Cheap Rent May Have Hidden Costs

Cheap Rent May Have Hidden Costs

For everyone that began to believe there really is such a thing as a free lunch and free rent, the game is changing. Landlords are willing to give a month, but the incredibly generous deals are fading as buyer interest picks up. Watch out if you find a deal that seems too generous. Watch for hidden costs lurking about as landlords seek to recoup costs from the bleak years.

We were hired as a tenant representative for a national firm with a building in Denver. Our needs analysis indicated the client/tenant had about 1,500 square feet more than they should. The local contact swore she needed every square inch but the national management company disagreed. Frankly we couldn’t understand why this particular office needed so much space. Something was hidden and our task was to discover where.

When we asked the landlord he was unusually angry about a national firm stepping into his firm’s business. We explained that all of the firm’s lease arrangements were handled by a national brokerage. He calmed down, but it appeared he was hiding something and asked for a request for proposal on the lease in question.

The answer was in the rentable usable factor, how much space is used by the tenant and how much is an add-on factor to pay for common areas such as atriums, halls and shared lunch rooms. This client had a whopping 22.5 percent rentable usable factor on an old building with no amenities. My client was paying for phantom space – at least 10 percent of its imagined square footage.

What looked good as a nice round number, wasn’t a fair price when all factors were included. With the strength of a national organization we successfully lowered the rate. But the lesson served as a warning for tenants in buildings occupied anywhere in the country to look more closely at this rentable, usable factor and see what is contained in the number.

Individual tenants may risk more than they bargain for by walking into a landlord’s office and demanding a drop in rent. A tenant representative specializes in analyzing hidden costs, comparing rates in surrounding buildings and developing a strategy for rate reduction. Our aim is to help furnish the kind of information that helps you as a lease-holder, make wise decisions.

About the Author

Lynn Drake’s status is well known in the industry: She’s the commercial realtor focused on maintaining “true north” for her corporate clients. It’s a reputation built on 35 years of commercial real estate experience. Lynn became a commercial realtor in 2001 after 15 years in corporate real estate. Thus far in her career, Lynn has successfully completed over 1,500 real estate transactions ranging from small business tenant leases to the sale and purchase of industrial complexes.