Three Secrets You Should Know About When Leasing Office Space

Three Secrets You Should Know About When Leasing Office Space.

Presented By Mark D. Rauch

Inventory of office space

In addition to real estate databases, a good Tenant Rep will have at his or her finger tips the exact date of lease expirations around the area. It is after all their job to market to office tenants for representation, so mining this information is natural. In addition to the list of "available" or "listed" spaces, a good list of tenants whose lease expirations fall within your schedule will provide you with a hidden outlet for alternatives. These spaces rarely come on the market because the landlords of these buildings also are attempting to keep their tenant and renew them. Think about yourself for a minute. You occupy a nice chunk of space; you know when your own lease expiration is. How many tenants on the market which might be compatible with your space know about it? Knowledge of these provides you with a second tier of possibilities.

Contact with the tenant of these potential lease expirations can give you secret indication of their intentions and whether approaching the landlord is viable. This is a better technique than contacting the landlord of these tenants because in so doing you reveal to the landlord that he has an automatic two players for the same space. But once you determine that certain lease expirations will likely result in a new vacancy not known to the market, this gives you the added weight with the landlord of being the potential automatic follow up tenant without having to put the space on the market and suffer the cost of the lease up period. And for your agent, his or her real estate commission will remain unchanged because you will a require that your agent's fee be apart of the transaction or no deal. The landlord can barely say no when the alternative is such a burden.

Existing Tenants

To round out a clear understanding of the market, it is genuinely a good idea to get the input from existing tenants in the buildings you are touring. By simply retrieving a roster of the tenants in the building directory or a reverse directory on the internet, make contact with the lead person, manger or owner of a variety size and type companies to discuss all matters that are important to being a tenant. Introduce yourself as a potential tenant. People like to talk and you will learn a great deal about how the HVAC functions, the personality of the building manager, the negotiations they achieved; and just listening to them talk will usually garner information on topics you did not think to ask about. Make good notes from these conversations as some of this information you may likely take to the landlord as part of your negotiations.

It was once discovered from another tenant that the building management had a reputation of hiring only the least reliable and indifferent janitorial services company and was almost always behind in making simple repairs such as public lighting. The building once was owned by an excellent and wealthy developer who had sold it to an individual investor who was lackluster in his management and spending money. The Tenant Rep made certain requests of the owner, to hire a professional janitorial service, to agree to certain specifications for management of the property and attempted to make sure all these were in the lease. Interestingly, the owner's arrogance said no. So, because the other tenant had revealed this reality, the tenant was able to avoid finding out way too late about the management, and then being dejected as a good paying tenant receiving sub-par service with no recourse. In another case, just such conversations revealed items that the landlord eagerly agreed to, which made for a pleasant and honest transaction without surprises. Don't be bashful in asking about what kind of deal the tenant negotiated or what kind of personality the landlord has for negotiations.

Without asking bold questions, one rarely receives bold information. In exchange, offer to provide him or her with the results of your negotiations or information. If you lease there, you have made a good neighbor (especially if the landlord one day hits either of you with a surprisingly high expense increase).

The Tour

When touring available spaces, you will be faced with everything from the never-occupied, new space to the dowdiest, chopped up, rat maze space. It is difficult at best to envision your future location in the very same spot now occupied by an out of business stock brokerage firm with hundreds of small partitioned offices unless your a stock brokerage firm. Likewise, it may be hard to envision your new image in a space now resembling a cave, with no improvements, ceiling, HVAC, or walls; just gray, dusty, concrete floor as far as the eye can see. When touring these buildings, do not prejudge anything good or bad. It will be up to the architect to marry your needs assessment and criteria with each building (programming), and evaluate the existing conditions (and value) of improvements, and evaluate each building's technical data. The tour is to give you a general sense of the building, the image, the view to and from the building, location, access, and how you might envision your company occupying the space. This sense and the process of programming, technical data and improvement allowance evaluation will provide you with some elements to determine if the building is "qualified" or is simply a "prospect". As each building clears certain evaluations they become "finalists".

When being toured by the enthusiastic leasing agent or building owner you will be faced with a fire hose of information. Building owners and listing agents are proud of their buildings and they energetically espouse all the specific benefits of each detail. You will hear the importance of the recessed sprinkler-head escutcheons, variable air volume HVAC, full height solid core hard wood doors, different ceiling heights, different ceiling grids, different ceiling pads, door hardware, window sill height, etc. In touring several large buildings, it was actually funny how in one building the agent showed unbridled enthusiasm about the building's thermostatically controlled HVAC zone areas. Five grown men and women in suits, for five minutes listening about vacuum driven HVAC boxes in the plenum. At another building, the seasoned building developer walked five feet into the space, waived his arm out as if to show us in and said, "How about that view? You need to be looking over this view for the next ten years." Rarely did he touch on specifications of the building. He was clear that there will be a time for that among the technical professionals, but today was for the sizzle. And by mentioning a ten year lease, actually started the negotiations right there. Do not commit to memory the floor weight capacities or one-inch mini blinds. Further, do not be put off or limited by the pre-existing improvements of the past tenant. It will be up to your professional team to determine the usability of any of that and as compared to the landlord's improvement allowance. And, if needed, in one week the rat maze can be cleared out to the shell to start over. Just enjoy the tours. Afterward, you can declare which building fits your criteria of image. Your team will determine which is compatible with your criteria and which then drops on to the qualified list.

During the tour, you will also be asked many questions about your plans, your office layout, lease expiration, detail after detail. Remember that if you have properly performed the needs assessment and criteria, your team leader and architect will be qualifying the building. It is unnecessary to reveal all of your information at the tour, there is time enough for that later. The best bet is to not talk about anything other than the building you are touring.

Using this "prospect", "qualified" and "finalist" framework throughout your process will give you the permission to tell a building owner or agent that their building has been "disqualified" if they do not meet the terms you set for them. Sometimes just a negotiation ploy to get a landlord to agree, but having the predetermined permission to disqualify a building is powerful stuff. It provides you with leverage to outline what terms or conditions would return the building to a "qualified" or "finalist" stage. If you want to see desperation in action, just tell a building owner that has just said no to your request for three more months free rent or more construction dollars that their building has been disqualified. You will likely get a call back from them saying, "Well, that would be just fine."

Nothing contained herein is to be considered legal advice. Always seek legal advice when evaluating any legal document.