Commercial market going strong, especially in Mercer County, real estate agents say

Commercial market going strong, especially in Mercer County, real estate agents say

Just before the economy plunged into a recession and began a sluggish recovery, Hilton Realty bought an undeveloped lot in the Carnegie Center office complex on Route 1 in West Windsor.

Four years later, as the local market for office space began to show signs of strength, Hilton broke ground on an 88,000-square-foot, high-end office building at the 300 Carnegie Center tract. No tenants were signed up in advance, but Hilton was confident they would materialize.

“We started to see increased velocity, increased activity in the market,” Hilton assistant leasing director Matthew Malatich said. “We decided to start building the building and everything started to fall in place.”

Last year, well before the building was finished, Hilton announced its first tenant, Heartland Payment Systems, which now occupies more than 22,000 square feet in the building. VMS Fund Administration, Peapack Gladstone Bank, Advisors Asset Management, Moofwd and JP Morgan Chase Bank have all followed Heartland, filling up about 55 percent of the building. Malatich said he expects the building will be full by the end of this year.

Such performance has real estate developers and owners confident that robust times are ahead for the area’s commercial space and warehouse market, which also benefits from a well-educated work force and regional metropolitan areas. The vacancy rate in Mercer County for high-end, or Class A, office spaces dropped 1.1 percentage points last year to sit at an even 10 percent, based on a market report by Cushman & Wakefield, a commercial real estate company.

Hilton’s new building is commanding a premium rent, about $36 per square foot, a few dollars above the average rental rate for higher end commercial office space in the area.

The three-story office building features a modern granite and glass interior with sleek metal trim and a wall of windows that let light flood into the lobby. Hilton also included a fitness room with lockers and showers, and built the structure according to high environmental standards, Malatich said.

Despite the success of the building and the current strength of the market, local development of large commercial office buildings has been slow to pick up coming out of the recession. There has been little new construction of this type in the area other than the 300 Carnegie Center building, said Aubrey Haines, CEO at Mercer Oak Realty. And that slowness on the part of developers has contributed to a growing shortage of space.

“When you’re looking for smaller spaces you have a wide range of choices,” Haines said. “If you’re at 50,000 or 100,000 square feet, options are limited.”

While the recession pushed down demand for a few years, it also suppressed development.

“That creates more pent-up demand so when the market comes back they need a lot of space in a hurry,” Haines said. “There’s almost no new supply expected to come online.”

Demand is outpacing supply in the market, Haines said, but until rental rates for high quality office space increase it will be difficult to convince large banks to finance the development of new buildings. The suburban nature of the local market leads financiers to be hesitant to lend despite growing demand, he said.

As a result 300 Carnegie Center is the only newly constructed Class A office space to open in the area since 2009, he said. From concept to completion, it will take an average developer about 2½ to three years to produce a new building, Haines said, and with none currently under development it is unlikely that new space will be put on the market in the next two years.

Even large commercial tenants already in the area are going to be affected as many large leases expire in the next three years, Haines said. These tenants need to start thinking about where they will be in a few years and the effect this market will have on rental rates, he said.

“They have nowhere to go but up,” Haines said.

After remaining stable around the $30-31 per square foot mark over the past decade, Haines projects that the shortage of new space will push rates up toward $40 per square foot by 2020.

The market for industrial space in the area faces a similar dynamic of rising demand and limited supply, said Marc Petrella, a senior analyst with Cushman & Wakefield.

As the midpoint between New York and Philadelphia, and on a larger scale between Boston and Washington, D.C., the local industrial real estate market is in a promising position, he said.

The market, consisting largely of warehouses and manufacturing sites, is concentrated along the Turnpike in two submarkets surrounding exits 7A and 8A, Petrella said, and the area has seen a lot of growth and is primed for further expansion.

The 8A submarket, consisting of south Middlesex towns including Plainsboro and Monroe, has one new industrial development under way; a 450,000-square-foot building in South Brunswick. While this is a significant addition, it enters a submarket that has 68-million-square feet of warehouse space which already has 92 percent occupancy.

The 7A submarket is highly concentrated in Robbinsville, and while it is smaller than 8A it has seen high demand recently, as it has exceeded 1 million square feet in new industrial leases in each of the last three years.

“You keep hearing about all the companies bringing their operations back toward population centers,” Petrella said. New Jersey, with its dense population and surrounding metropolitan areas, is one of those centers, he said.

The market for industrial space in the area was weak through 2009 and 2010, but has recovered since 2011, he said. Vacancy in the warehouse market is about 8 percent currently, he said. The 1.2 million-square-foot Amazon warehouse under construction in Robbinsville is a promising sign for future industrial development in the area, Petrella said.

“The continued growth in ecommerce for traditional retailers is good for New Jersey just based on where New Jersey sits,” Petrella said.

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North New Jersey Industrial Market Tightening Up

SUNDAY, MAY 26, 2013 LAST UPDATED: SUNDAY MAY 26, 2013, 11:10 AM
BY LINDA MOSS
STAFF WRITER
THE RECORD

While the office market continues to languish in North Jersey, industrial real estate is rebounding.

The Panasonic building at 100 Meadowland Parkway in Secaucus, which will be vacant later this year.
Hartz Mountain Industries Inc., which owns and manages one of the largest privately held commercial real estate portfolios in the country, leased more than 1.5 million square feet in the first quarter, and roughly 1.3 million of that was for its warehouse assets, according to the company. That activity included six leases for new warehouse tenants, who took about 400,000 square feet of space.

“The market is very healthy from a landlord’s perspective,” said Gus Milano, managing director for Secaucus-based Hartz.

How the market has improved
Area Vacancy rate 1Q 2013 Vacancy rate 1Q 2012 Rent 1Q 2013 (1) Rent 1Q 2012
Bergen 10.3% 11.2% $5.92 $5.68
Passaic 8.4% 8.4% $5.27 $5.14
North N.J. (2) 9.3% 10.3% $5.92 $5.72
(1) Asking rate per square foot a year for warehouse/distribution space
(2) Bergen, Passaic, Hudson, Morris and Essex counties

Source: Cushman & Wakefield of New Jersey Inc.

The overall industrial vacancy rate in North Jersey — Bergen, Passaic, Essex, Morris and Hudson counties — was 9.3 percent in the first quarter, down from 10.1 percent at the end of last year and 10.3 percent in the year-ago quarter, according to Cushman & Wakefield Inc. of New Jersey.

Some of the existing warehouse/distribution space is being taken by data centers, as the region has become one of the national hubs for data-center construction. And while the activity is generally considered positive, data-center operations generate fewer jobs than a warehouse or distribution center would.

“Anytime you’re in single-digit vacancy numbers, that’s a pretty healthy number,” said Marc Petrella, a Cushman senior director. “And in the first quarter of 2013, there were 5 million square feet of new deals done in those northern five counties. Activity is good. Supply is constrained, and so we see the market continuing on a positive trajectory and improving here in the near term.”

Bergen County saw its industrial vacancy rate decline to 10.3 percent in the first quarter from 11.2 percent in the same period a year ago. It was unchanged in Passaic County, at 8.4 percent.

In northern New Jersey, the industrial market is particularly active in not only the Meadowlands, which Petrella called “ground zero” for that real estate sector, but also Teterboro, Carlstadt, Port Newark/Elizabeth and, no joke, New Jersey Turnpike exits.

“I just had to do a report for somebody who wanted the vacancy rates per exit on the turnpike,” said Doug Bansbach, senior vice president and principal of real estate broker Cassidy Turley in Somerset. “The turnpike drives the market because of the truck traffic.”

There are a number of reasons why the North Jersey industrial market is getting a boost, creating an uptick that’s mainly being seen in warehouse and distribution space. Following the Great Recession, there’s pent-up demand for the space. Rising consumer confidence means companies have to supply and ship more goods.

Rising e-commerce sales are fueling the need for distribution outlets in the New York metro area, as well. Retail e-commerce spending surpassed $50 billion in the first quarter, up 13 percent from the year-ago period, according to ComScore.

While there’s growing demand, there’s actually a limited amount of state-of-the-art, Class A industrial space in most of Bergen and Passaic counties, brokers said. No one dared build it during the economic downturn. And some of the existing warehouse/distribution space is being snapped up for a whole new real estate use: data centers. And in general, data-center operations generate fewer jobs than a warehouse or distribution center would.

There are several industrial projects under way, reflecting the increasing strength of the sector. Teterboro Landing, the retail mall planned by developer Catellus for the former Honeywell site in Teterboro, will include a 160,000-square-foot, build-to-suit distribution center, said David Knee, managing director for Jones Lang LaSalle, the broker on the building.

“Multiple developers have been starting to spec buildings, which really was non-existent for several years, and the buildings are slowly getting leased,” said Ken Lundberg, senior vice president at NAI James E. Hanson in Hackensack.

Hartz plans to renovate the 673,000-square-foot warehouse complex at 100 Meadowland Parkway in Secaucus that Panasonic Corp. is vacating in October, Milano said. Panasonic is moving to Newark.

“The building is 40 years old and we have plans to make it a new, modern distribution building,” he said. “We’re going to raise the roof to 32-foot clear [from 24 feet]. There are very few 32-foot clear buildings that are half a million square feet or more. It’s a rarity. So it will be a pretty spectacular product to have in this market near New York City.”

That facility won’t be ready until the second quarter next year, but Milano said, “I already have tenants that I’m in negotiations with.”

Hartz also plans to demolish a 200,000-square-foot office building at 1 Panasonic Way in Secaucus.

“That parcel will be redeveloped as either an expansion of the warehouse or other possible uses,” Milano said.

Consumer spending and e-commerce sales have been on an upswing, and that fuels the need for industrial space.

“Warehouses fill up based on consumer consumption,” Lundberg said. “If, specifically, retail sales go up or companies are convinced they are going up, they will purchase more product, hence the need for more space.”

Added Milano, “There’s retail demand, and many of our third-party logistics companies support the retail industry.”

E-commerce is now a big part of that consumer equation. Amazon, with its same-day-delivery pledge to customers, has taken a huge stake in industrial real estate in Central Jersey, planning a 1-million-square-foot fulfillment center in Robbinsville. To keep its same-day-delivery goal, Amazon needed to have a distribution center close to New York City, but needed more industrial space than Bergen County, a mature market, had to offer, brokers said.

Ultimately, there will be a trickle-down effect for North Jersey, real estate officials said. Distribution centers need to be near large populations of end-users, Lundberg said.

“What’s going to help northern and central New Jersey, like the ports, is all the feeders that go to Amazon,” said Nicholas Nitti, CBRE first vice president in Saddle Brook.

Amazon isn’t the only company doing e-commerce, or promising quick deliveries to customers, that is leasing space in New Jersey. Online grocery seller Peapod said in December it is taking 345,000 square feet at the 880,000-square-foot Pulaski Distribution Center in Jersey City, Nitti said. His company represented Peapod in the deal, while Jones Lang LaSalle represented landlord Prologis. And most brick-and-mortar stores are now doing e-commerce, selling merchandise from websites, as well.

“We do have tenants that are in e-commerce businesses, there’s no question about that,” Milano said. “That’s part of the [warehouse/distribution] space they need for what they do. And some of the retailers have e-commerce within distribution space that they have under lease with us. So that’s certainly a segment of the market today.”

Rents for industrial space have also been trending up. In the first quarter the average asking rent for warehouse/distribution space in North Jersey was $5.92 a square foot a year, up from $5.72 in the year-ago quarter, according to Cushman. In Bergen, it was $5.92, compared with $5.68 in the first quarter last year. And in Passaic County, the rate was $5.27, up from $5.14 the prior year.

Rents on some of the new state-of-the art warehouse space are pricing in the mid-$7 range, Bansbach said.

“There is a slight uptick in asking-and-taking rents with fewer concessions that landlords have to make in terms of free rent and how much money they have to give a tenant to retrofit the space,” Knee said.

North Jersey has the largest concentration of data centers in the nation, and Bergen and Passaic’s stock of warehouse space is being eaten into by those centers, diminishing the supply as the demand is surging.

There’s been a burst of such activity in the past year. Digital Realty Trust Inc. acquired a former 271,000-square-foot Roche building at 701 Union Blvd., Totowa, for $16.8 million to transform into a data center. Earlier this year, Hartz sold a 283,215-square-foot building at 2 Emerson Lane, Secaucus, for $18.4 million to CoreSite Realty Corp. to convert into a data center. And late last year, Internap Network Services signed a long-term lease for 100,000 square feet in Secaucus for a data center. Those three deals alone took roughly 654,000 square feet out North Jersey’s pool of warehouse space out of 285.7 million square feet in overall industrial space.

All in all, the industrial real estate market has become extremely complex and challenging for brokers, Nitti said.

“In addition to understanding all of the industrial inventory and pipeline projects, you now need to understand inbound-and-outbound freight; space planning; logistics; drayage costs [the price between picking up a container at the ports and delivering it to another point]; flood and water tables; how will gas prices and tolls affect the distribution model; and how do traffic patterns affect it,” Nitti said. “Companies are scrutinizing many different pieces of the supply chain to get the most effective and efficient model so they can outperform their competitors and grow in this economy.

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How to Plan Space Requirements in a Warehouse

How to Plan Space Requirements in a Warehouse

Warehouse space is rented or leased by the square foot. To lesson the overall operating cost of the warehouse, it is vital that all space be used wisely and efficiently. With careful planning and foresight, it should be possible to maximize the usage of all floor space and lower your operating cost per unit.
Other People Are Reading

Instructions

1

Determine what type of material-handling equipment you will need. This will include forklifts, pallet jacks and operator-up machines. The narrower you can keep the travel isles the more room you will have available for product storage. An operator-up wire guided machine can operate in an isle as narrow as 6 feet. A typical forklift will require more than twice that amount of room to do the same job. Isle width is a critical element in your design and use of the available warehouse space.
2

Plan out your racking. Begin at one end of the warehouse and space the pallet racking equally, allowing for proper Isle width between each row of racking. Plan for the racking to be as high as your ceilings will allow. Pallet racking can extend to heights of 40 feet of more, allowing you to use the maximum amount of cubic space available within the warehouse. Allow narrow spaces of 6 to 8 inches between pallet racks that will be set back to back. This will help prevent product damage from pallets being set in from the opposite aisle.

3

Determine the optimum storage size of your product. Determine if it will be stocked in single unit cartons or on full pallets. Take careful measurements and lay out your shelf pattern to match these requirements. Most warehouses have a combination of single carton and pallets. It is important to create the proper number of each. If the wrong number are created, you will either waste labor breaking down pallets to be stored as single cartons or waste space by storing single cartons in pallet-size locations. Set your shelf beams to the proper height on the pallet racking to create the proper number of each size storage area.
4

Mark off an area to be used as your receiving dock and a second area to be used as your shipping area. If you have the space, it is always best to have these functions done separately to avoid confusion and shipping errors. Depending on your product, you may also need an area for value add (special customer requirements that must be added before shipment) as well as a holding area for future shipments awaiting the proper ship date.

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HOW TO LEASE WAREHOUSE SPACE

Instructions

Learn How to Lease Warehouse Space
1

Identify your needs. Walk through your operation step-by-step, listing the warehouse requirements at each juncture. You may need electricity and a certain number of outlets. You may need a water source. Ceiling space may be a concern. Your warehouse may also need to maintain a certain temperature.
2

Consider whether this will be a working warehouse. Some warehouse space is used only for storage. If employees will be working in your warehouse at length, you will need restroom facilities, proper ventilation, parking spaces and a break room.

3

Figure out how much space you will need. Very small, storage-only warehouses may have a set monthly rent like a residence. Most office space rents by the square foot. The basic formula is calculated by multiplying the number of square feet to be leased by the price per square foot. To determine the monthly rent divide this number by 12.
4

Research locations. When looking at the building and its location, consider how often you receive shipments. Companies that receive constant deliveries may need to be near a freeway or even a seaport.
5

Think about the kind of access you need to the building. Doorways should be large enough for deliveries. Certain businesses may require docks.
6

Check out the landlord and the property management. Ask other tenants about the quality of the services provided. Make sure the buildings are up to safety code requirements.
7

Recognize your responsibilities as a tenant. Do not assume that the landlord will do certain things. Don’t agree to anything that is not spelled out in the lease.
8

Understand your lease. Commercial lease terminology can become complicated quickly. For instance, a triple net lease makes you responsible not just for the rent but for all expenses associated with your warehouse space as well. Have your attorney read over the lease before signing it.
9

Know your rights as a tenant. Most warehouse leases remain enforceable even if ownership of the building changes. Make sure the lease addresses your inability to use your warehouse space due to a problem caused by the landlord.
10

Insure your equipment. The landlord’s insurance will not cover losses to your inventory. You should also purchase liability insurance in case one of your employees or a visitor is injured. Both you and the landlord can be held liable for events taking place inside the w

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Leasing Process and Timing

1. Define basic space requirements:

  • Size and layout
  • Expansion and option space
  • Price and term (market Information)
  • Image and quality
  • Geographical area
  • Intangibles and goals

1 day

2. Selection / interview with support team:

  • Space Planner
  • Interior Design (if desired)
  • Attorney / CPA

1 to 7 days

3. Determine alternatives available:

  • General market knowledge of
    “deals” available
  • Search of database
  • Verification of terms and conditions
  • Review list of alternatives

7 to 14 days

4. Narrow down alternatives:

  • Inspection tours of likely alternatives
  • Selection of 3 – 5 best alternatives
  • Space planning of best alternatives
  • Review and re-draw of space plans
  • Selection of top 2 – 3 alternatives
  • Request for proposals on top alternatives

7 to 14 days

5. Analysis of proposals and alternatives:

  • Financial analysis
  • Layout efficiencies
  • Intangibles and goal analysis

1 to 7 days

6. Final selection:

  • Choose top alternative
  • Establish terms required
  • Prepare and present counter-offer
  • Approve, re-negotiate, or select other alternative
  • Review lease for business points
  • Review lease for legal points
  • Review Workletter
  • Re-negotiate lease terms
  • Sign lease

7 to 30 days

7. Tenant improvement build-out:

  • Monitor progress
  • Report progress
  • Final walk through check

30 to 120 days

Time to Allow
Before Tenant Improvements

24 to 103 days

Including Tenant Improvements

54 to 194 days

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STOP YOUR RENEWAL

STOP YOUR RENEWAL!
Posted on February 29, 2012

stop your renewal Folks, I just have to say STOP! Don’t sign that renewal agreement without doing one simple thing – mystery shop your landlord. What’s mystery shopping? That’s when a customer goes into buy something but the store has no idea that the customer is actually testing them and will provide a full report back to HQ. I had this happen to me when I was on the dark side representing a landlord. The HQ hired a company who came in as a prospective tenant to not only shop our property but three of our competitors. Fascinating process (I passed with flying colors fortunately). But I digress,

What am I talking about and why should you do this? If you are negotiating your renewal without using a tenant rep broker (like me) to help you, you need information so your decision is informed. So pick up a phone or better yet have your assistant call from her cell phone (so caller ID doesn’t ruin this plan) and call your landlord as a prospective tenant. Ask what are the rental rates for a space about your size and what kind of improvements could you anticipate on a new lease. Now, how does your lease renewal terms compare? I bet you won’t be pleased by the answers, so pick up the phone and call me to rant about this.

Over the past three years I have seen a very disturbing trend with landlords. They are taking advantage of their existing tenants by offering them rental rates at or ABOVE the asking rent of the building. The asking rent is like the sticker price on the car – it’s only the beginning point of the negotiations. Times have been tough for everyone – including landlords, but landlords know that it is far more expensive to get a new tenant than to keep an existing one. So with that in mind, you should automatically get a better rental rate than a new tenant because the landlord is not spending as much money and the income stream of rent is uninterrupted.

If you try my suggested mystery shopping tip and your landlord failed your test, call me at 917-750-9787, OR EMAIL ME AT STEVE@GONJREALESTATE.COM, I have straightened out many a landlord and improved lease terms for many a renewing tenant.

PLEASE CALL ME AT 917-750-9787, SO I CAN BE OF SERVICE TO YOU.

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WHAT IS SPACE PLANNING?

What is Space Planning?

Space planning is the analysis and documentation of a business’s current and/or proposed facility. The purpose may include any of the following:

Improve work flow
Determine if a new space or building will accommodate a business’s current and future needs
Improve communications between employees and/or departments
Satisfy emergency exiting and Americans with Disabilities Act requirements
Creation of employee lounge spaces
Adding work spaces
Implementation of the latest workplace technologies
Creation of teaming spaces

Completed space plans are used in all aspects of implementing the reconfiguration or relocation of a business. Trades that require accurate space plans include contractors, flooring vendors, painters, electricians, computer and phone cabling vendors, HVAC contractors, IT professionals, lighting contractors, furniture vendors, movers, furniture installers and cabinet makers.

office space Plan

Space planning services offered by landlords aren’t always in the best interest of tenants. The space planning firm is being paid by the landlord and typically is looking out for the best interest of the landlord and not the tenant. Tenant square footage requirements can be exaggerated and can result in tens of thousands of dollars in extra lease costs each year. Considering the radical changes in how work is taking place, with the implementation of touchdown and hoteling work spaces, the amount of square footage required by a company in today’s work environment can be greatly reduced through proper space planning.

Written by the designers at officespaceplanners.com, providing space planning throughout the USA since 1988.

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INFO ON BERGEN COUNTY

http://www.co.bergen.nj.us/

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How to Minimize Your Security Deposit

How to Minimize Your Security Deposit

Written by Bert Rosenblatt & Andrew Stein

We’re asked all the time: what is a “normal security deposit”? Unfortunately, the truth is… it depends. Let’s start with the basics: the security deposit is a reflection of and hedge against the landlord’s perceived financial risk. Landlords generally ask themselves two questions in evaluating security deposits:

How much money am I spending to get this tenant into my building (the big-ticket items here are construction dollars and free rent)
How much faith do I have in the financial soundness of the entity signing the lease?

If you’re General Electric, you’ll likely pay no security, whereas a start up no one’s ever heard of is likely to pay a lot. Practically speaking, the range of security deposits runs the gamut from 0 to 24 months.

Here are a few things that may help you keep your security deposit on the lower end of this scale.
Find Built Space

Building “plain vanilla” office space in Manhattan in today’s environment can easily cost $100/s.f. Landlords shelling out this kind of money want their pound of flesh in the form of security. One of the easiest ways to reduce your security deposit is to find space that is already built out, as opposed to raw space where the landlord will “build to suit” or give you a cash contribution toward the build-out. With built space, the money that went into building becomes a sunk cost and will be viewed differently, and far more favorably when it comes to determining the security deposit.
Take Less Free Rent

Most office space tenants negotiate a period of time at the start of the lease where they occupy the space without paying rent. This can range from a month or two all the way to a year or more. From a landlord’s perspective, free rent is a necessary evil dictated by the market. It is also looked at as cash out of their pocket that they want to securitize or in other words, it’s one of the things that raises your security deposit.

From a Tenant’s perspective there are a two strategies worth considering:

Half rent instead of free rent: let’s say instead of 6 months of free rent you agree to 12 months of half rent. This helps the Landlord because they have immediate cash flow, which should equate to less risk and a lower security deposit.
Take less free rent: every deal has a lot of moving parts. Evaluating less free rent involves simple math – what is it worth to you and to the Landlord to have less free rent in exchange for less security or perhaps a lower base rent?

Negotiate a “Burn-Down”

If you’re a solid citizen and pay your rent on time, eventually, you should have established enough credibility that your Landlord feels comfortable holding less security. We call this “burning-down” the security deposit. Here’s how it works: you have to negotiate this up front and it must be part of the lease. Typically, the idea is that after a period of a couple of years of consistent and timely rent payments, the landlord will give back a month (or more) of security.

For example, let’s say you’re signing a 15-year lease with an initial security deposit of 9 months. You might agree that every three years the Landlord will give a back one month of security, provided you’re not in default and are making timely payments. The key concepts here are a) there are no hard and fast rules – negotiate what makes sense for your business; and b) make it part of the lease document.

The beauty of commercial real estate is that everything after your name and landlord’s name is a negotiation. The more you understand the rules of the game, the better you’re going to be able to navigate these issues.

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Why It Can Be a Financial Mistake to Negotiate with a Landlord Directly

Why It Can Be a Financial Mistake to Negotiate with a Landlord Directly

Richard Neuman

Contributed by Richard Neuman of Relocation Management Solutions, Inc.

Negotiating

When commercial tenants negotiate directly with landlords, they are often treated like captive markets. Without representation, tenants don’t know what they don’t know (for example, the ability to add early termination rights), and that necessarily results in unrepresented tenants leaving important terms, rights, and dollars on the table.

With tenant representation, it costs tenants nothing extra – only providing savings (often extensive), and the result is a financial document much more balanced in the tenant’s favor – plus the likelihood of securing a much better facility for the tenant’s needs than they can find for themselves, based on our comprehensive awareness of market options. Landlords know when the tenant is armed with extensive market knowledge, they cannot withhold any achievable concessions. Landlords also know the brokers may be negotiating with multiple landlords simultaneously.

Tenant Reps know the vacancy in buildings, but more importantly, the blocks of vacancy that are emerging in specific buildings soon, and what specific concessions certain landlords have granted recently. This knowledge is power for the tenant that they would not have or benefit from working independently.

So armed with this great information, why do tenants still insist on negotiating directly? Well, often what they are typically concerned about is the commission.

That issue, when addressed directly and transparently and explained in the context of the value of the brokers specific and relevant knowledge of his market, the competing Landlords current situation financial and otherwise (i.e., ownership structure, investment horizon) the knowledge of lease terms and the economic value of renewals, expansions, termination rights, market timed terms etc, should become much less of an impediment.

Keep this in mind. Tenant representation is what a tenant rep does. It is their business and one would assume that the tenant rep has the knowledge, experience and business savvy to negotiate a deal that is in the best interests of the client.

Here are some thoughts:

1. STRONGER NEGOTIATION POSTURE WITH LANDLORD

By hiring an experienced real estate broker to renew your lease, you signal to the landlord that you are keenly aware of competing office buildings and are prepared to relocate, which in turn will force the landlord to compete more fiercely for your firm’s continued tenancy. The more time spent investigating other space, the better the renewal transaction becomes.

2. BROKER’S EXPERIENCE IN SIMILAR TRANSACTIONS

A good real estate broker in today’s market is active day-to-day spending his time negotiating renewal transactions in a similar office market for his clients many of whom, may have the same office space requirements. Because of this experience, certain creative solutions and deal structures can be brought to your firm’s attention that would otherwise remain unknown. Those strategies used in renewing a lease are often times different from those strategies used in searching for new locations.

3. USING THE BROKER TO NEGOTIATE

By using a tenant rep, the tenant will not be required to directly interface with the landlord, who may be taken back by the aggressiveness needed for a successful negotiation. The broker may act as the “bad guy” while the tenant remains a “good guy” at all times, thus allowing for a more favorable long term relationship with the Landlord.

Start with the premise that the landlord (and/or the landlord’s broker) is only looking out for his/her own interest in achieving the best terms for the landlord. The tenant rep broker-without any conflicts of interest creates market competition for the tenant in a renewal. Taking a lease to market benchmarks other alternatives that should demonstrate the merits of a renewal vs. a move.

Sure they’ll save the tenant time, but more important they are skilled and experienced negotiators who clearly earn their fee in achieving the lowest costs and best lease terms.

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