Landlords require security deposits to protect themselves from losing upfront costs and renovation expenses in the event of default by a tenant. They frequently spend heavily to entice new tenants, often by assuming alteration and improvement costs, and free or reduced rent at the start of the lease term. In addition, landlords incur legal, accounting, brokerage and permitting fees. Many of these “costs” apply specifically to one tenant with little enduring value in case of default.
It may be somewhat of a cliché, but you need to consider the end before the beginning. Before you sign on to a new commercial lease, you should establish a viable exit strategy.
Tenants evaluating only the rental rate when comparing a Class A building ($31/sf) to a Class B building ($28/sf) may be making an error much more costly than the 10% discount.
Similar to other industries, the effectiveness of a commercial real estate firm is determined by 15-minute issues. Attention to detail differentiates experienced brokers from novices and can make the difference in a wide scope of services.
With a nod to Bob Dylan, your office space needs to be changin’ too, along with the times. As your industry adapts to unexpected developments, your business must meet those developments to remain competitive, and the ability to alter or modify your space to respond to the latest changes may become paramount.
Relocation to another building is one thing, but what about relocation in the same building - when the landlord asserts a unilateral right to relocate you. It happens! Landlords use this process when they need to accommodate a large tenant.
A key fault line of many organizations is the intersection between business and friendship. Often tenant friendships with landlords become business relationships as well as vice versa. When you work with someone on a common goal or struggle in a business environment, you learn a lot about people. You often bond together, and that bond affects future decisions … as it should.
Tenants who consider buying out of their existing office lease usually do so for three main reasons:
Tenants looking for office space will often consider a sublease rather than a direct deal with the landlord. Subleases can be very favorable for tenants, as they often include furniture, and even phone systems, plus rental rates lower than a standard lease. However, tenants often make a mistake by dismissing subleasing opportunities when the term is too short. We encourage our clients to think “outside the box” and consider two methods for augmenting the term:
Operating expense clauses in commercial leases may be categorized into two distinct groups. The first type, Triple Net leases, obligate the tenant to pay for some operating expenses directly, such as cleaning, utilities and HVAC maintenance, and others based on the percentage of the building leased. These include common expenses such as snow plowing, landscaping, roof repair and plumbing.
Does your landlord view you as a gnat or 800-pound gorilla? Knowing the answer to that question can greatly affect your ability to negotiate terms in your new or renewed commercial lease. Of course, a gnat to one landlord may be a gorilla to another!
Landlords require security deposits during the term of almost all leases. Most commonly, this protection takes the form of a letter of credit or cash security deposit,determined primarily by the financial strength of the tenant. However,for tenants of more limited means, a landlord may also request a personal guaranty to reinforce the contract. This document makes the signing officer(s)(the guarantors) personally liable.
5. Know what your lease renewal means to your landlord: If you negotiate your lease renewal on your own, it’s impossible to know the countless variables your landlord considers and their effect on creating leverage and extracting concessions, such as:
It’s the most common mistake made by commercial tenants: they miss a huge opportunity, and lose truckloads of money, by negotiating their own lease renewal. While more than 90 percent of companies looking for 5,000 square feet or more rely on the expertise of a real estate professional to find and negotiate a new space, hese same companies abandon this tried-and-true approach when renewing.
In the large majority of cases, when a tenant pays a flat charge per square foot for “tenant electric,” it serves as a profit center for the landlord. In the Fairfield & Westchester county region, landlords charge from $2.75 to $3.00 per square foot per annum in addition to the base rent. For tenants with 4,000 square feet or more, we strongly recommend installing an electric meter on the premises, as it measures actual consumption, typically from $0.75 to $1.25 per square foot. The cost to install a meter, about $4,000 to $5,000, can often be negotiated as part of the tenant improvement allowance provided by a landlord.
In today’s office market, landlords are providing generous improvement allowances to fund the renovation of office space for new and renewing tenants. The amount depends on many factors including the credit worthiness of the tenant, the terms in the lease and the total square footage of the space. Generally, a landlord offers more for larger tenants with a longer lease term (seven years or more).
In a lease renewal, you can change a lot more than the standard options of extending your term and reducing your rent.
Most tenants understand the impact of office rent on their bottom line and try to reduce it, often by negotiation. However, they frequently overlook free rent, a common concession in the current real estate market.
NORWALK, CT – Adam Cognetta, vice president of Choyce Peterson, Inc. (www.choycepeterson.com), a full service commercial real estate brokerage and consulting firm with a specialty in representing both office and healthcare tenants, recently served on the Executive Committee for the American Cancer Society’s Comedy Against Cancer event in Stamford, CT, which raised net donations of more than $350,000.