Question from Someone Leasing a Commercial Spot for First Time
I am opening a business and in the process of singing an LOI on the spot that I have found. I am working with an agent who really seems to know his stuff, but I have three questions for you all-

1.  I am curious about the timeline- I have spoken to an architect and engineer and the spot is the perfect size for what I am trying to accomplish. The landlord is trying to get me to sign an LOI ASAP and said there is other interest in this property (I have my doubts as it is a unique building and been vacant for years). The architect and engineer firm said their drawings will take 2 months to get back and then an additional few months to get everything passed by the city. My question is: do a lot of businesses sign a lease and pay rent for a building that won’t be ready for 6-8 months?  

2.  Is there a cheaper alternative to hiring one of these big firms to handle the drawings? I don’t want to be sitting around for a few months waiting on drawings and paying them $175.00 per hour only to hate what they produce. The city I am in requires drawings for: electrical, plumbing, interior &amp; exterior design.

3.  Is there anything you recommend that is a must have when creating an LOI from the tenant’s perspective?

Thank you for any feedback!
[{"id": "gm3zweo", "text": " I don\u2019t know what city you live in but typically the landlord pays for the drawings. And the architect shouldn\u2019t take more than a week to make the plan.\n\nI did a 22,000 SF transaction last year and permitting plus drawings took a month total. Permitting can be 3-4 weeks depending on city. \n\nAbated rent, free or reduced parking, turn key allowance, cap on controllable expenses, to name a few \u201cmust haves\u201d", "replies": [{"id": "gm4681j", "text": "Tier 1 city here. Good luck trying to get a landlord to pay for the tenants drawings. Not going to happen here.", "replies": [], "depth": 2}], "depth": 1}, {"id": "gm403b2", "text": "What kind of commercial property? Sounds like maybe retail? If thats the case, I would say do not feel pressured as that asset class should have plenty of vacancies. \n\nWhy are you getting drawings, etc before even locking up the space or even offering on the space? Is your use and the buildout you need relatively standard? If so, then you may want to focus on negotiating a deal that makes sense for you with TI $$ and/or free rent to help with the buildout timeline. Then once you have the space and deal more secure you can get drawings done. Doesnt make sense to have drawings and everything for a space you do not control and therefore could lose and have to start over with drawings on a new space. \n\nLastly, Is the agent you are working with representing only you or also the landlord as well? Get yourself a local tenant rep, sign an exclusive so they feel protected and then let them do their job and answer all these questions for you. At the end of the day the landlord will more than likely have to pay your rep\u2019s fee if a deal gets done.", "replies": [], "depth": 1}, {"id": "gm45gpt", "text": "1) LOI\u2019s are non-binding. Lease review and signatures could take a month or so, if not more. The drawing, stamping, and approval take time. It\u2019s taking even longer now with COVID. Depending on the pull of your architect and contractor, this process could be as short as 30 days to as long as 4 months right now. This is the norm. Negotiate rent abatement for however long you deem you will need to get built out and up and running. Budget for 30 days at least longer than you expect. And your last question - it all depends. Negotiate rent commencement and possession date accordingly. \n2) That\u2019s the cost of hiring an architect. You\u2019ll need a set of prints drawn and stamped by an architect before submitting to the city for approval. No way around it. Think about it. Want a bum off the street to sketch a print and submit it to the city for approval? Commercial real estate is expensive and time consuming. Get used to it. Opening a business is the same way. Buckle up and make sure you have enough liquidity. If you\u2019re fretting the cost to get prints/approvals, good luck floating any build out in this current construction environment.\n3) Ask your broker \u2014 not this sub. That\u2019s what he/she is getting paid to do.\n\nThanks", "replies": [], "depth": 1}, {"id": "gm45ntb", "text": "Since you are improving the owners space, many times you will either split the cost of the architectural drawing or get a Financial or monthly rent credit for a set amount that is applied to your build out. Very very few places are \u201cunique\u201d;  owners and developers (like me) are happy to accommodate you and help you along the way so you are a long term easy going tenant. Wishing you well, Azure", "replies": [], "depth": 1}, {"id": "gm45q0j", "text": "\\- Get the landlord to do your drawings at his cost as part of the deal (shouldn't take more than a few weeks)\n\n\\- They may not have any money to do it depending on their situation, so if not you can hire smaller firms.  I would never use a large firm with multiple offices unless I am working on a project that warrants that\n\n\\- There are so many things in tis LOI which your agent should be familiar with.  You should be getting some kind of a free rent period which is negotiable.  Usually 2 to 6 months to allow for getting permitted and buildout complete.  I'd imagine most landlords are offering a TI (Tenant improvement) or build-out allowance right now for longer leases and tenants with good credit.  You should also have a couple of 5 year options to extend your lease in your LOI as well", "replies": [], "depth": 1}, {"id": "gm46fnp", "text": "Lawyer here. You would typically sign a lease before incurring significant tenant expenses. If it\u2019s a long lead time or less competitive ask for abatement of base rent (less often OpEX) until you take possession. This could be in one month or three.", "replies": [], "depth": 1}, {"id": "gm4a3l8", "text": "They should be giving you time to build out your space without paying rent, insane that they would ask you to pay rent day one without being open. You should ask for at least 120 days of build out time (at the minimum, you should ask for more) / free rent to get all of this going.", "replies": [], "depth": 1}]