From an Ask-NCN Discussion, 12/2/15
James Thompson, New Path Foundation
I was wondering if any of you had protocols or policies or just learning experiences in terms of the costs associated with having to pay for the planning of space for new tenants; specifically related to floor plan drawings and the engagement of consultants to do this type of work? Currently we have been underwriting all associated planning costs and were looking around to see if there was examples of cost sharing between facility owners (i.e. Landlords) and new tenants coming in. After a few experiences with tenants requesting redesigns and changes along the way to layouts, we are needing to rethink our current approach of covering all these costs. For example, perhaps a set rate for plans/drawings based on square feet that would be covered initially by the landlord with any subsequent changes or additions being borne by the tenant…just a thought we are mulling over at present.
Debra Bodner, City of Vancouver
Not sure if this will help at all, but we, in Cultural Services at the City of Vancouver, have a grant program specifically aimed at space-related issues. In this program we will fund both planning and capital projects. Among other things, organizations can apply for a grant to plan for new space or plan the re-design of the space, and then apply for capital funds to do renovations. We fund up to 50% of the project costs; the organization may contribute 25% in-kind services; they must raise at minimum the remaining funds.Here is a link to our program guidelines and information. http://vancouver.ca/people-programs/cultural-infrastructure-grant-program.aspxPlease feel free to contact me if you’d like more info or have questions.
Faisal Abid, The NonProfit Center of Boston
I’m the Property Manager at the NonProfit Center of Boston run by Third Sector New England, and have been involved with the management of this property for about 4 and a half years.In my time here, we’ve had some new organizations move in that required a redesign of existing spaces; in addition to this, we’ve had existing tenants who, as part of a lease renewal, have requested redesigns of their space. For the most part we build in the cost for both the design and the actual construction in to their lease term (as in the $/sf/year cost is higher if a redesign is needed), and specify exactly what we are willing to cover in the lease. As an example, we have a tenant here with about 1,800sf who is renewing for a 5 year term, and as part of the extension, requested a redesign of their space. We wrote in to the improvement plan of the new lease that we would cover the cost of two full (space layout, mechanical, etc.) drawings done by a professional architect, and anything beyond that would be the tenant’s responsibility.I also used to work for a property management company, and at a lot of their sites, they would establish a per square foot allowance for new tenants that would cover any drawings and construction, calculated based on the length of the term and the per sf cost the tenant would be paying.I’ve also found it helps to have someone from building management involved from the start of the design process, to manage expectations around what is and isn’t possible within the space.
John Powers, Alliance for Sustainable Colorado
At the Alliance Center in Denver, tenants are required to pay for space modifications. The amount may be tempered by the length of lease agreement executed – the long the lease, we, the landlord, may bear some of the costs, whether soft (designs, engineering, etc.) or hard (tangible materials). We don’t use a formula. We assess costs by getting competitive bids. We also reserve the right to approve designs and materials, particularly because the Center is LEED certified and we neither want to jeopardize the certification nor end up with pink Leopard spots for carpeting or wall paint.
Kim McNamer, Deschutes Children’s Foundation
Keep in mind…we are an organization who does not charge rent or a property management fee. We have a use fee for each partner that covers basic CAMs and is figured by their square footage, but it isn’t an actual lease.Typically, when a new partner is moving in and they request a redesign, new paint, new carpet, etc., we work with them to ensure whatever they want done meets our standards, but they are on the hook for paying for/or getting in kind services for all the work. We will help them by getting competitive bids if they don’t have any connections or by putting them in touch with those we have worked with in the past.I have learned over the last few years that this can be a gray area for us, so we typically do things on a case by case basis. An example of when we share costs is in regards to classrooms with preschool kids. There is more wear and tear on those rooms and we typically will pay for half of the cost to replace carpet if needed. We had a request for AC from one of our partners this year. We received got the bids and options, discussed them with them and suggested the one we thought was most cost effective. It was going to impact our administrative offices, so we split the cost with them. For new carpeting in the common areas and conference rooms, we pay. If they want to paint their office because they are bored with the color, they must go through us, request permission to paint, show us the paint color they are wanting, we ask a few questions about who is doing the work and then we remind them to do it right, mask and should anything get ruined, paint spilled on carpet, etc. they are responsible for the repair/replacement costs. One program needed a special AC unit to help keep their vaccine fridge opportunity at appropriate temperatures. This affects their program only. We got the bids, ordered the work that needed to be done and then billed them for entire project.Our rule of thumb has been that we are responsible for all things outside their offices and classrooms and they are responsible for everything inside. Meaning, they are to leave it as they found it, get permission if they want to change it, but then all costs associated with changing it inside their space is their responsibility.
Pam Mauk, Together Center
Our standards are about the same as Kim’s. Over our 25 year history, we have sometimes handled buildouts at critical junctures when we needed to move forward on space, but typically we handle preparing what is in place with new paint always and new carpet if needed and any buildouts are handled by tenants, including architectural work, permits and construction. We need to approve any changes, but have tenants sign that they are responsible for any permits and impacts from their work.We have handled the payment of contractors on occasion, adding the cost of the buildout to the lease for reimbursement over time, or other negotiated payments.
Karen Maciorowski, The CT Nonprofit Center
I direct the CT Nonprofit Center and we partner with a nonprofit real estate development organization who owns and leases the space while we run the shared space/services/resources/collaboration.
We approached this in 2 ways:
1. The below market rate rent was raised $0.50 per sf and the funds were put into a pool of money to be used for planning configurations and for the construction as long as the organization signed a 3 year lease. Due to low financing rates, this was an achievable goal.
2. The State of CT provided us a grant for a collaborative project of which we use funds to plan and implement all data ports and configuration to the shared data closet. Additional funds are used for some build out costs as well.Once round 1 is complete (when our grant runs out April 2016) we will have to either raise additional funds OR charge new tenants as most commercial real estate organizations do. We do not have any inflators on the leases – once a lease is signed, it is the same rate for the period of the lease.
Dustin Barrington, HNS Life Center
We were very fortunate to have the services of an architect donated for our project in exchange for some naming rights. Free wasn’t always cheap, but “in kind” generally worked for us.We have built out about 40k sq ft in the last 18 months. The school of hard knocks has taught us to be clear and consistent throughout the entire communication process with tenants. We started off trying to accommodate everyone’s requests but found that some tenants were willing to spend money as long as it was ours… Reserving generosity for partners that are willing to shoulder their part of the burden seems to produce better results for us.