Welcome to the second article in a 6-month series on tenant leases and real estate issues from an architect’s perspective. This month we will discuss the landlord's workletter as it relates to the language that is agreed to between a landlord and tenant on a given amount of construction work or monetary contribution towards a tenant’s overall construction costs provided by the landlord.
First, let's define two types of standard construction that we typical see offered to tenants: The "Pre-Built" and the "Built-to-Suit."
The "Pre-Built" space is one in which the landlord has created a standard design with their architect and offers the same overall design and quality to all of their tenants. The work includes all facets of building a complete tenant space. This would include but not limited to partitions, electrical devices, suspended ceilings (or in some cases open ceilings), lighting, office glass fronts, flooring materials, pantries with appliances, doors, hardware, etc. The "Pre-Built" standards currently seen in NYC, offered by many landlords are of a very sophisticated level with many choices in colors and palettes from a preselected list of manufactures.
The "Built-to-Suit" is a type of construction whereby the tenant can design their own project either with the landlord’s architect or an architect hired directly by the tenant. This work is "custom" to a client's brand and culture. Usually the design has unique features including specialized glass office fronts, lighting, custom millwork, acoustics, and flooring materials.
The choice on the type of construction to use depends on the building. Both options can serve the tenant and landlord community equally very well.
The workletter describes the work to be carried out by the landlord, in a "Pre-Built", the scope describes all of the materials to be used, the quantities and the manufacturers that have been selected. It sets the baseline of what a client can expect to match their typical "Pre-Built" and also can list add alternates that a tenant can select for an upgrade that will be an additional cost. From a tenant’s perspective, it's important to understand the quantity limitations of lighting and electrical outlets to be provided as this can be a significant cost. As architects, if we are brought in early enough in the lease negotiations we can help develop a space plan and determine the add alternates in advance so they can be acknowledged during this stage instead of during construction.
In a "Built-To-Suit", the landlord may offer a dollar contribution toward the overall construction costs or the equivalent amount of “Pre-Built” costs to offset the customization of the tenant’s scope of work. Once again, the architect can help define the construction budget costs during the lease negotiations so that a tenant can know ahead of time their expenses and the landlord can be assured that the tenant can afford and meet their obligations.
Here are two case studies:
1. Kahn Architecture was brought into a "Pre-Built" situation by the tenant’s real estate broker and as the tenant’s architect to confirm the standards of the "Pre-Built" was indeed the same as represented on the landlord’s architects drawings. We also were tasked to manage the add alternate costs and confirm that those modifications were included in the issue set of drawings to be included in the final construction set of plans. All costs were identified in advance of lease signing.
2. For another project, we are the landlord's architect, brought in to design and coordinate the customization of a "Pre-Built" and to help the tenant understand their add alternate costs. This facilitated a quicker lease signing by all parties.
The workletter details the deliverable of construction scope between landlord and tenant and the contents within should have definition and clarity of the highest detail. The architect’s experience and understanding of the nuances in programming, design and construction will help all parties best meet lease target dates, documentation scheduling and construction milestones. A good workletter will only accelerate the entire lease review process and the “architect” can be essential in helping define actual needs of the project saving both landlord and tenant costs in the end .
Michael Kahn, AIA
Director of Operations, Vice President
2 West 45th Street, Suite 502
New York, NY 10036