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.
To be sure, landlords all over the country have been forced to lower rents because the price has fallen through the floor. Any number of companies has folded after the 2008 recession and the launch rate of new businesses launched has not kept pace with failures of seven-figure companies or the global mergers. Even among the thriving companies today, the firms have learned to conduct work with fewer human beings. They downsized. Other companies incentivize employees to telecommute.
In either scenario, the supply of space in nearly every town looms larger than demand. The good news for tenants is that bargains are available even in the luxury skyscrapers.
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. Here is another example:
A top flight entrepreneur told me she had just made a brilliant move by comparing the rental price per square foot against that which other tenants were paying in her building. She hoped this secret information would create a subsequent drop in rent.
Wait a minute. Before approaching the landlord, get some more information. Does that $7 per square foot represent gross or triple net? Is it based on a long-term contract or a sliding scale, with a $7 the first year to compensate for move-in costs and $14 a square foot ever year after? Is the rental price fixed or does it include management-made improvements? A full build out in office space can cost anywhere from $25 a square foot to over $100 a square foot.
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 to secure the best lease rate, come to Compass Commercial. We’re ready to invest the 25 to 40 hours a tenant representative often spends to land a deal.
How much does it cost? Most of the time it costs you nothing. Landlords absorb the costs. Stay tuned to these blogs for ideas and answers.