Real Estate Research
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This paper presents the findings from a research conducted on the terms of a lease for 3,000 square feet of office space. Office space is required for carrying out of various functions. The demand for office space is high and this trend is likely to continue given the limited supply of office blocks or commercial buildings. Owing to their high demand, the rental values are subsequently high. This is also due to the fact that office establishments are required to adhere to strict laws and regulations. Amongst these are safety and health standards as well as various statutory requirements. The high rents demanded by the investors are high since the costs of establishing such complexes are also huge.
The office space, which is the subject of this study, is on the fourth floor of the Times Towers, which is located at the central west of New York. It has available spaces depending on the kind of business one wishes to undertake. I enquired about the terms from the letting agents who are located on the fifth floor of the building. These were their responses to my queries. I used a questionnaire to collect the data. First, I asked about the terms of the lease. I was informed that the minimum period is one year, while the maximum was five years. The rent for space in the building is $50 per square feet inclusive of service charge, which is paid in advance to the landlord and the receiptforwarded to the managing agents. Service charge refers to those costs incurred due to the provision of services such as cleaning the common areas, security, and insurance of common areas.
However, the rent is to escalate at 5% per annum. Tenants are given an option of renewal at the expiry of the specified terms. On termination it was observed that either party can terminate the contract by giving at least three months notice to either party or payment in lieu of three months’ rent to the other party. However, in case of a breach of the covenant, the lease terminates summarily and proceedings are to be commenced against the party at fault.
Other additional charges include payments to the landlord due to any taxes introduced by the authorities that would be accruing on the property. The costs of insuring internal areas would also be borne by the tenant. The initial security deposit that is equal to three months rent and the fees for preparation of the lease by the lessor’s advocates constitutes other additional costs to the tenant. These are paid prior to assuming possession. The security deposit would act as a guarantee that the tenant will fulfill his part of the promise by paying the rent and maintaining the property as required. Where he fails to uphold such conditions, the security deposit would be used to settle the debts accruing to the tenant.
Other terms and conditions include the following. The tenant would use the premises for office purposes only. The tenant cannot sublet the premises and not partition the space without the prior written approval of the landlord. This type of lease is a single net lease. This is because the rent paid is inclusive of inclusive of taxes that accrue to the property. This price is reasonably fair. This is because other office spaces in the neighborhood have higher rental rates. For instance, the opposite office complex lets at $65 per square feet, yet, there are minor differences in terms of the quality of space offered. Hence, the subject space is cheaper, making it preferable given that the services offered are of a decent quality.
The location of office space is important towards the success of a business. However, this is based on the kind of trade or business that one undertakes. The terms of the lease are equally of great importance. Terms that are fair should be selected, so that the tenants are in a position to achieve their goals. Therefore, it is critical that before any office space is chosen, the terms of tenancy should be scrutinized to ensure that the best location and terms are attained. Through this tenants would stand a better chance of gaining from an appropriate location and favorable terms of tenancy.
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