Special Features of Technology Office Leases

SAN FRANCISCO-Leasing of office space to technology-oriented companies has been one of the major drivers of the rebound in the office market throughout the US, particularly in the San Francisco Bay Area. In many cases, these technology companies are in a fierce competition for talent, and their corporate real estate has become a key tool in attracting and keeping this talent.  Here are a few of the key areas in which a lease to a technology company may be different from a standard office lease.

1.  Food Service: Many tech companies offer free food to their employees prepared by the company in specially-designed kitchens within the premises. The lease will need to specifically permit this food service and associated improvements, and include provisions for additional janitorial and cleaning requirements.

2.  Dogs: Many tech companies desire to allow their employees to bring dogs into the office.  Leases should include provisions establishing the number of dogs permitted at any given time, allocating responsibility for any incidents relating to the dogs, requiring evidence of vaccinations and allowing for the removal of dogs which exhibit improper behavior.

3.  Density of Use: Most technology companies no longer design their space with individual offices, preferring instead to utilize an open floor plan with additional conference rooms.  This will inevitably result in a greater number of employees in the premises as compared to a typical user, meaning that conventional density limitations in the lease will need to be reconsidered. 

4.  Competitors: Because of the ongoing competition for talent, technology companies leasing space in multi-tenant buildings or projects may require limitations on a landlord leasing additional space in the building or project to a competitor.  This is typically accomplished by agreeing on an initial list of competitors, with periodic substitutions permitted, but with a maximum number of entities allowed on the list. 

5.  Bicycles: Especially in urban areas, many employees of technology companies use a bicycle to commute to work.  As a result, a technology company may require that the building in which they are located have appropriate facilities for bicycle storage and perhaps showers. 

6.  Type of Build-out: Technology companies are known to favor less traditional layouts and materials than a standard office user.  The parties should, relatively early in the leasing process, agree on a space plan and general materials, as well as any restoration requirements.

7.  Electricity Usage: Many technology users are more dense users of power than a traditional office user.  Given the extended hours that such tenants may utilize the premises and the increased density, it may be most appropriate to structure the lease as net of electric with the tenant paying for its power on metered basis.

8.  Flexibility: Technology users are often in an early stage of development, and therefore may have a more difficult time than most tenants in forecasting their head count projections.  Therefore, technology users often look to incorporate additional flexibility in their lease terms to ensure that sufficient expansion space is available to accommodate projections. 

Steve Berkman, a partner in the real estate practice of Paul Hastings LLP. The views expressed in this column are the author's own.