REDEVELOPMENT OF EXISTING SITES AND BUILDINGS MARK ELLIOT & DAVID KIRK
To further complicate this for the owner doing a building densification, many leases will exclude any new space added to the building from the operating expense provisions, under a clause that will look something like the following:
Excluded from operating expenses are: … costs associated with any improved space added to the Building after the date of this Lease.
Second, almost any lease would exclude utility and related costs incurred in creating the new space, as an extraordinary expense not related to tenant’ s use of the building, and thus not reasonable as an inclusion in operating expenses. If this is the case, submetering the contractor’ s use of utilities would be required, if that was even possible.
Finally, there is the issue of extra wear and tear on the common areas of the building, by virtue of ultimately having more people( tenants) using the same amount of common area. Extra wear and tear will cause higher operating expenses. To the extent this extra cost is not offset by more square footage paying into the operating expense pool, then each individual existing tenant’ s operating costs will increase, as a result of densification. Depending on how operating expenses provisions are negotiated in leases, that may be a problem. plazas; entrances; entry drives) will get more crowded when floors with extra tenancy are added; common areas do not grow as floors are added.
( vi) Stress on parking is addressed elsewhere; with crowding of the main building lobby, outdoor plazas, entrances and entry drives, tenants may not have a legal action under their existing lease, but these actions of adding extra space could have a dramatic impact upon existing tenants’ willingness to renew their lease. This is the case because common areas are sized on the basis of what the project use and tenant population they are serving are. If you add 10 % more space to your building, you have the effect of increasing the users of your common areas by 10 %. What is the practical impact of those additional users? The ability to move traffic around on internal roads may be negatively impacted. The ability to exit the project at a signalized exit point may be adversely impacted. Lines may be longer for the use of building amenities.
( v) Common Area Stays Static. Common areas of the Building( parking; main building lobby; outdoor