Tag Archives: Lease Medical Offices in Tampa Bay

Types of Rent…………………..

Rent $

Among the most common questions asked by our clients is, “So what is the total gross rent that we will be paying?”  The answer to this question starts by stating that each building can be slightly different and most landlords have different definitions as to what constitutes gross rent for the space they are leasing.

The simplest approach as far as tenants are concerned, gross rent will include all real estate costs associated with renting a space ( except sales tax in Florida):

  • Base Rent
  • Property Taxes
  • Building Insurance ( Landlord’s)
  • Common Area Maintenance (CAM’s)
  • Building Management
  • Parking Costs
  • Gas & Electric Utilities
  • Janitorial
  • Trash Removal
  • Tenant Insurance
  • Tenant Improvements

1. Gross Rent Example Two (Modified Gross “MG”): Base Rent + Additional Rent (Utilities?) = Gross Rent Additional Rent varies from property to property, so always ask what additional rent includes. Gross Rent / 12 months = Monthly Gross Rent

  • Example One (Triple Net “NNN”): Base Rent + NNN = Gross Rent NNN = Taxes + Building Insurance + CAM’s Gross Rent / 12 months = Monthly Gross Rent
  • These costs are not always clearly laid out in the marketing material of various property listings and some of the costs vary broadly from property to property (i.e. taxes on office/flex space vs downtown office space). In addition, some of these costs are entirely founded in what the tenant may require and are outside of the landlord’s control. Items like data wiring or tenant specific improvements need to be assessed prior to finalizing any deal and signing a lease. We define these costs by placing them into two categories: gross rent & variable costs.
  • Will you please send me a breakdown of your NNN’s or additional rent?
  • Do these expenses include items like management, gas & electric utilities?
  • If gas & electric utilities are not included, how are they charged? Are they seperately metered or pro-rated?
  • Can you send me a 12-month average if utilities are not included? (This information can also be achieved by calling the utility provider for the building.)Variable costs are paid by the tenant, either directly, or indirectly as they are assumed in the rent as offered. Some of the costs are defined below:

2. Variable Costs

  • Tenant Improvements: Some spaces are ready “turn-key”; the tenant signs the lease, grabs the keys and moves right in. Other spaces require a build-out, meaning that to prepare the space to meet the tenants needs, the landlord and tenant must negotiate who will pay for and be responsible for completing a certain amount of finish.
  • Telephone/Data: Always carefully review your costs as they are associated to your connectivity. Some buildings are wired with access to high speed internet while others do not have a major service provider like Comcast or Century Link. Keep in mind data costs will vary broadly as service providers have different definitions of “high speed.” Make sure you are comparing this real cost to weigh your options when looking at various properties!
  • Landlord Incentives: I find it is often overlooked that landlords may offer incentives. These discounted costs deviate from one building and it’s landlord to another, but always keep in mind to ask.
  • As you can see, there is no straightforward answer regarding what gross rent does and does not include. Whether you are a tenant or a landlord, these costs should be clearly defined in your lease agreement. Sourced by the Colorado Group

How Does Location and Occupancy Costs Impact Your Business Percentage of Market Share

What about your business or service? Are you maximizing your location and are your occupancy costs efficient and serving you, rather than you serving them?

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It is a known fact that your business’ occupancy costs are among its top three expense categories.

What about locational costs  as they impact your ability to garner market share?

There are known and obvious ways that you can reduce your occupancy costs (we wont go into them in detail here, however the use of a professional like TMC-The Mahr Company in assisting to evaluate your cost of occupancy and its value to your business or service model is priceless.)

  • What about market share do you know what your percentage of market share is?
  • Have you identified what potential market demographic you are appealing to ?
  • Are you operating in the most efficient manner for your business/professional service?

TMC-The Mahr Company specialists in services for your office/business needs. www.ItsTheLeaseWeCanDo.com

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Ever Wonder What The Difference Is Between Rentable Square Feet versus Usable Square Feet

December 19, 2013 By Ben O’Grady
Sourced by: Property Metrics

One of the first steps in evaluating a commercial property is determining the total rentable square feet. While this might seem like a straightforward calculation, it unfortunately doesn’t always end up being so simple. This is particularly true for multi-tenant buildings. In this article we’ll go over how to calculate rentable square feet (RSF), usable square feet (USF), and the load factor, then we’ll tie it all together with a clear example.

Usable Square Feet

In a nutshell, usable square footage is the actual space you occupy from wall to wall. Usable square footage does not include common areas of a building such as lobbies, restrooms, stairwells, storage rooms, and shared hallways. For tenants leasing an entire floor or several floors, the usable square footage would include the hallways and restrooms exclusively serving their floor(s).

Rentable Square Feet

Rentable square footage is your usable square footage PLUS a portion of the building’s shared space. As mentioned above, shared space can be anything that is outside of your occupied space and is of benefit to you (lobbies, restrooms, hallways, etc). As a tenant in a commercial space, you pay for a portion of the shared space and thus your monthly rent is always calculated on RSF.

The increase in the the rentable square footage above your usable square footage is referred to variously as the “load factor,” “common area factor,” or “add-on factor.” This is generally in the 10-15% range and can be higher in some buildings. When evaluating commercial real estate space options, you’ll want to be aware of this factor so you know exactly what you’re getting and what you’re paying for.

How to Calculate Load Factor

Calculating the load factor is pretty straightforward. First, find out how much total floor area a building has. Then, subtract the shared square footage to determine the usable square footage. The owner or owner’s agent should be able to give you these numbers. Then divide the total floor space by the USF to get the load factor.

Rentable Square Feet Load Factor

Example: A 100,000 square foot building has 15,000 square feet of shared space. The usable square footage is 85,000 square feet. The load factor would be 1.176 (100,000 / 85,000). That would also be the same as saying the building has a load factor of 17.6%.

Rentable Square Feet vs Usable Square Feet Example

Let’s look at a quick scenario when comparing load factors and rentable square footage to see why it’s useful.

The situation
A tenant is looking at two different office spaces, both with 5,000 square feet of usable space and the exact same rental rates, but differing load factors.

Option A
The first suite has 5,000 usable square feet and has a 20% building load factor for an additional 1,000 sf (5000 x 20%) of rentable space. Thus, the rentable square feet is 6,000 square feet.

Option B
The second office has 5,000 usable square feet and a 15% load factor. The rentable square footage is 5,750 sf (5,000 x .15 = 750). Option B has less rentable square footage and thus would cost less per month for the same amount of usable space!

With the same rental rate, the tenant would pay more per month on his lease for Option A at 6,000 rentable square feet. However, one factor to consider is with higher load factors, are you getting better shared amenities that justify the cost? In some cases, a fancier lobby and shared kitchen area could be enough of a draw to justify the higher cost for the same amount of usable square footage.

As shown above, rentable square feet is not always so simple. To make matters worse, sometimes landlords will even fudge the load factor and USF numbers to the point where it becomes part of the negotiation process itself. As with all commercial real estate leases, always read the fine print so you understand exactly what you’re paying for and exactly what you’re getting in return.

Strategic Leasing Can Reduce Costs for Your Medical Practice

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By Leo Griffin | June 12, 2013

As healthcare reform and Medicare funding changes unfold, physicians are paying more attention than ever to their operating expenses. In addition to patients, they must examine their medical office needs with the goal of maintaining the most flexibility possible in these changing times.

                        Strategic leasing could potentially be the vehicle to accomplishing the much-needed business flexibility. Lease terms can range from three to 10 years (the initial period having a definite impact on the rates and tenant-improvement allowance). Although rent is typically 6 percent of a practice’s budget, the expense has a tremendous effect on both the top and bottom lines. It impacts the location, patient flow and staffing requirements for the office.

We recently discovered an opportunity for a practice to move less than a mile away to capture rent savings of $2,000 per month. The short geographical move yielded substantial long-term benefits. The physicians could maintain current staff and reduce overhead in addition to enjoying the new digs.

It helps to think of a medical practice’s month-to-month decision making as an internal competition for cash. As they examine the business model to adjust to the changes in healthcare, the principals have to consider the best allocation of available funds. Will it be for new equipment or another provider or staff member? Could it be for an additional office in another location that offers the desired patient demographics? Interwoven with the decision on how cash will be dispersed is the measurement of the return on investment. The proverbial “Cash is King” mantra rings true as ever for medical practices.

One key tactical maneuver has been to take the practice off campus to a medical office building offering lower occupancy costs. Baby Boomers want their off-campus facilities to cover all the services available in one facility, just like the retail center they grew up with. In the example above, the practice had nine months remaining on its current lease term. We found an opportunity that was much better for the business’ bottom line, and current patients only had to make one additional turn to get to the new location.

Reduced costs are just one part of strategic leasing. When planning to keep your practice on the road to success, think triple A: Access, Agility and Assets. Strategic leasing can allow the practice to better reach its desired patient demographics, while providing the ability to react to the aforementioned major market forces. The biggest asset is the business itself, so making a move that boosts its availability, versatility and bottom line makes plenty of sense.

Securing the most favorable occupancy costs through strategic leasing allows doctors to focus on their patients, people and, of course, the pursuit of business value.

— Leo Griffin is vice president of Healthcare Real Estate Services at Atlanta-based Bull Realty.

www.tampamedicaloffices.com