When searching for your company’s next office space with your commercial real estate broker there are countless variables that come into play.  Your search likely starts with narrowing the nearby availabilities based on desired location, followed by filters of square footage, lease term, and building amenities offered.

If your real estate broker is savvy enough, he or she will advise you that these variables are just one piece of the equation.  Getting a good understanding of the existing conditions of the office space’s interior build-out is critical towards determining if the economies of the deal will make sense.  Comparing an office suite in raw shell condition with a suite that was recently improved is like comparing apples and grapefruits.

As early as in the process of touring office space before a lease offer, or Letter of Intent (LOI) is drafted, it should be acknowledged that the build-out planning process has begun.  In many cases, it can be helpful to enlist the expertise of an architect to conduct what is called a fit plan, to determine how well the tenant will fit in the prospective suite. The architect will often see how many workstations, offices, conference rooms, and other rooms will fit into the existing space.

Once a fit plan has been developed, with input from other industry partners, a high-level estimate and schedule can be developed for the proposed space.  In some spaces with lots of existing improvements, it may be strategic to reuse as much as possible, which in more shell condition spaces, it will be necessary to spend more tenant improvement dollars.

Once the team has a 30,000 foot high view of what the tenant improvements should be, the economics of the leasing deal will start to present itself.  Using the broker as the liaison, lease offers can be compared at each building based on how the total improvements compare to the landlord’s contribution, i.e. the total out of pocket tenant improvements.

There are other considerations one should consider when comparing potential spaces in the lens of a builder.  Some questions to ask for contrasting a short list of office spaces:

• Do any of the candidate spaces have a higher risk for unforeseen conditions to present themselves?  Older buildings or existing tenant improvements that have not been updated in very long periods of time could present a greater chance of hidden conditions such as hazardous materials

• Do any of the candidate spaces inherit code compliance issues that will be triggered when a permit is pulled?  This could range from anything from ADA upgrades, life safety device coverage, sprinkler coverage, Title 24 upgrades, etc.

• What are some of the requirements of the building management and ownership at the various properties?  It’s helpful to know if one property has any special rules and regulations such as when certain activities can be performed.  This can potentially sway the budget.

• Do the candidate buildings require union labor?  If all things are equal and one building requires union labor and one doesn’t, you guessed it, the build-out in the non-union labor building will not be as expensive as the one requiring union labor.

These considerations will give you a nice head start in making sure your future build-out project runs smooth before agreeing to move forward on selecting the suite in the first place.