Seller Disclosure

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Commercial Office Space Austin | Seller Disclosure Truths

If you are selling a commercial office or office building , this primer (summary) can help with Seller disclosure and the truths around having to use one.

Disclosure Truth 1

As a seller you can use TREC’s seller’s disclosure of property condition document TXR 1406 or another form however it has to meet the statutory requirements for disclosures required by the Texas Real Estate Commission.    As a seller however, once you have a commercial real estate broker helping you listing your property for sale, they can provide you with the member’s only form from the Texas Realtors which provides more details and reduce you risk of a dispute.

Austin Office market

Seller’s should fill out a property disclosure statement even if it is for more than one unit, such as a duplex although it is not required. What is required is seller’s must fill a seller disclosure for residential one unit dwellings.  You should again engage with a knowledgeable commercial real estate broker to help you fill out the right forms.

Updating the Property Condition Statement

Once you fill out your property condition statement , provide it to the buyer.  Seller disclosures are required to provide additional information if they find material issues with the property after the disclosure statement has been filled out. 

You can be provided an update form that is available for members only called TXR 1418.

A commercial real estate broker or agent should never fill out your disclosure document. Brokers or agents can provide consultations and support in filling it out however it is the Seller’s responsibility.

Shire Commercial represents Buyers and Sellers of commercial property in Texas. Brokers and agents are not allowed to provide any legal interpretative advice regarding documents.

Commercial Office Space Austin

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Commercial Office Space Austin | Summer 2019

Austin’s commercial office space market for the summer of 2019 equals 2 words, higher rates!  Current lease rates for commercial office space have hit all time highs in the Austin area.  Vacancy rates are down now below 10%.

Lower vacancies and positive occupancy have pushed lease rates up to a historic high, overall construction is up currently for office properties. The lease rate quoted above is for a full service rate which includes all expenses, electric and janitorial costs.  Although leasing rates have increased, they did not increase as much as they did the previous quarter.

  • Operational costs have increased as well up $0.10 from the first quarter of 2019.

Commercial Office Space Terms Austin Office market

Commercial office space terms are typically 3-5 years. As far as costs go most multi-tenant buildings have a “FSG” full service gross lease quoted. Outside of that tenants may be looking at a NNN lease which has a base lease rate plus operating expenses added onto the lease rate and it does not cover electric or janitorial costs.

Expect TI finish out concessions to go in line with longer lease terms , short lease terms less than 3 yrs typically do not have leverage to negotiate finish out in the tenant’s favor. Your credit should be good to excellent if you want to lease a Class A or B Building in Austin.  Because we track lower lease rate deals, you can find these on our website page under “Office Deals“. We do not project much change near term for the next quarter of 2019.

 

Foreign Investment in Austin Commercial Real Estate

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Improvements White Box Space

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Improvements | White Box Space

What is a white box space? A question like this may come up from a tenant that is looking to occupy a retail space or office space in Austin. White box is defined as an improved space that is “vanilla” , it really does not have any amenities or tenant specific improvements to the premises. Let’s think of a space that is completely unfinished. Minimum attributes do exist in a white box space such as

  • Electrical
  • Drywall- Sheetrock – painted white
  • Glass walls
  • Plumbing- restroom areas
  • HVAC – typical for office building space
  • Duct work-sometimes

Every tenant has their own look, just like you have a your own look when it comes to the way you dress. A white box allows the tenant to start with a blank slate and renovate it with a new look. Permitting does come into play depending on what the tenant wants , it could include many things such as : Relocation of HVAC systems, lighting , sprinkler systems, exit doors etc..

 

Costs of Improvements for White BoxWhite Box and Tenant improvements

Costs of improvements seem to be a grey area for most people and it is usually under-estimated. Trying to provide some clarity on costs of improvements even for white box solutions can be a bit tricky. Here are some guidelines for costs of improvements. 

  • HVAC unit replacements depending on the tonnage? $5000-$8000 per unit- this is typically for retail if your unit goes out while you are leasing the space
  •  Drywall $5 to $10 per linear foot
  • Drop ceiling $4 a square foot
  • Lighting $4 a square foot
  • Restrooms $8000-$15,000 (if it is a new restroom)
  • Flooring $4 a square foot
  •  Architect design $3 a square foot
  • MEP- mechanical electrical plumbing $1.50 a square foot (upper range)
  • Management fees for construction if you want it – 4-5% of the construction costs
  •  Permitting costs : Demo permit $250 where as a full building permit is $1500
  •  ADA review is require on projects larger than $50,000

Texas Department of licensing and registration requirements exist for projects as well and will cost up to $1,500.00

 

 

Round Rock Incentives

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Round Rock Incentives

Summary taken from Round Rock Chamber of Commerce

The City of Round Rock and the Round Rock Chamber are offering customized incentive packages for relocation and expansion of businesses. Assistance may include tax abatements, waivers of fees, job training , and fast permitting. Here is a summary of the incentives on the table:

Tax AbatementsAustin Growth Population

Tax abatements are incentives being offered by Round Rock Texas for new businesses and existing expansions, included in this are personal property tax abatements associated with real property. If your business is making improvements to a facility or adding new equipment that add tax value those improvements may be considered for an abatement.

Financing and Grants Possible

Round Rock has a chapter 380 government code that provides authority to grant a loan of city funds to promote economic development. A 380 grant would be in the form of a municipal sales or property tax rebate. Performance based cash grants can be offered on job creation, capital investments and other factors as well.

Round Rock Incentives with Permitting and Job Training

Permitting incentives to fast track a project exist. Local officials can customize a development time table for businesses requiring and aggressive build schedule. Round Rock touts this as a distinct advantage versus their neighboring towns. The Round Rock Chamber can assist companies locating or expanding in Round Rock by securing state-provided job training. The Texas Workforce Commission offers the Skills Development Fund and other training to finance customized job training provided by public community and technical colleges.

For help with relocation and expansions, Shire Commercial has been helping clients since 2004 to locate their businesses.


Gross and Net Leases

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Gross and Net Leases for Office Space

No matter which type of business is reflected, the commercial real estate lease is a binding agreement created to defined the terms of occupancy for a tenant. Bottom line, most commercial real estate leases whether they are gross or net leases are drafted to offload as much exposure from the landlord onto the tenant as much as possible. It is for that reason that a tenant should understand that searching and negotiating a lease thru a brokerage like Shire Commercial, is not the whole enchilada.  A seasoned broker will offer you as a Client more services that just finding you a space, anybody can do that.  On top of lease reviews, a good broker who represents your interests will point out potential issues in a lease and recommend that you consult a legal authority for more detailed review.

Gross vs Net Leases Commercial Real Estate Broker in Austin

Roughly speaking, there are 2 main types of leases for office space in the Austin area, they are gross and net leases. While both may represent some risks for tenants, the gross lease offers the biggest chance for the lease language to hide some pitfalls . Why? This is because Net leases are written to have the tenant responsible for pay for property expenses beyond rent  to include taxes, insurance and maintenance , almost as if you as the tenant own the property.  A Gross lease on the other hand detail out the tenant expense beyond rent in details that need some attention right away. These attentions to detail include: units of measurement being used and calendar years being referenced within a lease.  Having a firm grasp of the details within a Gross lease versus a Net lease is important for a tenant to understand.