Changing gears, I’m going to give an update on my office.
In a previous post, I had mentioned that you should always expect delays and to go overbudget. Apparently, for my tenant improvements, this sentiment was an understatement.
After 2 months of planning, my office finally broke ground 3 days ago. My lease officially began on October 1, but up to now, we had been working on the architectural drawings and building permits. Unfortunately, being the end of the year and all, various people went on vacation, causing futher delays.
At this point, my contractor believes that the project will be completed in 6 to 8 weeks. I’m expecting 10 to 12 weeks. Originally, I had aimed for a January 1, 2011 open date, but now, I’m hoping for March 1. Hopefully, all of my private insurance contracts will be in place by then as well. Lucky for me, my first rent won’t be due until March.
As for the budget, I’m definitely spending more than I had expected. Originally, I had budgeted myself to contribute up to $40,000 in tenant improvements. Based on my general contractor’s initial estimate, I should have been right on the money. What I didn’t know was that the architectural drawings, permit fees, plan revisions, and data cabling (not a general contractor’s service) would cost an extra $20,000. Thankfully, this extra expense will be offset by the money I saved from other areas, mainly my consultant fees.
I’m excited that construction has begun. Visiting my demolished office, reality began to seriously hit me. For the first time ever, I wondered what I had gotten myself into. Here we go.
Howie’s note: construction always takes longer than you think. Two good ideas are to contractually have a deadline in your lease agreement on when the office will be ready for occupancy, with financial penalties if it isn’t ready. The second idea is to visit the site and phone the contractor frequently for updates. By being a pest you’ll get things done.
As for the lease commencement, since the real estate market wasn’t tight when I signed my lease they didn’t start the lease until I actually moved in (and even gave me a two week rent free move in grace period). This is in contrast to Ho Sun who had to pay rent during tenant improvements.
The market has tightened since then, and I believe if I signed a lease today they’d commence it so I’d have to pay rent even during tenant improvements. But everything is negotiable!
Since my tenant improvements were minimal they wanted me to move in before I was ready- I wanted to take more time off. You can see that finding a space with the least amount of tenant improvements saves both time and money, but it shouldn’t come at the expense of picking a less than desirable location or wrong size office or overpaying rent.