The benefits of a Project Manager reviewing lease renewals, negotiations and agreement for leases

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As Project Managers, we are constantly engaging with industrial tenants and occupiers who have agreed key commercial terms or signed transaction documentation without careful consideration and full understanding of the inherent risks and commercial exposure, when securing their new business space requirements. Unfortunately, this can be a costly exercise and lead to challenging situations and or/delays to key project deliverables. 

To avoid finding yourself in this position, it may be worthwhile engaging a Project Manager to provide best in class advice from project inception right through to completion. Not only will this add value and improve the financial performance of your industrial asset, but it will also minimise the long-term commercial exposure and risk to your business. 

As Project Managers, we work alongside the leasing agent or client representative during the negotiation through to completion of any transaction document - whether that be an agreement for lease, a lease renewal or contract of sale. We represent our client’s interests, adding value and de-risking the process and enable you to make informed decisions. 

Through our experience, we have outlined below the three key considerations all tenants and occupiers should be aware of when dealing with transaction documentation. 

1. Technical requirements to be formed as part of the base building offer 

All incoming tenants will have performance brief requirements. For example, you might require increased height or floor loading to account for internal storage requirements in certain areas of your facility, you may require increased base building services, functionality or fitout aspects over and above specific thresholds/limits. The aim of reviewing technical requirements from a building, engineering and architectural perspective is to ensure these requirements form part of the base building offer, deliver long term operational efficiencies to your business and do not cause abortive works costs, obsolescence or delays to your project. Not only will this result in ensuring you achieve the long-term operational efficiencies and cost savings, an all-round better offer for the tenant, but it will also close the gap, ensuring that the landlords obligations are aligned with your expectations on your new business space. 

  2. Key project milestone dates / expiry dates

Undertaking a detailed program review is essential. The program will be overlayed with the key dates in the lease and this will determine how realistic the deliverables are towards the landlord. It is essential to ensure that realistic timeframes are included across all phases of the project  to avoid the consequences of failure to meet sunset dates (key milestones within the transaction documentation) and account for any lease expiry and relocation timeframes required on your current premises.
 
In reviewing the program, we ensure the transaction documentation accurately reflects key considerations and durations for all  authority and statutory approvals, sunset dates, early access dates, impacts of vacating your current premises or lease expiry and account for any  make good obligations under the existing lease. The above points form the framework from a program perspective. This allows us to ensure we assist you in determining the most efficient and realistic timeframes required for the  delivery of the works, and ensures we identify and mitigate potential risks that we want to avoid, such as an extensions or re-negotiations on your  the existing lease, , liquidated damages, and limiting risk around delays in authority approvals or sunset dates. 

3. Terms & Conditions and clauses 

These can be ambiguous and favour the landlord (especially around early possession/sunset dates). To de-risk the project you need to carefully consider the consequences for failure to meet those dates. In our experience, the most common issues we come across include: 

  • Extensions of Time : If there is a delay on site or delay in achieving key milestone dates and the conditions are written in favour of the landlord, there may be no mechanism within the transaction documentation to mitigate the delays and reduce the commercial exposure to the tenant or occupier on your current premises.
  • Ambiguous variation and PC Sum clauses: It’s important to review how these are determined and the commercial impacts. 
  • Failure to meet sunset dates: What are the consequences of failing to meet these key dates and assessing liquidated damages? 
  • Payments towards fitout works or building upgrades forming part of any landlords  incentives or tenant / occupier contributions. 
  • Environmental / land considerations? For example, is the site contaminated or is if fit for industrial use? 
  • Ensuring  there are correct titles for the land or the creation and registration of easements over the land? Does it require development approval, do they cause operational constraints and do they require access considerations?
  • Statutory Approvals and Permits for the facility: Ensuring all required development approvals and statutory permits include both building and use, do not cause operations constraints and enable unrestricted access to your premises;
  • Completion of tenant / occupier fitout works: How will these works be completed? For example, integrated with the landlords works, engaged by the tenant / occupier and coordinated by the landlord during early access periods, or completed post Project Completion? 
  • Project Completion certification: Has the landlord selected a favourable certifier and are they independent?
  • Defects management, supplier warranties and as-built documentation and ongoing maintenance and DLP periods: What happens, who’s responsible and how is the process managed?

So, with the above key considerations in mind, are you about to negotiate or document the transaction documentation for your new business space requirements? Is there a pending lease expiry or key milestone dates on your existing premises about to occur? Does your team need assistance in negotiating and documenting the transaction documentation on your new property requirements? Engaging one of our experts from the outset will ensure the most efficient delivery with respect to time, cost and quality, and most importantly, ensuring your expectations are aligned with the landlord’s obligations. Contact one of our industrial experts today. 

 

 


Related Experts

Tim Edwards

National Director | Victoria

Melbourne CBD

Tim Edwards is an accomplished property professional with over 30 years’ experience in industrial, logistics and commercial property across the Australian and ASEAN markets and sectors.

Tim brings a strategic yet personable approach to all aspects of the commercial, industrial and logistics property development process and is firmly committed to the philosophy “experience matters, inspire confidence”. He has proven capability and expertise across all facets of property development from strategy, acquisitions, JV, ownership and funding structures, business development, project delivery, and customer relationship management.

With a background in construction and design, and a passion for property, sustainability, building communities and helping businesses achieve relevance and difference within the dynamic competitive landscape, Tim has a keen ability to listen, understand and respond to customers’ needs and changing situations.  

During a secondment with TCC Group in Thailand working on transforming and rationalising DC networks and supply chain strategies, Tim sharpened his eye for seeing the potential of a holistic approach and finding creative and innovative business space solutions to suit customers’ needs, emerging trends and technologies, and market drivers.

As a National Director in Colliers' Project Leaders team, Tim is committed to taking an active role in providing a total value proposition. Tim works closely with customers and key stakeholders to identify and provide innovative property solutions that maximise operational and commercial efficiencies and deliver project certainty.

 

 

 

 

 

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Conor Maguire

Associate Director

Sydney CBD

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