To Consider When Leasing Retail Space

Retail Use- Ground Floor

Retail Space ( not food related)

  • How large is the frontage
  • Is it column free or what is the distance between columns
  • Ceilings heights
  • Is there a basement
  • What kind of signage can be placed
  • Electrical amps
  • Close to transportation
  • Competition

Retail Space- Food related

  • What type of food establishment
  • Will cooking be done on premises
  • Do you require gas
  • Is there a vent if not can one be build
  • Is there any refrigeration in the space
  • What layout is the space
  • If there is a wine/beer license or alcohol license in place. Even though they are not transferable in NYC but if the establishment has them already it is much easier to get one
  • Is there outside seating
  • How large is the frontage
  • Is it column free or what is the distance between columns
  • Ceilings heights
  • Is there a basement
  • What kind of signage can be placed
  • Electrical amps
  • Close to transportation
  • Competition
  • Is there KEY MONEY

To Consider When Leasing Retail And Office Space
For all Industries

Desired Location

When considering location:

Does the specific area or neighborhood have other items that are important to you and your company ( ex. Hotels if you have people traveling, restaurants, are your suppliers close by etc..)

  • Does the surrounding area fit the “image of your company”
  • Is it close to transportation
  • Are you looking for high traffic area such as an Avenue locations or can a side street work for you

For more information on neighborhoods in Manhattan please visit: http://en.wikipedia.org/wiki/List_of_Manhattan_neighborhoods

For more information on New York City Subway please visit: http://web.mta.info/maps/submap.html

For more information on New York City Buses please visit: http://web.mta.info/nyct/maps/manbus.pdf

Type of Building:

Building Classes

Most commercial office spaces in Manhattan fall in the following 3 classes of buildings:

Class A
  • Usually High-rise building
  • Usually concrete and steel construction – Expert construction
  • Highest quality materials and finishes – Attractive buildings
  • High quality building infrastructure
  • Generally, 100,000 sq ft or larger – Five or more floors
  • Strong identifiable location – Convenient access (public transportation,…)
  • State-of-the-art systems according to BOMA guidelines
  • Business/support amenities
  • Professional management of the building
  • Premier tenants
  • Highest rental rates
  • Definite market presence
  • 24/7/365 Lobby attendant
  • High level of security
Class B
  • A grade below Class A
  • Slightly older buildings – Good management – Quality tenants
  • Building finishes – Fair to good
  • Good quality systems – not at Class A level
  • Well maintained – Functional
  • Average rental rates
  • Good tenants
Class C
  • Lowest grade for useable office buildings.
  • Usually older office buildings
  • Located on less desirable streets in older sections of the city
  • Higher than average vacancy rates for their market
  • Less impressive architecture
  • Limited infrastructure
  • In need of extensive renovations
  • Antiquated technology
  • Lower rental rates
  • Often targeted for re-development
  • Tenants requiring functional space and usually requires more out of pocket for building amenities

Square Feet

With very few exceptions in retail spaces most office spaces in Manhattan have a loss factor.

The square footage is measured from beam to beam of the building so most spaces will have a 10%-40% loss factor. ( ex. Rentable/Usable If the gross size of the space is rentable 1,000sf the actual usable size of the space will be 600sf-900sf) This will depend on an individual building.

The loss factor is usually determined by the following factors:

  • If you are renting Full floor or Partial floor – usually a full floor will have a smaller loss factors then partial floors because a partial floor include hallways, bathrooms, staircase, HVAC units and anything else that is shared on the floor, is used to determine the gross (rentable) square footage
  • Type of building – Usually high end buildings such as Class A and B building will have the highest loss factor on partial floor spaces

Floor Preference

In Manhattan commercial buildings unless zoned otherwise floors are divided in to Retail Use and Office Use

Retail Use – Is usually the ground floor and basement, if basement is available and it is zoned as work can be done there then it is a sellable space and the landlord will want rent for it. If it is not zoned for work and only for storage then it is included as part of the asking price with the ground floor.

In certain cases 2nd and 3rd floors are zoned as Retail Use. It means clients that come to your space they usually come in without an appointment.

Prices for Retail Use tend to be higher than for office use.

Office Use – In most commercial buildings this means 2nd floor and higher. If your company has clients that come to your space it is usually done by appointment only and not clients that walk in from the street.

Views – If views are important to you then usually the higher floors will work better. Most higher floors tend to have a higher asking price than lower floors

Noise – Depending on the building the higher floors will have less noise then the lower floors

Elevators – Deepening on how many elevators the building has some buildings allow for people to use the staircase. In the event you have a lot of people coming up and down from your space a lower floor would work better if the building allowe to use the stairs.

Full or Partial Floor

Depending on how much space you need there can be pros and cons of leasing a full floor or a partial floor and have other companies on your floor.

Space/Build Out

If the area and the building can work for you but the existing layout does not then in most cases we can negotiate for a landlord to give you a new build out or additional free rent for you to do a build out. This will depend on case by case basis depending on the building and the landlord.

Specific Requirements for Space:

An example would be for the space either to have or to be able to install a bathroom, pantry, a server room, to have high ceilings, good views, sound proof walls, large windows, office to be close to the elevator or freight elevator, to have high security and 24/7 access or any other special requirements a company needs

Term

Standard Length of Lease -Unless the space is a sublease most common lease terms in Manhattan are:

  • 1 – 3 Years
  • 5 Years
  • 7 Years
  • 10 Years

Depending on the size of the space most landlords prefer leases over 3 years.

In certain cases landlord will only do deals on 5, 7 or 10 year leases. This is determined by:

  • Size of space
  • Use
  • Amount of build out they have to provide for the new tenant.

The longer the term the greater the chances are of negotiating the best possible deal.

Leases over 10 years – in most cases unless the space is a retail space landlords will not give a lease for more than 10 years

Options – in most cases unless the space is retail landlord will not provide options but in many cases you can ask for First Right Of Refusal when the lease is up.

Budget

In most cases the asking price per square foot in Manhattan can be negotiated. The main factors that will be considered in determining the price are:

  • Term of the lease
  • Amount of build out they have to provide for the new tenant
  • Type of use
  • How strong are the companies financials how secure is the landlord the rent will be paid on time for the term of the lease

Keep in mind that besides what the rent will be you should estimate an additional 10%-15% of what your rent for additional building expenses ( such as utilities, tax, CAM charges and other expenses associated with leasing the space ). – Let’s put link to addition expenses

To calculate price: Square feet X Price per square foot= Annual rent/12 months = Price per month (ex. $40sf X 1,000sf = $40,000 Annual rent/12 months-$3,333.33 a month

Timing

Depending on your targeted move in date you should start the search 90 days – 18 months before.

The main factors will be:

  • Use – depending on the type of use you have you might need special requirements or permits to conduct business in NYC. In some cases you have to have the space first before applying for the permits
  • Size- usually the larger the size the longer the build out will be. Also larger deals tend to take longer to negotiate both on a real estate side and by the attorneys.

Build out- In NYC any construction work requires permits, the more extensive build out you need the longer it will take for you to move in.

Searches For typical office use spaces that require several offices, conference rooms, pantry etc.. You should allow 2-5 months from the start of the search to move in date.