/ space planne, efficiency/logistics expets o othe consultants can detemine the wok space efficiencies fo each popety. This pocess also poduces sample tenant impovement designs pio to you ageement on tems, enabling you to compae you options based on financial and nonfinancial citeia. You wokplace designe will povide the following sevices duing this citical evaluation phase: > Pepae a detailed existing tenant impovement audit > Assess items suitable fo e-use in the impoved plant o facility > Manage the pe-design pocess including a eview of local authoity appovals and code equiements > Pepae selected site audits > Pepae a stacking and blocking plan > Pepae peliminay concept designs > Povide an opinion of likely tenant impovement costs TENANT IMPROVEMENT COSTS Attaining a tenant impovement that is aligned with you oganization s ideal outcome depends on which components ae viewed as necessay and what is discaded duing the design phase. It is citical to assess all aspects included in the tenant impovement to detemine thei contibution to the oveall objectives. Equally impotant is the identification and evaluation of the potential components that ae excluded. Identifying positive and negative components though the audit pocess maximizes the effectiveness of the final esult and minimizes the cost of the tenant impovement. Collies Intenational Industial Leasing Guide P. 11
Step Thee Commit to Pemises Complete you lease documentation; commence the full design pocess Lette of intent/rfp Once the business paticulas of a lease ageement ae negotiated, both paties will sign a lette of intent. This document is geneally not legally binding, but is a gestue of good faith that the basic business points have been ageed upon. When signed, this document will be used to bief attoneys so that the final lease documents can be pepaed. Wokplace design issues When a lease ageement is complete, the wokplace tenant impovement pocess begins immediately. At this stage, you should have completed: > Needs analysis > Space plan > Test fit This will enable you to engage a space planne and you equipment vendo s technicians with accuate infomation egading you equiements. The soone these esouces ae engaged, the bette the outcome. P. 12 Industial Leasing Guide Collies Intenational
Step Fou Design and Poject Management The final stage of the pocess povides the pefect oppotunity to e-think wokplace/facility impeatives and pomote oganizational effectiveness, community, communication and poductivity. > Pepae documentation fo building owne and authoities > Coodinate stakeholdes DETAILED DESIGN AND DOCUMENTATION PHASE CONTRACT ADMINISTRATION > Manage the delivey pocess and administe contacts > Appoint all appoved contactos and supplies including head tenant impovement contacto > Manage the identification and completion of all outstanding and defective woks > Cost epoting and final accounts > As-built dawings, opeating manuals, guaantees and waanties DESIGN DEVELOPMENT AND CONSTRUCTION APPROVAL > Engage and fully bief all othe specialists and consultants > Commence detailed design > Review likely tenant impovement costs > Pepae documentation fo constuction bid > Obtain building and constuction pemitting BID REVIEW PHASE > Detemine ageed bid eview panel > Coodinate all equied meetings > Coodinate quality contol inspections > Cost and vaiation management > Poject manage delivey pogam > Poject completion/occupation > Ovesee pactical completion > Final inspection and completion of woks at the end of the defects liability peiod > Pepae detailed constuction timeline > Review and assess bid esponses > Issue Code of Compliance cetificate > Bid management and analysis > Inspection and sign-off Collies Intenational Industial Leasing Guide P. 13
Tanslating the Lingo Glossay of Tems Building Consent Appoval fom the elevant authoities fo caying out building wok on the pemises, usually fo tenant impovements. CAP AND COLLAR A tem and method used in some maket eview clauses. It is a mechanism that puts a cap o maximum amount by which the ent can be inceased, o a colla, the maximum the ent can decease, on the ental ate eview date. As industial leasing makets stengthen, these eview methods ae moe difficult to negotiate. GROSS EFFECTIVE RENT The ent payable unde the lease, accounting fo all incentives and including all building expenses. GROSS FACE RENT The ent payable unde the lease, excluding any incentives but including all building expenses. LESSEE That legal entity, company o peson whose name appeas as the occupie o use of space on the fomal lease document, binding the lessee to the tems and conditions stated theein. Also known as the tenant. LESSOR The paty whose name appeas as lesso on the fomal lease document. The lesso is the landlod o owne of the popety. MAKE GOOD The lessee s obligation to etun the pemises to thei oiginal condition pio to expiation of the lease. NET RENT, GROSS RENT Net ent is only the cost to lease the popety. Goss ent is the ental ate including occupie s shae of the opeating expenses (e.g., popety taxes, insuance, popety management). Lease tems such as modified o industial goss, Net-Net, Tiple Net, etc. descibe diffeent popotions of opeating expenses paid by the tenant. OPERATING EXPENSES All seconday expenses othe than ent associated with insuance, opeation, upkeep and/o maintenance of the building, including ai conditioning, elevato maintenance, common aea cleaning, secuity and electicity. RENT REVIEW The method by which you ent can vay duing the tem of the lease. This can be a maket ate eview, a pedetemined figue (such as 3 pecent) o a ate fixed to an index such as the CPI. The eview stuctue is ageed upon pio to lease commencement. RESOURCE CONSENT Appoval fom the local govening authoity with egad to zoning o changes in the pemitted use of the pemises. RIGHT OF RENEWAL The lessee s ight to enew a lease fo an ageed peiod of time pio to expiation of the initial lease. STATUTORY EXPENSES Statutoy expenses include costs such as municipal ates, wate and sewe ates and usage chages. SUBLEASE/ASSIGNMENT The mechanism unde the povisions of the lease allowing the lessee to find a suitable eplacement tenant. This is subject to lesso appoval and unless specifically stated, does not limit you legal esponsibilities duing the tem of the lease. P. 14 Industial Leasing Guide Collies Intenational
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Fequently Asked Questions How can I negotiate the best deal? By caefully selecting the ight popeties on you shot list, you can ceate a competitive envionment to achieve the most favoable lease ageement. You Collies Intenational boke can assist you thoughout this pocess. WHAT ARE MY TOTAL REAL ESTATE COSTS? In addition to you net ental ate, you may also pay fo opeating costs such as insuance, building and gounds maintenance, taxes, utilities, and othe expenses incued by the landlod. WHAT ARE THE DIFFERENCES BETWEEN GROSS RENT, NET RENT, EFFECTIVE RENT AND FACE RENT? GROSS RENT is the ent calculated inclusive of all building costs, wheeas NET RENT is the ent calculated excluding building costs. FACE RENT is the quoted ental ate befoe taking into account incentives o inceases, wheeas EFFECTIVE RENT is the ental ate aveaged out ove the tem of the lease, including consideation of ent-fee peiods o up-font incentives. WILL I BE ABLE TO SUBLEASE OR ASSIGN MY LEASE? Most commecial leases allow the lessee to sublease o assign thei pemises. Typically, the lesso is unable to uneasonably withhold consent to the sublease/assignment. A pudent lesso will conside the stength of the contact being offeed by the incoming tenant and will be eluctant to accept a sublease/assignment if it could potentially compomise thei financial position o secuity. WHAT ARE THE RENT REVIEW PATTERNS FOR THE TERM AS WELL AS THE RENEWAL PERIOD? Most lessos have a standadized lease document fo thei buildings, including a peaanged ental eview schedule in light of the lesso s own objectives and cuent maket conditions. Lessees will typically equest a ight of enewal as pat of the lease negotiation, allowing them to extend thei occupation beyond the initial lease tem. It is nomal to set out the ent eview patten fo this tem in the oiginal lease document. WHAT IS A MAKE GOOD AND HOW MUCH WILL IT COST? A Make Good is you (the lessee s) obligation to etun the pemises to its oiginal state upon completion of you lease, usually excepting fai wea and tea to pemises. HOW MUCH WILL MY TENANT IMPROVEMENT COST? This depends on the quality of tenant impovements you equie. Factos in the cost include the existing tenant impovements fom the pio tenant, the quality of finishes selected, infastuctue needs such as plumbing and wiing, and the complexity of the equested build-out. Typically, landlods povide a tenant impovement allowance and tenants ae expected to pay the diffeence between that allowance and the actual cost of impovements. Collies Intenational Industial Leasing Guide P. 17
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Relocation Checklist A Step-by-Step Guide PRELIMINARY Mail moving notices PRE-MOVE INTERNAL POST-MOVE Finalize lease fo new location Notify pesent landlod of temination date Advise staff of date and location of move Engage a logistics/supply chain consultant (if applicable) Ceate a maste change-of-addess list Envionmental impact eview? PRE-MOVE GENERAL Bid and awad moving contact Bid and awad telephone and compute cabling Inventoy existing assets, including funitue, equipment Code funitue and equipment on a colocoded floo plan Audit keys Ode any new office funitue and equipment Ode new stationey File change-of-addess foms with post office and fowad mail Check you insuance coveage fo the move Obtain the Cetificate of Occupancy and any othe equied pemits o licenses Banks and financial institutions Clients and customes Pofessional oganizations Cedit accounts and cedit cads Insuance companies Accounts eceivable and payable Newspape and magazine subsciptions Telephone company and intenet sevice povide Pospects and special sevices Hold a meeting at new pemises thee weeks pio to move. Bing in all paties involved (equipment vendos & technicians, design/constuction/move/cabling company/infomation technology specialist) to ensue all details ae coveed and all esponsibilities clea Change locks/access codes on new pemises as close to moving day as possible to secue access Schedule public elations effot, including plans fo news eleases Aange fo signage at new facility Aange fo post-move cleaning Oganize a staff moving committee if appopiate and delegate esponsibilities Schedule and pepae agenda fo you employee move oientation meeting Develop a maste elocation poject schedule Schedule and implement a clean-up pogam (puge files, dispose of tash) Schedule staff fo unpacking, including stocking supply cabinets, stoeooms, file ooms, to ensue you company will be opeational as apidly as possible afte move Aange fo staff to tou new pemises a few weeks pio to move Schedule post-move taining fo secuity, fie, and life safety pocedues at the new facility Distibute access cads and keys fo new pemises MOVING DAY Remove compute equipment (seve) and phone system pio to aival of moves and commence einstallation at new site Daft an emegency contact list fo vendos such as elevato maintenance, building management, utilities, telecommunications and moving company Install and test telephone system Distibute new phone list Do a detailed walk-though of the pemises and epot any damage to moving company Run benchmak tests and calibation of majo equipment Tansfe you insuance to the new location Obtain Cetificates of Insuance fom you insuance company Confim temination of old leases Collect paking passes, secuity cads and keys fo the old facility. Confim the etun of any deposits held by the landlod fo these items. Audit final invoices against contacts Complete and file all waanty infomation fo all new funitue and equipment Update fixed asset accounting system fo any new funitue and equipment puchased Confim the change-of-addess coections made Schedule pess elease and client announcement Advise supplies Decide on secuity pocedues fo the move Collies Intenational Industial Leasing Guide P. 19
www.collies.com Acceleating success. This document has been pepaed by Collies Intenational fo advetising and geneal infomation only. Collies Intenational makes no guaantees, epesentations o waanties of any kind, expessed o implied, egading the infomation including, but not limited to, waanties of content, accuacy and eliability. Any inteested paty should undetake thei own inquiies as to the accuacy of the infomation. Collies Intenational excludes unequivocally all infeed o implied tems, conditions and waanties aising out of this document and excludes all liability fo loss and damages aising thee fom. This publication is the copyighted popety of Collies Intenational and/o its licenso(s). 2011. All ights eseved. P. 20 Industial Leasing Guide Collies Intenational