Friday, January 04, 2013

Retail Space For Lease

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As a Houston general contractor for the past several years I have seen several things over and over again. People who are looking to build out a retail lease space are usually so excited about the concept of having their own store that they over look 5 (actually there are way more, we will leave the rest for future posts) potentially very costly items. They do not take these things into consideration and therefore it comes back to bite them. Ouch! It is understood that most business owners are not thinking about these items in detail, at least new business owners, thus the cause for this post. I would like to share 5 things to consider when you decide to lease retail space. I have learned that if you help people look for ways to save them money it only can benefit you in the end.

1. Electrical Service:
     The existing electrical service (this is explained below) should be large enough to handle the electrical requirements of the space. It will always be cheaper on your pocket book if you can reuse what is available. Every item that requires electricity places a certain amount of load on a electrical system. Even items that do not run constantly have to be calculated in the formula (this is what is called a "load analysis", and this can be produced by a sharp master electrician or an electrical engineer) to determine what your electrical service requirements (voltage and amp size) are.
     The electrical service is composed of the wire & pipe coming from where the power is being supplied to the tenants, switch gear/disconnects (large boxes that have a handle on the right hand side that can move up/down to turn power either on/off), power company meter can (this is where your electric meter is located), and the panel boxes on the inside of the space. Sometimes the power coming to the space is considered "high power" and therefore a transformer (usually a large metal box that sites on the floor or is hung up in the ceiling) is required to lower the voltage for actual use.  One item to consider before leasing retail space with an existing transformer is make sure it is not "humming louder than you can stand". The vibration, or hum, is a reaction by the transformer metal to the presence of a magnetic field created as electricity passes through. Many times when you look at a space with a leasing agent the power is off. Before you ever sign a lease make sure you are comfortable with the sound the transformer makes when energized. They all generally make a humming sound, from "I never really hear it" to "it's driving me crazy". It does not necessarily mean that it is damaged or it is about to quit working. Many times we have installed them up above the ceiling so they are less noisy and to allow more floor space. When you lease retail space with an existing electrical service you will always save yourself money if it can handle your new build out.

2. HVAC- Heating Ventilation and Air Conditioning:
     Now let me first say that we are Houston general contractors based in Houston, Texas. I am saying this to establish our geographical location. Why? you ask. Because different types of systems are used in different parts of the country. I am not going to attempt here to describe the major differences because I want to keep this post fairly general to all spaces.  
     The majority of retail space for lease here in Houston have a roof that can support what is called a "package unit". The package unit (a package unit is where your compressors and air handler/blower are contained in the same metal box) generally set upon a curb (metal framework attached to the roof that the unit itself actually sets on) that a roofer usually installs. The HVAC company supplies the curb and the roofer installs it. The duct work is attached to the underside of the unit and passes through the opening cut into the roof by the roofer. The duct work (also called the trunk line, which can be metal or fiberboard, both are silver in color) is installed above the ceiling where you have a ceiling and is exposed when you do not. From the trunk line you have what is usually a flexible silvery snake looking thing (this is called flex duct) and it is connected to a usually square piece of metal called a supply grill. You say, "David, why are you telling me this? and my reply is "Ignorance is expensive." Now the above is just a simple explanation of what a commercial HVAC package unit and system is. 
     Another type of system you see here in Houston, usually in buildings that have a metal roof or in a building that is framed out of wood is what is called a "split system". This is the same type of system that most people in the South use in their homes. You have your compressors on the outside of the house and the air handler is located in the attic or in a closet. Now I personally do not like split systems when it comes to commercial space due to the fact that they cost more and there are more pieces to the puzzle. 
     If you have found retail space for lease that has an existing HVAC system installed you absolutely want the landlord to furnish you with what is called an "HVAC Survey". This survey if done corectly will give you an honest report of the known existing conditions of the unit(s) and associated ductwork. It is usually performed by the landlord's a/c man and a good landlord will already have one on file. The survey will not tell you if it is going to break down tomorrow and cost you hundreds or thousands to repair, but should give you (only if the man who is checking out the unit is honest and qualified) a picture of the current condition of the unit. You want to know before you sign the lease if the unit(s) are still intact or have they been vandalized/robbed of the copper and are they in good working condition. This is especially critical if you are taking the space "as-is" to save money on the rent. This is the second reason you want the power to be turned on before you lease retail space. It's always best if you can get the landlord to warranty the existing units for at least (1) year, make sure this is in your lease. HVAC work is not cheap, and things always seem to break down at the worst times.
     If you are going to be installing new units your general contractor should provide a (1) year labor and materials warranty on the complete system (as well as the whole project). The manufactures offer limited warranties on their equipment, usually they only cover the supplying of certain components after a period of time, not the cost of the labor. Things typically break down after the full warranty has expired. This usually just leaves you with the manufactures equipment warranty. They will generally warranty their compressors for 5 to 10 years, but this does not include the labor to remove and reinstall the new ones.
      Now let's talk about filters for awhile. There are generally (2) places where the return air filters are located on commercial units, 1. In a return air filter grille located at your ceiling or 2. in the unit on the roof. Many times the store owner will change out their own filters when the ceiling is low enough (generally 10' above the floor accessible with a 8' stepladder) and have their a/c company change them out when they are located in the unit. The main problem is that filters do not get changed out regularly whether they are in the space or on the roof. Why?, because people are generally lazy and tight when it comes to maintenance.
     To maintain your (1) year labor and materials warranty that the general contractor will usually provide, the lease space operator is required to change the filters at least once a month. Otherwise it is considered neglect of proper maintenance (basic maintenance of the unit is required to be performed by the retail space operator) because neglecting to change filters regularly can cause equipment failure. A unit that does not have it's filter(s) changed regularly causes dust, grime and other harmful airborne particles to collect on the interior coils which can cause the blower motor and other electronic items to fail. And here in the South the a/c always go out at the worst of times. So then the a/c guy shows up to check out the problem and lo and behold the filters have not been changed out in 6 months, ah! so now we know why the system froze up, overheated, started blowing water out the supply grilles or whatever. Who do you think is responsible for the "new HVAC unit" going out? You see what I'm talking about? The point of this little story (yes this is true, I have seen it before) is to remind you you that you could still be financially liable for any repairs to a new system under warranty if you do not change your filters regularly. Even if a person was to change the filter out right before the a/c guy showed up there are other signs that tell him if it's been changed regularly. Now this is when the filters are accessible from inside the store. If the ceiling is to high or if you have an open to the deck concept and you cannot reach the filter grille then you need to set up a maintenance contract with the a/c company who installed the system for the general contractor. They will come out once a month, check out the unit and change the filters. Your unit will provide better service for a longer period of time if you do this which in turn will save you a lot of money and headaches. See how much money I am saving you already? You can thank me later.
Blogging is hard work and I'm tired already. Next we will be writing about Plumbing. To be continued...