The Hidden Costs in Cheap Rent

The Hidden Costs in Cheap Rent


For those who believe there really is such a thing as a free lunch and free rent, the game has changed, especially when it comes to leasing commercial space. Landlords are generally willing to give a free month, but the incredibly generous deals of the past are fading as buyer interest picks up.

Found a deal that seems to generous? Watch Out!

Hidden costs may hit you hard, as landlords seek to recoup lost revenue from the bleak years.

Here is an Example:

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 really needed. 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 what and where.

The landlord he was unusually angry about a national firm stepping into his firm’s business. We explained that all of our client’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 an atrium, hallways, and shared lunch rooms. This client was being charged a whopping 22.5 percent rentable/usable factor on an old building with no amenities. They were 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 the factors were included.

With the strength of a national organization behind us, we successfully lowered the rate. But the lesson served as a warning for tenants in buildings anywhere in the country to look closely at this rentable/usable factor and see what is contained within that 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.