Few topics seem more unrelated than the ever-evolving world of e-commerce and the seemingly constant world of real estate. While the possibilities in cyberspace seem endless, real estate is a finite commodity. Surprising, however, regardless of how ethereal and expansive the world of cyberspace may be, it necessarily must come in contact with the more grounded world of real estate (pun intended). For, unless the prophecies of Star Trekd are correct and the human race evolves into some non-corporeal existence, every business still needs a physical address from which to operate. For some businesses, the physical location of their hardware, personnel and/or inventory requires very modest settings. For others, a great deal of physical space is required, particularly in the online retail business (i.e. warehouse space for inventory). For these reasons, among others, businesses in the world of e-commerce must carefully consider their real estate needs. This article examines certain real estate issues facing today's e-commerce market.
Location, Location, Location. The mantra of the real estate market applies to the e-commerce industry as well. The needs of the e-commerce industry, however, are often greatly different from other, more traditional businesses. In fact, many technology-oriented companies can make use of space that is otherwise unusable or undesirable to users of typical office, retail and manufacturing space.
Many technology upstarts will begin by leasing space for their operations. In addition to the traditional leasing issues faced by brick-and-mortar companies, technology companies often have unique requirements with respect to the leased premises based upon their specific business. Whether you are locating in a traditional office setting or a trendy "telecom hotel", it is critical that the building's physical characteristics, technological compatibility and ability to expand with the business are examined.
Utilities. The source, type and capacity of utilities available to a property are of paramount importance to technology concerns. When examining a specific location, an examination of the existing utilities, the potential for expansion and the ability to add additional types of utility service to the building is essential. Additionally, a tenant must make provisions for redundant systems and alternate supplies of utilities in the event of the failure of any given utility. Most landlords will disclaim any liability for utility shortages. Therefore, it is important to ensure adequate, uninterrupted supply of utilities for technology-related businesses.
Conduits and Risers. The company should also look to see if the existing conduits and building risers provide sufficient capacity to add any additional service necessary to meet the company's current or future needs. In that regard, the company should seek to require the landlord to grant the company access to, and the right to use, the conduits and risers. Many older properties are not well suited to adding additional cabling, fiber-optics or other means of supply or distribution of utilities and data. Responsibilities for maintenance, repair and replacement of the conduits and risers must be negotiated between the technology company and the landlord. These types of issues may become significant depending on the physical location of the conduits and risers. Additionally, the landlord, tenant or some other party may be required to give other tenants of the building access to the conduits and risers for those tenants' own needs.
Communication/Antennas. If the business of the tenant requires any type of dish, antenna or other means of reception or transmission which must be located on the roof of the building or other area outside of the leased premises, it is important that the tenant have access to the roof or other portions of the building for the installation, maintenance, repair, replacement and upgrade of this equipment. This can be troublesome given that the areas in which such equipment is usually located are typically under the sole dominion and control of the landlord. Additional maintenance obligations, common area charges, security deposits and insurance requirements may be imposed on a high-tech tenant that requires access to the roof or other areas.
The Landlord's Perspective. Landlords have their own set of issues with respect to leasing space to technology companies. In addition to the leasing concerns discussed above, landlords are heavily regulated with respect to technology. Rules and regulations promulgated by the Federal Communications Commission and other governmental agencies place significant requirements on landlords and at times impede landlords' freedom to restrict the use of their properties. Access to competing telecommunications carriers, mandatory national standards for "simple inside wiring" of rental premises, prohibitions with respect to restrictions on a viewer's ability to receive video programming services, as well as numerous permitting, zoning and land use issues plague landlords and developers alike. Even when a lease provides for the requirements of a high-tech tenant, there may be laws and regulations that prohibit or restrict the landlord from fulfilling its promises to the tenant, threatening to render the leased premises useless for the agreed high-tech use.
These are just a few of the many issues to be considered by landlords and tenants involved in e-commerce. While many technology-oriented businesses consider real estate to be only a minor portion of their business, careful consideration of these and other issues is essential to the long term success of these ventures.
Reprinted with permission by SBN magazine