Pre-Lease Due Diligence for Tenants

Nov 3, 2017 // By:Scott Hamele // 3 comments

Understanding what you are Leasing

By Scott Hamele, DBIA President and founder of Nationwide Commercial Inspections, LLC and Construction DesignWorks, LLC.

If you are about to lease a commercial space or represent that tenant, wouldn’t be a good idea to fully understand the space you are about to lease?   Commissioning a Property Condition Report (PCR) during the due diligence period offers numerous benefits to the tenant.

  1. Establish the baseline condition of the space, which may save you thousands of dollars when you move out. At the end of the lease term, you may be required to turn the space over to the building owner in the same or better condition. It is invaluable information to document those conditions.
  2. Most commercial leases require the tenant to maintain or possibly replace particular parts and components of the space. Items such as HVAC, overhead doors, plumbing fixtures, elevators are just a few of the items that could be the responsibly of the tenant over the term of the lease. A PCR will offer insight and information on the Expected Useful Life (EUL) and Remaining Useful Life (RUL) of building systems and components.
  3. Typically, in a lease there is a minimum condition in which the building owner is to turn over the space to the tenant. It may simply be called a “white box” finish or “warm shell”. In every case, the tenant should know exactly the condition of the building systems and components and if it complies with the condition of the space in accordance with the lease.
  4. The results of the PCR may reveal a space or building that is of lesser quality and conditions than the asking lease rate. If the space has numerous deficiencies that the building owner is not willing to rectify, the tenant may request a lower rental rate.
  5. The operating costs of your leased space is directly proportional to the energy efficiency of the building. A PCR will reveal if the structure is adequately insulated, proper joint sealants, R-value of the windows as well a effectiveness of the HVAC system.

A PCR is a value-added service all tenants and commercial real estate brokers should consider. Be considered one of the top in your industry and a savvy tenant. This value-added benefit only solidifies yourself as a trend leader.

NCI utilizes their architectural, engineering and construction expertise to create and develop high quality Property Condition Assessments (PCA). These reports are customized for each type of real estate: office, retail, flex-space, industrial, hospitality and healthcare.  If you are interested in protecting your real estate investment, contact us at 913-667-7774 or visit our website at www.nwc-i.com.

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