You may have noticed when going through the leasing timeline in Chapter 2 that there are more players on your leasing team than just you and your advisor. Each has a very important role to play in the success of your transaction, so it’s important that you take the time to understand their roles, what to look for in hiring them and what their services should actually cost.
We like to think of your leasing team as a “diamond formation”…
Your advisor is out in front, cutting your deal
Your lawyer and architect are next to you, making sure the deal the broker helps you make is properly documented in your lease and in your construction drawings
Lastly, your construction manager is behind you, making sure that after the deal is cut and documented, it gets implemented to your satisfaction
Should I let my advisor choose the rest of my team?
No! While it may seem like a convenience to let your advisor select the individual members of your core team on your behalf, otherwise known as “sole sourcing,” this is generally not good practice. If your advisor sole sources your team, the team will often feel and act as if they work for your advisor, not you.
An analogy in residential real estate would be to let your residential broker hire your housing inspector when you buy a home – the inspector is very unlikely to report anything that might jeopardize the broker’s deal for a $300 inspection fee!
Instead, request three to five (3 – 5) recommendations for each position from your advisor, interview them directly, ask for references and follow-up. Consult our Resource Center for a list of recommended service providers in your area. You can always select whomever your advisor recommends, but you will learn a lot in the interview process!
What should I look for and what’s all this going to cost?
What to look for: Find someone who specializes in leases. And try to either use a small or medium-sized firm. Negotiating a lease document does not require paying big firm rates; however, if you feel comfortable with an existing law firm (and they have a qualified attorney focused on commercial office leasing) we suggest you stick with your trusted advisor. While most lease negotiations are relatively straight forward, you should NOT delegate this entirely to your lawyer. Lawyers get paid by the hour. When the comments you get back from your lawyer no longer seem important to you, it is probably time to bring the negotiation to a close. Moreover, this is a very important document, and you should know what it says (see Chapters 6 and 7 for more details on leases).
What it costs: Depending on your market, lawyers should cost approximately $300-400 per hour and will be worth the investment. You should try to limit their time to 20 hours, if possible.
What to look for: Interview architects with experience in your specific size range and who have designed the kind of space you want to have. This will ensure that your work is of a size and type that is important to them. Be sure you are not sold by the firm’s senior architects and then serviced by their junior staff. Much like when choosing your advisor, you will need to check references to make sure the senior architects at the pitch will be the ones who actually do the work.
What it costs: Full construction documents should cost approximately $2.50 per square foot.
Note: The term “construction documents” actually refers to a number of different sets of documents created during your leasing process:
Your best and final landlord candidates pay for you to plan your space in their building. This is called a “dime plan” because it typically costs 10 cents per sf. It provides a basic layout of your space noting square footage of various functional areas and adjacencies.
Once you select a building, you then work with your architect to do a space plan. This consists of a detailed drawing of walls and spaces.
The space plan is converted into the architectural construction drawings by adding finishes, lights, electrical outlets, carpeting, etc. The space plan is like a black and white picture, the architectural construction drawings are like a color picture.
The last step is to add the mechanical, electrical and planning drawings (“MEP” drawings) to the architectural construction drawings to create a full set of construction documents. The MEP drawings are all the things in the ceiling and behind the walls that you don’t see, but that the municipal permitting agency needs to review to approve your plans. Once submitted, permitting the construction documents (the “CD’s”) usually takes four to six weeks.
What to look for: Construction management (CM) is the one possible exception to the rule when it comes to letting your advisor pick your team. We think it is very important that the brokerage firm supply you with someone to help you manage your construction and your move. Some firms have this capability in house. If they do not, as with your lawyer and architect, ask for 3-5 references and follow-up. It is also good practice to ask your architect if they have worked with your advisor’s construction manager in the past.
What it costs: Whether your advisor provides you with an in-house construction manager or you hire a third-party, you should negotiate with your advisor to pay for this service out of their commission. Whatever you do, DO NOT agree to have the landlord pay this person on a percentage of cost basis, typically quoted at 3.0% of “hard and soft” costs. In actuality, this service should cost around $100 per hour. It is always better to either: a) have broker pay out of their commission as part of service they provide (recommended) or b) pay by the hour and get a cash allowance from landlord to cover your out-of-pocket costs (worst case).