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Turner Drake & Partners Ltd.
6182 North Street
Halifax, N.S.
B3K 1P5
Canada

Tel.: (902) 429-1811
Toll Free: (800) 567-3033
Fax.: (902) 429-1891

Suite 221
12 Smythe Street
Saint John, N.B.
E2L 5G5
Canada
Tel.: (506) 634-1811

Suite 11
109 Richmond Street
Charlottetown, P.E.
C1A 1H7
Canada
Tel.: (902) 368-1811

35 York Street
St. John's, N.L.
A1C 5M3
Canada
Tel.: (709) 722-1811

4th Floor
111 Queen Street East
Toronto, ON.
M5C 1S2
Tel.: (416) 504-1811

E-Mail: tdp@turnerdrake.com
Internet: www.turnerdrake.com

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# Friday, March 29, 2019

You are a tenant looking for commercial space to lease. You start your search by checking the local Kijiji ads and maybe check with a few colleagues when you realise that perhaps you are in over your head. One ad is asking for $14/ft.² net plus operating and taxes, while another is asking $3,500 per month gross. How do you compare these two rents?  

Or perhaps you are a new landlord, eager to fill up your new investment property and start making a return. You are not sure what to charge for rent, but you want to ensure that all of your operating expenses are recovered at the end of each operating year and you are not out of pocket for any expenses.

First, let’s summarise the rental terminology:

Net Rent: Often called “Base Rent”.  This is what you pay for the right to occupy a given space

Additional Rent: Often called “Common Area Maintenance (CAM) and Realty Taxes” or “Service Rent”:  This is the cost of operating a given space or property.  It includes such things as electricity, heat, garbage removal, snow clearing, etc.  It is typically paid for by the landlord and then recharged to the tenant on a per square foot basis.

Gross Rent: This is the sum of all rent paid (Net and Additional Rent).

In order to compare a net and gross lease, the rents must be converted to the same basis (ie: both must be compared on a per square foot basis, or both on a monthly rental basis).  For example: let’s say that a particular unit is 1,500 ft.2 and it is being offered at a Net Rent of $14/ft.² and CAM and Taxes of $11/ft.².  Converting this to a monthly rent is as follows:

 

($14/ft.² + $11/ft.²) X 1,500 ft.² = $37,500 annual or $3,125 per month.

 

Alternatively, if you are provided with a rental rate of $3,500 per month gross for a 1,500 ft.² space, converting this to a per square foot rent is as follows:

 

$3,500 per month X 12 = $42,000 per annum / 1,500 ft.² = $28.00/ft.²

 

Now that you know how to calculate and compare net and gross rental rates…which one is better?  A net lease or a gross lease?...well it depends which side of the lease you are standing on.  The main difference between a net and gross lease, comes down to who shoulders the risk of increasing operating costs.  Under a gross lease, a tenant has committed to a set amount of rent for the lease term.  If the operating costs increase during the term of that lease term, the landlord “eats” those costs, thereby cutting into his/her effective rent.  Under a net lease however, the Additional Rent charged for operating costs fluctuates throughout the term of the lease.  Since landlords are recharging the tenants for common area costs, any increases are simply passed on to the tenant.  Tenants may prefer a gross lease since it represents a steady and guaranteed rent, and no risk of increasing common area costs during the length of the lease.  Landlords on the other hand tend to prefer a net lease where there is a steady and guaranteed base rent, and any risk of increased expenses is simply passed along to the tenant.

Ashley Urquhart is the Senior Manager of our Brokerage Division.  She has a vast network of contacts and would be happy to assist you with all your leasing needs.  Feel free to contact Ashley at (902) 429-1811 or aurquhart@turnerdrake.com.

Friday, March 29, 2019 11:05:01 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Brokerage | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Monday, October 22, 2018

 Why Hire a Commercial Broker? How a Commercial Broker Adds Value in Real Estate Transactions

There are ample online and offline resources available at your fingertips to help you purchase or sell a commercial property on your own – so why hire a broker? If you have the time, negotiating skills, real estate market information, and understand your target market and how to reach them, you don’t!

However, unless you can say yes to all of the above, here is how a commercial Broker adds value to your transaction:

1. Your time is valuable.  Letting a Broker do the heavy lifting and deal with “tire kickers” allows you to focus on your business.

2. Brokers have the contacts and resources to market your listing or find you a suitable property, ensuring all opportunities are uncovered.

3. Brokers understand your target market and how to reach them.

4. Brokers do not have an emotional attachment to the property or transaction.

5. Brokers are often members of local real estate associations, which can provide you with access/exposure to the MLS system in addition to their own websites, social media platforms, and databases.

6. Brokers have the inside track on market data, sales transactions, planning considerations and players in the market who are looking to purchase or sell commercial properties. They can help you determine a reasonable price and can help maximise market exposure.

7. Brokers know how to properly measure a building and collect the property information required, such as any material latent defects that must be disclosed in a transaction, which can avoid future lawsuits.

8. Brokers prepare Purchase & Sale Agreements, Counter Offers, etc. on your behalf, saving you from hiring a lawyer to assist with these items.

So, once you’ve decided to hire a commercial broker, how do you choose which broker/brokerage to represent you? The short answer is to simply hire the broker with whom you feel most comfortable. There are many excellent commercial brokers locally, so meet with a few, ask them questions, and choose the broker you feel will best represent you, and who understands your wants and needs. Each commercial broker has their own strengths; it is up to you to determine which one is the best fit for your organisation. 


As Senior Manager of our Brokerage Division, Ashley Urquhart assists both landlords and tenants meet their space requirements, and vendors and purchasers optimise their property portfolios. For more real estate brokerage advice, you can reach her at aurquhart@turnerdrake.com or 1 (800) 567-3033.

Monday, October 22, 2018 10:44:48 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Brokerage | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island
# Monday, March 30, 2015

Your current office space is no longer working for your organisation.  You are busting at the seams, unable to hire any help, otherwise setting up shop in the nearest broom closet.  Fortunately, your lease is nearing the end of its term and a refresh is in order.  You are currently located in an older, tired building, so you start the search for a new space… and somehow you got stuck taking the lead on this project with little real estate experience.

 

You decide you are out of your comfort zone so you turn to NAI Turner Drake for help.  After reviewing your space wish list, you are provided with a list of potential locations.  Some are currently built out with full offices, boardrooms, meeting rooms, kitchens, washrooms etc., but there is not one that completely suits your needs.  You feel the best location is in a brand new building, fresh on the market, so you can achieve the exact layout to maximise efficiency in your space.

 

You walk into the empty bay, typically with an unfinished concrete floor, exposed ceiling, unpainted gyproc walls and the HVAC, plumbing and electrical only running to your unit, not throughout.  The landlord provides a space planner to help you layout the office based on your requirements.  You reflect back on your recent kitchen renovation and think “Hey, this won’t be so bad”.  The space plan comes back and now it’s time to determine the budget… how much is this going to cost and how will it be paid? You are shocked, feeling rather light headed and fearing for your job when the quote comes back from the general contractor… “I could build a new house for that price!”.

 

The average cost to build out a typical office space is $60 per square foot.  This figure obviously fluctuates with the market and inflation; however we can use it as a starting point.  Typically, a landlord will include a tenant improvement allowance within the asking net rent to help offset these costs.  The remainder is to be paid by the tenant.  There are a few options: a tenant can cut a cheque for the entire amount (this can have an accounting benefit), the tenant may amortise the amount over the lease term and pay back to the landlord as part of the rental payments (this helps spread the costs over the lease term, but the landlord typically charges interest on this amount) and/or a combination of both options. The landlord will make these concessions based on the strength of the covenant of the tenant.

 

Construction items to consider when building a space from a raw state:

 

Partition Walls (Metal Studs and Gyproc):  Even in an open concept space, washrooms, meeting rooms, etc. must be partitioned from the main space.

 

Flooring:  Flooring can range from carpet tiles to laminate flooring to ceramic tiles and anything in between. Carpet tiles can be among the more cost effective flooring options, while ceramic and porcelain tile are among the more expensive flooring types.

 

Paint: Fortunately, paint is paint.

 

Ceiling Tiles: A suspended T-bar ceiling grid can help improve sound nuisances within an office.

 

Lighting: There are many lighting options available today, including more efficient LED lighting.

 

Electrical Distribution: In a new build, the landlord typically brings electrical into the unit, but in some cases it is the tenant’s obligation to install a transformer and then distribute the electrical throughout the unit (outlets, drops, etc.).

 

HVAC Distribution: Again, the landlord will run HVAC to the unit, but it then becomes the tenant's responsibility to distribute the HVAC throughout the unit. This will depend on the unit layout, an open concept office will require less distribution and diffusers than a fully built out space with all private offices.

 

Plumbing: The landlord will have a plumbing stack to the unit, but it then becomes the tenant’s responsibility to distribute throughout the unit. It is more cost effective to keep all plumbing in the same vicinity, as to avoid cutting into concrete to run pipes, significantly driving up construction costs.

 

Millwork (Kitchen, storage, etc.): Millwork comprises of kitchen cabinets, storage cabinets, washroom counters, etc. These items will depend on the space design.

 

All of these items add up.

 

Remember: the stronger your tenant covenant, the more concessions you can negotiate with a landlord.

 

 

 

Leasing and Sales Consultant, Ashley Urquhart, assists both landlords and tenants meet their space requirements, and vendors and purchasers optimise their property portfolios.

 

To learn more about Ashley, visit our Facebook page to see her Featured Consultant article!

Monday, March 30, 2015 2:50:38 PM (Atlantic Standard Time, UTC-04:00)  #    -
Brokerage
# Wednesday, February 11, 2015

As an existing tenant with a lease expiry date looming, your varied options (relocate, renew or resize) may seem intimidating. Here are some tips to consider:

Relocate

One of the first things to look at is what length of notice your current landlord requires in regards to your notice to renew or move on. This is a process that should begin anywhere from six to nine months prior to your lease expiry depending on the complexity of your move.

Some leases have clauses that specify how much notice is required. In some cases, if that notice period is missed you could find yourself in a delicate situation. If you get into an over-holding position some leases have the right to increase your base rent anywhere from 150% to 200%.

After determining the length of notice required, it is now time to decide: where do you want to be; what issues are critical to making a move; what costs (other than rental) are involved?

Renew

If the market is soft and is what is described as a “tenant’s market”, some landlords will look at renewing your lease earlier in order to guarantee a longer tenancy. A sound knowledge of market conditions (supplied by your broker or agent) will guide you through this process and outline what incentives the landlord will supply, i.e. paint, carpet, renovations, parking, etc..

Resize

If your growth has not gone as anticipated and you are looking to downsize, you will find that the majority of landlords are more than willing to accommodate your requirements, should you have a good relationship with your landlord.

If you are looking to expand because you are exceeding growth expectations, the landlord will be pleased to speak with you to determine if they have options in the current property or availabilities in other properties within their portfolios.

Overwhelmed by your leasing options? Call Russ (or any member of our Brokerage Division) at (902) 429-1811.

Wednesday, February 11, 2015 10:00:24 AM (Atlantic Standard Time, UTC-04:00)  #    -
Brokerage
# Thursday, August 7, 2014

No one wants to tell a client their space looks like a recent episode of Hoarders. However, it is essential to show a space in its best light to reduce the marketing exposure time and get the best price (rent) for your client.

Here are some tips to keep in mind when selling or leasing your space:

1. Clean Unit: There is nothing worse than walking through a cobweb, jumping back in fear that you have a spider crawling on your back, only to brush your good suit jacket up against a wall covered in gyproc dust. Tip: Take a duster and vacuum through the unit on a regular basis to ensure it is fresh and clean for each showing. 

2. Clean Washrooms: Believe it or not, people actually open the toilet cover while touring a space. Although pink is pretty, it is not so much when it comes in the form of a ring around a toilet bowl. Tip: Flush the toilet every few days to ensure the stagnant water does not leave a mark.

3. Fresh Paint: Let’s face it; some people cannot get passed the harvest gold paint! While it was modern in 1970, it is not anymore. Tip: Although it can be a bit of an investment, prime the walls (and ceiling if applicable) in a contemporary white colour. Not only will it enhance the appeal to potential tenants and purchasers, but it will help them envision their organisation’s color scheme and give the unit a fresh feeling

4. Flooring: Can you see the subfloor through the carpet? Are there multiple chips in the ceramic tile from accidentally dropping a heavy piece of equipment? Tip: If a good cleaning does nothing to improve the appearance of the flooring in the unit, I recommend removing it and leaving exposed concrete.

5. Garbage & Storage: While it is very tempting to use your vacant unit as a storage room for garbage, excess materials, for your own company etc… don’t. Tip: Leave the unit empty. It is hard for a potential tenant/purchaser to imagine themselves in a unit when it is full of clutter. Plus you will have to remove the garbage, excess material etc., for the incoming tenant/purchaser anyways so why move it twice.

6. Windows & Window Coverings: Do the blinds look as though they have been the latest victim of a cat attack? Are there finger prints, paint overspray or perhaps even a face print on the window? Tip: Ensure that the window panes are clean and only leave the window coverings up if they are in good condition.

7. Lighting: While it is tempting to turn the electricity off to a vacant unit, it is important to be able to see the space. Though we always bring a trusty flashlight, it can become a real safety issue for both the client and the agent touring the space if they have to feel their way around. Plus, it is not showing your space in its best “light”. Tip: Lights on! 

Advice given by Ashley Urquhart, Consultant in Turner Drake’s Brokerage Division and Manager of our Business Development Division. For more real estate brokerage advice, you can reach her at aurquhart@turnerdrake.com or 1 (800) 567-3033.
Thursday, August 7, 2014 12:04:36 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Brokerage