We’ve all heard of the rich perks leading tech companies offer their employees – from gourmet food to full-service gyms. Borrowing a page from these companies, office landlords are offering many of those perks to their tenants as added amenities as they look to lease-up their buildings and increase rents. While their interests diverge, today’s office landlords and tenants (not just the Googles of the world) share a simple mission: create a workplace where people want to be and where they thrive. That’s particularly the case today where everyone is looking for ways to retain and attract millennials.
Looking forward to a new chapter in your business, you just moved into your new office space. Your old office building is, however, haunting you after receiving an invoice from your prior landlord for restoration obligations. Most office leases contain a relatively innocuous provision commonly referred to as the “Surrender Clause” which spells out the obligations of the tenant to restore their premises to a certain condition upon lease expiration or termination. Many tenants pay little attention to this provision in lease negotiations based on the conventional wisdom that the landlord will likely demolish their space and rebuild it for a new tenant. In this post, I outline what tenants should consider in limiting their liability when surrendering their premises. Continue reading
The trend of companies moving to urban areas in search of younger talent has challenged some suburban based companies, landlords and suburban governments in the Chicago area and across the country. Earlier this year, I posted a blog examining the trend of urban migration in Chicago and nationally: Corporate Office Urban Migration – Chicago & Nationally. While the Chicago area is well connected with mass transit (including an extensive rail system), the challenge has been for commuters to get to and from the rail line. That’s particularly been a detriment for suburban companies trying to recruit “car-less” millennials whom live in Chicago. While there’s train service for reverse commuters, the transit from the train to suburban office parks is a challenge. Recently, however, a Chicago area based company, along with the support of DuPage County and the Regional Transit Authority (RTA), has piloted a car-share solution at a local train station to improve transit connectivity. Continue reading
Occasionally, we hear of a tragedy where a bomb explodes in a former war zone. Likewise, in commercial real estate where most markets have recovered from the recession, there is a time bomb of building ownership that can be disastrous for office tenants. That ownership structure is a TIC (Tenancy-In-Common). In this post, I outline what is a TIC, the challenges they present and how tenants can safeguard their interests.
On the heels of the great recession in December 2010, I wrote about whether the trend of office tenants moving to urban areas is a secular shift or an aberration (“Downtowns Drawing Tenants Over Suburbs: Secular Shift or Aberration?“), concluding that companies that are location neutral (i.e., don’t need to be suburban or urban) will be driven by qualitative factors including, most importantly, labor. Here in Chicago and many other markets nationally, we’ve seen an increasing number of companies relocating all or a portion of their operations to the Central Business District (or surrounding areas). Most recently, it was announced that McDonald’s Corporation will relocate their HQ from west suburban Oak Brook to Chicago. With urban office rents being considerably higher than suburban, these companies are not looking at real estate from purely a cost perspective, but rather how it can be a strategic tool in driving their core business. In this post, I summarize the reasons underlying this trend, what we can expect in the future and what is happening in Chicago as an illustration of this national and global trend. I also explore why some companies have decided to stay in the suburbs.
While your ultimate decision on leasing office space will be based upon how it supports your business goals, the building tour is an initial litmus test. A thoughtful inspection of a building and space may identify potential issues that you can address early on in negotiations as well as avoid dead-ends. Before you look at new office space, here are some “do’s and don’ts” to consider based upon my 20+ years representing office tenants in Chicago and nationally. Continue reading
On November 11, 2015, the Financial Accounting Standards Board (FASB) decided upon the effective date for the long awaited and much debated new lease accounting standard requiring companies to recognize leases on their balance sheets. The effective date for public companies will be in fiscal years (including interim periods within those years) beginning after December 15, 2018. The effective date for private companies will be for annual periods after December 15, 2019. Upon issuance of the final standard, which is expected to be early 2016, FASB allows for early adoption which some companies will do to meet SEC requirements. Continue reading
With strong office markets in many parts of the country, landlords are becoming rather bullish. In that spirit, they are looking to maximize leasing flexibility in accommodating new and growing tenants. One leasing flexibility tool that landlords have in their toolbox is the right in the lease to relocate a tenant. While tenants want to see their landlords succeed in keeping the building well occupied, they are more concerned with maintaining a productive office. Relocation is extremely disruptive for businesses when they are planning to move at the expiration of their lease; it’s even worse when the landlord issues you a notice out of the clear blue that they are going to relocate you. Even though the relocation move is typically paid for by the landlord, assuming the tenant has negotiated that into its lease, that is little consolation for the intangible loss in productivity to the tenant’s business. Outlined below are strategies to fundamentally eliminate this right and, where that is not feasible, to neuter it as much as possible. Continue reading