“When people find out I’m a commercial real estate agent they often sidle up close and whisper in my ear, “Let me tell you, I got such a deal,” and expect me to nod approvingly. Dare I frown? A deal isn’t always a deal.
A gentleman who coordinated real estate for a now-defunct company with multiple properties bragged at a luncheon that he used a scare tactic to beat down the rent price. He would threaten the landlord with an impending bankruptcy, leaving that individual with empty space and a guilty conscience if the rent wasn’t lowered. A couple times the “meager times” approach worked. But he could have brokered a better deal without compromising his ethics. Rent price is only part of the equation. If a landlord gives an existing tenant a 10 percent hardship reduction when prices have fallen 30 percent, the negotiator tripped up.
If you are looking for a new commercial space on your own here are some dos and don’ts:
The To Do’s
- Determine how many square feet and number of offices you will need before you start looking for space
- Make sure the building you want to lease is zoned correctly for your use. For instant medical tenants need spaces with a higher density of parking.
- Find true comparable sales pricing by checking with the city what other buildings sold for. Do not use comparable sales that are over a year old
- If you are going to lease a building find out what comparable buildings lease for and how much money the landlord gave for incentives.
- Make sure your perspective landlord gives you quotes in writing detailing all costs and improvements.
- Don’t expect the persons whose name is on the for sale or lease sign, represents you. Their job is to get you to pay the most rent possible
- If you have access to a commercial MLS do not make the assumption the posted rates reflect what your deal should be. There are many variables in every transaction
- Make sure you understand what other costs you as a tenant in a transaction are responsible for. Who pays for janitorial, taxes, insurance, ground maintenance etc.? There can be many hidden costs most people don’t understand. For instance did you know an n/n/n building means the tenant pays for everything?
- Don’t assume that what you negotiated as part of your agreement is in the lease. Things get missed and verbal agreements won’t matter once the lease is signed
- Don’t forget that unlike residential real estate there are no laws to protect your rights. Make sure you read every line in the lease or purchase agreement and understand what it means.
Remember to look before you leap. If you want to get the very best deal in town, go out and get bids for similar space in the same city or similar areas. Base your bid on square footage, multi-year contract and build-out. If you’d rather concentrate on your core business and get a professional who understands the jargon hire a Tenant Advocate whose firm only represents tenants/buyers. By the way we are available to help you. www.compass-commercial.com