The Landlord's Dos and Don'ts of a Deal
Sep 11, 2006
There are several ďdosĒ and ďdonítsĒ that should be followed by both the landlord and the tenant in a leasing transaction to secure office space. Here is my breakdown of dos and doníts from the landlordís prospective; follow these guidelines to achieve a more successful negotiation.
∑ The market is hot; make sure you maximize your potential rental rates.
∑ Keep your tenant improvement costs as low as possible.
∑ Keep rent concessions to a minimum.
∑ Make sure that the lease includes at least a CPI increase or a fixed-rate increase every year.
∑ Expose your property to as many prospective tenants as possible to keep the building in a competitive position.
∑ Keep legal costs down in lease negotiations.
∑ Keep legal costs under control by using a balanced lease that will be subject to less change.
∑ Keep your vacancy rates on par with or less than your competition.
∑ Maintain a modernization plan that keeps your building up to date.
∑ Donít wait to secure the highest rental rate possible. Profits could be washed out by additional vacancy time; in addition, market conditions could change rapidly. Remember 2001 and the dot-com crash.
∑ Donít rule out tenant improvementsólosing a proposed tenant by refusing to make improvements could lead to additional vacancy time.
∑ Donít make the mistake of not using free rent to secure a higher contract rate that could be more in line with the market if rental rates continue to grow.
∑ Reward brokers but donít make the mistake of cutting out promotions as well as fees as the market tightens again. If you are not competitive in these areas, you risk fewer tours, which mean less qualified tenants, which could lead to longer vacancy times.
∑ Donít keep rental rates high and accept a high vacancy rate while waiting for market conditions to improve. High vacancies could lead to high tenant improvement costs and free rent as additional concessions.
∑ Donít discontinue modernization plans in a hot market. A modernization plan takes months to develop and build out. Tenants want the level of service and quality of appearance to be maintained over the life of their lease. This may attract them to stay for another lease term, saving you thousands of dollars in downtime, leasing and legal fees, and tenant improvements.
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Written by: Hans Hansson
Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 21 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email firstname.lastname@example.org or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.