Full Service Office Space is generally classified using
letters, such as A, B+, B, C+, and C.
Class "A’ buildings are the finest and generally
represents a multi-story multi-tenant office building, less than 12 years old, a
prominent geographic location, structured parking garage, national credit
tenants, on site management and maintenance, 24 hour onsite security, and all
the finest finishes and amenities. These buildings carry the highest rental
rates, often in excess of $2.00 PSF per month ($24 annually).
Class B facilities may be older Class "A"
facilities without all the currently desirable amenities, or may be new
construction without the class "A" location or finishes. Generally
class "B" buildings will have a mix of local and national credit
tenants, possible onsite management, onsite security for a portion of a 24 hour
day, and some degree of covered parking available (perhaps covered parking is
available for one third to one half the employees in a company). Rental rates
range from just above class "C" rates to just below class
"A" rates, i.e.; from $1.25 ($15 annually) to $1.83 ($22 annually) PSF
per month.
Class "C" buildings are generally smaller secondary
locations geographically, or older class B facilities with older mechanical
systems, local and regional tenants, generally lacking onsite management,
security, and covered parking only, and possibly in need of updating both
cosmetically and otherwise. Class "C" Buildings generally rent for
$1.00 ($12 annually) to $1.25 ($15.00 annually) PSF per month.
Office building space in Houston and San Antonio is most
often leased on a "Net Rentable" basis, which means that in addition
to the "usable" square footage, tenants are billed for a share of the
common area (lobby, hallways, restrooms), which is referred to as the
"add-on percentage". A typical add-on percentage might be 16%, which
means that while your lease may state that you have 2500 net rentable square
feet, you would only find 2100 "usable" square feet within the walls
of your space. A good rule of thumb is to allow 250-350 rentable square feet per
person, although some high density operations such as telemarketing firms
utilize as low as 100 SF per person. Most buildings will paint the space and
install new carpeting prior to lease commencement in exchange for a three year
lease term. For a five year lease term, they generally will do more substantial
remodeling.
Within the rental rate, the building furnishes electricity,
air conditioning (during normal business hours), janitorial service and building
maintenance, and often times, building security. Most buildings with parking
garages have eliminated free parking, which can run $40 to $60 per month per
space or more for garage parking. Uncovered surface parking is generally free.
Typically, the lease will be in a "Base Year"
format, in that all the building operating expenses (taxes, insurance,
electricity, security, landscaping, maintenance, etc.) are included in the rent
during the "base" or first year. In subsequent years, the landlord may
pass any operating expense increases through to the tenant in the form of rent
increases. Since building expenses comprise about one third of the rental rate,
a 4% increase in operating expenses will translate to a 1.3% increase in your
annual rent.
Generally it takes from three weeks to five weeks to locate
several spaces for the company to consider and to negotiate a lease on. That
time frame, of course depends to a great degree on how fast the company proceeds
with the decision making process. Additionally, it may take the building owner
anywhere from two weeks to eight weeks to do any necessary remodeling, depending
on the complexity of the work. Office tenants should consider their relocation
options no less than six months prior to the expiration of their lease.
WHAT DO WE
DO?...
Many business owners ask that! We
function as a business’s Real Estate Department, just like Citibank, IBM,
or General Electric would have a seasoned real estate professional on
staff as a full time Director of Real Estate. We assist businesses in
evaluating their needs, developing location criteria, performing market
searches for available locations, and negotiating terms under which the
company can lease or purchase property. As a bonus to the businesses we
represent, we can generally perform these activities at no cost to the
business since we are typically splitting a fee with the listing agent of
the property. Our in house data base has information on more that 1200
Houston full service office buildings and 350 San Antonio full service
office buildings,
so if you’re considering relocating or expanding, contact John O’Connor
for more information.
THE REAL ESTATE DEPARTMENT
John O'Connor
BROKER
Houston
Telephone 281-497-8696
PO
Box 771612 Houston TX 77215
FAX 281-497-8752
San
Antonio
Telephone 210-696-0276
PO Box 780697 San
Antonio TX 78278
