As Commercial Real Property Analyst for Any Municipality County, Dixie Phair must acquaint herself with the economics of many different property types. Flex space, which appears straightforward, is not as simple as it seems.
During Dixie’s review of evidence provided in an appeal, she noticed a different operating picture compared to online property listings and subsequent conversations with brokers. To assist in her understanding, Dixie contacted a property manager employed by a large, out of state flex developer. Here is what she learned:
- Apply rental rates from actual rent transactions (not just from listings, and not from non-market contract rents).
- While many brokers express flex leasing as triple net or double net for sales/marketing purposes, much of this product is leased closer to some form of a modified gross basis. The reason? These properties have additional expense borne of tenancy design and occupancy.
- Tenants tend to be hard on existing build out, which exacerbates an already highly diverse extent and quality of unit finishes. They often cobble in their own ideas of additional improvements and modifications during their tenure.
- Since many flex tenants are entrepreneurial small businesses, turnover in dynamic economies is notoriously high. The added expense of reformatting space for releasing is not recoverable from tenants.
Dixie’s extra research supported the appellant’s provided evidence. Broker information is critical, but property managers often can contribute to the whole picture.