How a tenant fits in the building is significant to the landlord’s motivation to “reach” to make a deal. A good credit tenant with a history of a stable size operation in a building where you are larger than the average size tenant…that’s positive; if the past five years show a good credit tenant and growing business that’s even better. Generally landlords, particularly institutional landlords, are looking for the larger tenants committing to a longer term so there is less risk to the portfolio value.

The space has been vacant for six months or more and there has been no tenant obligated to pay rent during that time.

Obviously, the longer the space has been on the market, the more the landlord will be motivated to re-think his previous pricing strategy. Again, this is also a function of the type of landlord as mentioned earlier. It is important to note, however, that if there is a tenant who has vacated the space but is still obligated to pay rent, the landlord is less motivated.

Great credit is the number one way for a prospective tenant to go to the front of the line of all of the tenants interested in a particular space. Typical security deposits range from 0-3 months of rent. Short of being a strong financial credit, the landlord will require a larger security deposit or a personal guarantee to the extent that the landlord has any cost to modify this space. This issue is critical in that some landlords would outright pass on making a deal to a poor credit tenant.

Generally, landlords are most competitive when they believe the tenant is in a position to act decisively on a commitment to occupy space within six months. Considering permitting and construction time for alterations and time to actually negotiate the lease document, landlords believe that three months is the fastest that entrepreneurial tenants can move and six months for the more “corporate” entities.

A typical cost to completely remodel a space or to build out raw space is $30-50 per sq. ft. Generally, this is a cost to the landlord to get a market deal. The amount of tenant improvement dollars is related to the rent and “free rent” being negotiated and is also related to the amount of security deposit the landlord would expect from a tenant with less than stellar credit. If the cost to the landlord is less than per sq. ft., which would cover slightly more than new carpeting and paint, this would be an attractive deal to the landlord. If the tenant improvement allowance is kept low, the tenant should be mindful of the cost that the landlord is avoiding and translate this into “free rent” for the tenant. It is important to differentiate between the costs to remodel the space, which the landlord will have to do for any tenant, versus the cost to remodel, specifically to only your occupancy.

A standard market (or full) commission is approximately 5% of the rent in the first five years and 2.5% of the second five years of the lease term. The tenant broker earns a full commission. A landlord broker earns a half commission if there is a tenant broker, or a full commission otherwise.

Absent broker involvement, a tenant should try to attain half of the savings realized. This is generally 2.5% on a five year deal, 1.875% on a ten year deal with no brokers, or half that amount if there is only a landlord broker.

As the landlord might think of a tenant without a broker, if the landlord does not have a broker they may be less informed on the market.

It is to the benefit of the tenant to pay for actual electric consumption via a sub-meter rather than a flat rate to the landlord, whereby the landlord may recover more than 100% of his utility bill. This can equate to as much as per sq. ft. savings, depending on the tenant’s hours of operation, how much consumption the tenant uses for computers, and any provision for the tenant to pay for after hours HVAC.