Top 10 Lease Mistakes - Part 2
When do most executives
think about their office lease?
Usually when it is about to expire!
“Apples to Apples”
As we continue to trudge through the heat of the summer, and the top ten mistakes in Lease Negotiation, let’s look ahead to the cooler fall temperatures, trees showing off their autumn colors and apples, specifically, “apples to apples” comparisons.
6. Not performing accurate “apples to apples” comparisons of available facilities:
All buildings are distinctively different and so are leases. A comparative analysis should present the various space alternatives in a format that makes it easy to compare all the factors of the lease. The analysis should break down the many components of the different leases and compare the clauses and economic factors of each. Among the many items that need to be compared are lease types (full-service, net, triple-net, etc.), finish levels, tenant improvement allowances (slab-to-slab, below ceiling, etc.), lease incentives and usable and rentable square feet. A lesser rate is not always the best deal, especially if you have tenant improvement allowances or rent abatements that factor into the financial equation. To really understand the best deal these factors must be carefully scrutinized and compared on an “apples to apples” basis.
7. Failing to obtain accurate, current market research:
How can you get the best deal on the market if you don’t know the market? To avoid paying too much for your space, it is imperative to perform a thorough market analysis. A Landlord’s bargaining position is always “negotiable” depending on factors such as occupancy rates in their building, the competition’s lease terms, financial strength of a Tenant, and Tenant’s square footage requirements. Cherry Associates actively tracks the Charlotte office market and we have access to invaluable market data. We can provide an overview of the current office market and a detailed sub-market survey that lists available properties, rental rates and other economic factors. We also know which landlords can offer the best terms for your specific situation such as build-out allowances, rent incentives and flexible lease terms.
8. Failing to create a competitive environment for lease negotiations:
Whether you are considering renewing the lease in your existing space or looking for new space, you must create a competitive atmosphere for negotiations. Finding competitive building alternatives that meet your needs will promote competition among Landlords and will give you the leverage to cut the very best deal for your company. To accomplish this, you must first “sell” your worth – actively promote the desirability of your firm or business. Provide Landlords with current financial statements, credit rating reports, client lists and recent articles or press releases. It is important to realize you, your employees and clients are not the only ones affected by a relocation - determine how staying or leaving will impact your current Landlord. Every owner and building agent will acknowledge that retaining a high-quality tenant is far less costly than attracting a new one!
9. Signing the Landlord’s “Standard Lease”
without modifications:
Beware when you hear a Landlord say, “it’s our standard lease – everybody signs it!” Remember “standard” does not mean fair or equitable – building owners are looking out for their own interests! A lease is a contract and it is absolutely prudent on your part to challenge any language that is unacceptable to you. Hire an attorney! Office leases are very legalistic, complex documents, but you would be surprised at the number of firms that choose not to engage an attorney and will sign the standard lease with few, if any changes at all!
10. Paying the “Sticker Price” for space:
Most Landlords set their initial lease terms higher than they are willing to accept. Remember, most business terms in a lease are negotiable. However, if you haven’t done your “homework” or you haven’t hired someone to do it for you, you will have very little, if any leverage at this point. A Occupier Services Representative, who is involved in the earliest stages of the process, can bring choices and market knowledge to the negotiating table. He should have some insight into how far a Landlord will go to get the deal done.
Complete List of Top 10 Lease Mistakes
Not allowing enough time and resources for the process
Beginning a space search without determining short-term and long-term needs and goals
Using the wrong broker, or no broker at all
Beware of “as-is” property
Not using architects and general contractors under your control
Not performing accurate “apples to apples” comparisons of available facilities
Failing to obtain accurate, current market research
Failing to create a competitive environment for Lease negotiations
Signing the Landlord’s “standard lease” without modifications
Paying the “sticker price” for space
These are mistakes that can be made by anyone. That said, they can be costly and have lasting effects depending on the length of the lease. Don’t allow your unfamiliarity with the environment to keep you from hiring a firm that will protect you from costly issues, like some of the ones referenced above. Hire a firm that will put your needs and the needs of your business first.
