Managing Construction the Cherry Way
There are many opportunities to create savings in the commercial lease process. One very tangible way is to manage the construction process from the Tenant’s perspective.
Don’t Lose Control
Assume you are an office space user with a need for new space, or you are considering renewing your existing lease. You have narrowed your building choices to no more than three or four. And, like many other Tenants, you allow the Landlord of each building to have space plans drawn up and have them priced by his contractor – big mistake! Now, you have the overwhelming task of comparing and analyzing the details and pricing of each plan – an almost impossible task when you consider the fact that each building is distinctively different and has been priced out to different specifications. It will be very difficult for you to get an “apples to apples” comparison of the building alternatives.
Also, by allowing the Landlord to coordinate the construction up-fit with his space planner and contractor, you will likely lose the ability to control the design of your space as well as the ability to maximize the up-fit allowance provided by the Landlord. Most importantly, the space planner and contractor work for the Landlord! Their obvious responsibility is to look out for the best interests of their Client, the Landlord, without any fiduciary responsibility to you, the Tenant.
Streamlining
At Cherry Associates, we believe that controlling the construction process begins by streamlining the services. In the above scenario, we would have taken a very different approach. Instead of using multiple planners and contractors, we would carefully select one space planner and contractor to plan and price all the alternatives. And, of course, prior to engaging their services, we would negotiate market rates for both the design and construction.
Because the space planner and contractor are essentially working for the Tenant and not the Landlord, there is an inherent commitment to the Tenant’s best interests. With one planner and contractor, we can now be assured that all the spaces are planned and priced out to the same specifications, each building’s efficiencies and inefficiencies are quantified, the spaces are accurately measured, and there are no hidden fees or mark-ups. We have virtually eliminated any ambiguities in the details of the pricing and we can create an “apples to apples” comparison of the alternatives.
Creating the Plans
The process would begin by having the space planner provide very “specific” plans of each alternative. The plans would include not only drawings, but a pricing document with specifications and budget estimates for carpet, wallcoverings and paint, millwork, lighting and many other items.
The contractor would now be ready to begin pricing the plans. We require the contractor to use the same 16-line-item pricing document to price each alternative. This will allow for a proper comparison of each building and, in the event we need to have another contractor price the plans, it will make it easier to compare both contractors’ prices. At this point, the contractor can also help us “value engineer” the specs. His expertise in this type of project can help us identify any overpriced or unnecessary items in the specifications, further maximizing the up-fit allowance.
A detailed review of the pricing documents will be performed to uncover any latent mistakes or omissions. As long as the final construction drawings do not change significantly from the preliminary pricing documents, there should be very little variance in the final pricing. In essence, it allows us to project the ending costs and avoid any costly surprises in the final construction.
Ranking and Decision Making
Once we have ranked the alternatives using a qualitative analysis, the Tenant should be able to identify which building best meets their requirements. And by maintaining at least two or three back-up alternatives, the Tenant will have valuable leverage in the event negotiations for their primary choice break down. Armed with this vital information, we can now begin negotiating the business points of the lease by sending out a “Letter of Intent” to our first choice.
The Benefit
This construction approach can effectively generate savings and value to the project by creating a cohesive team atmosphere early in the process. And by ensuring that all the decisions regarding your space are based on clear and accurate facts, you will be able to not only select the best space for your needs, but uncover an potential problems to help prevent any costly surprises down the road – surprises that could result in reactive or hasty responses and could cost you a great deal of time and money.
Final Note
Cherry Associates has developed sound relationships with space planners and contractors in Charlotte and surrounding areas. We select firms with strong reputations and proven track records. If you are planning to select a space planner or contractor to handle your project, remember, experience is key! They should have ample experience working with your type of project and contractors should be bonded to handle the project. Check their references and, if you are in a lease situation, verify that the owner will approve them to perform the work – this is often a good indication as to whether or not they are credible and qualified.
Cherry Associates can help clients analyze all aspects of the lease decision process. If your firm is considering moving or renewing an existing lease, let Cherry Associates help guide you through the complex process.
