Private Sector Office Space

 

Private Sector Office Space Leasing Procedures

Legislative Mandate

ARS § 41 – 792. D. mandates the Arizona Department of Administration (ADOA) to approve all state agency leases for privately owned office space. The Board of Regents is responsible for approving state university leases.

Program Goals:

  • Provide annual lease cost data to the Lease Cost Review Board, which must estimate the annual average square foot dollar cost for private office leases.
  • Ensure that state agencies are leasing space at the most economical available rate per square foot.
  • Achieve consistency in the format of state lease contracts. All lease documents must conform to the legal requirements established by the Arizona Attorney General Office (AGO) and utilize the ADOA boilerplate lease template document.
  • Maintain an accurate database for leased office space that will support budgeting, planning, and reporting responsibilities.

Basic Leasing Definitions

State Agency – all agencies, boards, and commissions, excluding the Board of Regents;

Office Space – privately leased space in which business, clerical, or professional activities are conducted, including storage and laboratory functions;

Amendment – a revision of or change to the terms of an active lease;

Addendum – the addition of terms, conditions, or clauses to an active lease;

Full-service lease – includes all costs associated with using the space; i.e. base rent, taxes, utilities, janitorial, and parking;

Net Lease – does not include one or all of the costs usually associated with a full service lease including, but not limited to, occupancy taxes, janitorial, utilities, and parking;

Lease Transmittal Form – required cover sheet for all leases that provides the total known or estimated operating costs associated with the lease. Examples of operating costs include lease occupancy taxes, janitorial services, and utilities.

State Contracted Tenant Broker

ADOA requires agencies to utilize the services of its real estate tenant broker (Contracted Broker) when initiating a new lease and when renewing, amending (except for administrative amendments), and/or re-casting (renegotiating) an existing lease. The contract prohibits entering into an oral or written contract for private sector lease representation with any other real estate broker.

The Contracted Broker represents agencies in all manner of operating lease negotiations, including but not limited to:

  • Analyzing and defining State Agency space requirements;
  • Identifying appropriate space to meet the space requirements of State Agencies;
  • Researching and providing market and supporting data for current or future space needs;
  • Renegotiating, renewing, amending, and recasting existing leases;
  • Presenting and touring potential spaces to State Agencies for site selection;
  • Soliciting leasing proposals from potential landlords;
  • Initiating and presenting lease proposals and lease counter-proposals to potential landlords;
  • Providing financial analysis for comparison of space options;
  • Negotiating the most favorable lease terms for the State Agency;
  • Assisting with tenant improvement construction management
  • Providing space planning assistance;
  • Preparing lease documents;
  • Preparing non-binding letters of intent (LOI);
  • Assisting in strategic planning; and
  • Providing any other service or information necessary to facilitate leasing for existing and new space requirements.

Boilerplate Lease Template

All new and renewal leases must conform to ADOA’s approved boilerplate lease form. ADOA will provide notification to State Agencies in the event its boilerplate lease form is revised to reflect new and/or updated lease clauses and added or deleted statutory requirements, etc. Agencies renewing a lease previously made and executed using an outdated lease form must renewthe lease utilizing the most current version of the lease document. Lease form exceptions must be reviewed and approved by ADOA in advance of finalizing lease negotiations.

The Lease Cost Review Board (LCRB) forecasts two-fiscal years of an estimated average square foot dollar cost forleasing privately owned office space. Any proposed lease rate (including base rent, occupancy taxes, real estate taxes, janitorial services, utilities, and parking) that exceeds the LCRB established lease rate must include a written justification for the proposed lease rate. Factors for the justification include, but are not limited to, the following:

  1. The availability of suitable space in the vicinity of the State Agency geographical requirements. Please includethe actual market area considered.
  2. Include the competing lease rate quotes for comparable and suitable private lease space.
  3. Identify any special requirement or program specific needs for premium space, such as retail mall space.
  4. Identify special needs that are not normally covered in a full service lease rate.

Unless approved in advance, ADOA will not approve leases for a term greater than five years, and will consider only minimal lease rate increases over the term.

Basic Leasing Procedures

  1. Any agency requiring assistance in locating private lease space, negotiating a new or renewal lease, renegotiation of existing lease terms, or other lease-related inquiries, should contact the Contracted Broker at least 180 days prior to the desired commencement of the lease.
  2. An agency must complete and include an ADOA Lease Transmittal Form with each lease submitted for approval. The agency must complete all sections of the Lease Transmittal Form to provide the total known or estimated operatingcosts associated with the lease. Examples of operating costs include lease occupancy taxes, janitorial services, and utilities.
  3. An ADOA form lease is signed in this order:
    1. Lessor

    2. State Agency Lessee

    3. AGO

    4. ADOA

      1. If ADOA has approved a lease form deviation, the signature order may change. Please call ADOA prior to routing for signatures.
  4. ADOA will forward a copy of the agency’s proposed lease to its assigned AG counsel for “approval as to form.”
  5. Lease payments are initiated by warrant at the end of each month (“in arrears”). See General Accounting Office(GAO) Technical Bulletin 99-2. ADOA will not approve lease terms that require months or years lease costs paid in advance.

Please see the Leasing Procedures flowchart for visual reference.

Contact

To obtain more information about agency leasing of privately owned office space, please contact:

Connie Castillo, Program Specialist
Arizona Department of Administration
General Services Division
100 N. 15th Ave., Suite 202
(602) 542-1796
[email protected]

Steve Corney, Managing Director
Jones Lang LaSalle Americas, Inc.
3131 E. Camelback Road, Suite 400
Phoenix, AZ 85016
(602) 282-6300
[email protected]