The two biggest trends for tenants with Manhattan Office Space are subleasing and renewals. In either case, refreshing your space can offer multiple benefits. Rich Colucci shares tips & tricks on how to get the landlord to pay for the refresh and also offers insight as to how refreshing space can help your sublease stick out in a competitive market of commercial real estate listings.
As a tenant with Manhattan office space, your requirements can often change. You may decide you need a different layout or perhaps just something to freshen things up. When that happens, you turn to the people who can renovate your space, so you do not spend time and money on relocation.
For this episode of “Conversations with Cohen,” I’ve brought on Rich Colucci, CEO of Distinctive Offices. Rich and his team are precisely those reno guys you need when faced with some big office changes. Today, we will be chatting about the current climate of Manhattan office space and the biggest trends we’re seeing in office space: subleasing and renewals. Rich is a fountain of knowledge with over 20 years heading Distinctive Offices, and we’ve become fast friends after working together on a number of my own clients’ projects.
About Rich and Distinctive Offices
Rich started out as a floor covering subcontractor. He specialized in carpeting and was working on a bunch of projects doing just that. Eventually he realized he preferred being more of a primary contractor where he could control his own work, so he marketed himself directly to the clients. He got a huge break when he was tasked with doing 12 floors of carpeting and eventually took over managing the project. It went incredibly smoothly, and Rich and his business partner at the time identified this niche market of refreshing occupied office space and ran with it.
Now, Distinctive Offices has been around for 20 years and works on projects large and small. One of their most recent projects was with a firm named TB Alliance down at 40 Wall Street. Distinctive’s team came in and selected finishes from new cabinets in the kitchens, to paint colors, specialty flooring, and carpet. They did all that over the holidays, so they never got in their client’s way, making the process virtually seamless.
I’ve been getting tons of questions from clients about subleasing their midtown office space these days, and understandably so. Covid-19 has taken us for quite the spin, and not everyone is using their office space. Subleasing can often be a great solution for a burdensome lease agreement. The problem is that basically everyone’s got the same idea. Over the past 30 days, over a million square feet of office space has become available. So, I asked Rich what he’s been able to do to help his clients sublet their space in such a competitive market.
The bulk of Rich’s work these days has been around staging his client’s spaces. As he put it, “it’s a beauty contest.” In today’s competitive market you need to make your space as attractive as possible and, of course, visuals are a big part of that. Rich pointed out how surprised some folks might be at how many subleasing spaces are on the market that look like the tenant ran out in the middle of the night. If you bring in some folks to freshen it up by throwing up a new coat of paint or maybe some different furniture (often rented), it can completely transform the space. The other part of that, is making sure the space is in as close to move-in condition as possible.
Renewals are really the forte of Rich and his team at Distinctive Offices. Nowadays, there’s been a real trend in lease renewals in both downtown office space and midtown office space as folks find the challenge of seeing new spaces or taking on a large project to be too great of an obstacle during Covid-19. Rich can come in and make an old space look brand new by putting in new carpeting, lighting, cabinetry, and so many other things. His team’s goal is to improve space with no disruption to a company. He’ll send his team in to get work done on the weekends and clean up after themselves before Monday morning. Each weekend or two becomes a phase and after some time, they’ll get that entire reno project done for you and you’ll hardly even see them.
There are a lot of benefits to doing a renovation on a lease renewal as opposed to finding a new space. It offers your employees comfort in knowing they don’t have to relocate, find a new route, and all the annoyance that comes with a move. It also shows your employees that you’re really invested in their wellbeing and comfort in your space by sprucing it up. Possibly the most important part is that it’s cheaper. You don’t have to move all your equipment or even buy new stuff. Instead, you can get a fresh space with a brand-new feel for a fraction of the cost. In fact, often when you sign an extension the landlord will give you some money to get the renovation project done, so you may not even have to pay for the project!
Often, during these sorts of renovation projects, the landlord is happy to foot some or all of the bill but wants control of the project. This could be because they want to make sure quality contractors and materials are being used, or the folks aren’t messing anything up in the building. If possible, Rich suggests the tenant try and gain control of the project. That way, you as the tenant can ensure the project is getting done at convenient times and to your specifications. From Rich’s experience, landlords are only too happy for his team to work on the a renovation project.
Rich’s Tips and Tricks
A guy like Rich, who’s been in this space for over 20 years, has a wealth of knowledge and insight to share on the renovation process. I asked him to share some tidbits he thinks are really critical for tenants to know. One thing we focused on quite a bit was having the landlord fund a renovation when you sign a lease renewal. I asked Rich what a good asking price is for a tenant to request for their landlord for such a project. Supposedly $10-$15 a square foot will cover mid-range carpeting and painting, but Rich suggests asking for $20. Ask for a little bit more and get something that’ll make your space pop a bit!
I also asked Rich about some advice he’d offer tenants looking to renew a lease for the first time. His main suggestion? Hire a commercial real estate broker. I swear, this was not scripted. Rich talked about some truly terrible negotiating he iha seen tenants do for themselves. A common example is a tenant getting stuck with the landlord controlling all the of the renovations. Time and again, Rich sees the landlords doing the renovation job during the work week, meaning the client is out of their office space for potentially weeks at a time. So, the landlord may pay for the renovation but you’re out of your office! He’s consistently seen brokers able to get far more for their clients.
So, for a tenant with under a year left in their current space, what would Rich recommend they do moving forward? Well, if you’re interested in a renewal, he recommends calling your commercial real estate broker and getting started sooner rather than later. Early negotiating usually leads to good things. Rich recommends a 3-5-year lease renewal, as a year barely gets you anywhere and 3-5 isn’t too long that you’re stuck in something bad long-term. In terms of the tenant improvement money for a landlord to fund your renovations, Rich definitely thinks that timespan works.
A Little Something Extra…
Time to turn to food. I like to bring up my guest’s favorite eateries in New York City to give those small businesses a little plug during these challenging times. Rich’s got a favorite Cuban takeout place over on 6th Avenue between 39th and 40th Streets. But the place he’s most looking forward to getting back to sit down in is an Italian restaurant in New Jersey called Taormina’s. Their chef and owner is straight from Sicily and their stuff is truly authentic. Go try their Braciole there; a rolled-up pork with cheese, spinach, and breadcrumbs. Rich’s favorite.
Go check out my FULL video interview with Rich to learn even more about the topics we discussed and to learn more about what Rich and Distinctive Offices can do for you, visit their website. That’s all folks. Have a great one!