August 10, 2018 2:02 pm

Trying to keep up with the pace of change in New Jersey’s real estate markets may give you whiplash. For those of us on the front lines, it has been simply amazing at how quickly the psychology of a Tenant market has morphed into the more classic Landlord market.

What is a Landlord market, you ask? A Landlord market is when Landlords perceive that they have the leverage in a lease negotiation.  When Landlords recognize that their space is now in demand, they will quickly reset the terms under which they will agree to make a deal. Whether it be the term of lease, the minimum rent, the credit rating of a tenant they will consider, or the amount of incentives such as construction dollars that they will offer, the leasehold incentives are among the first things to go.

Industrial space, for example, is so hot right now that should construction work need to be done to add more offices, Landlords are no longer willing to provide an allowance for the tenant improvements and are now requiring the Tenant to come up with the cash.

Office space vacancy rates are starting to improve as well, so we are seeing that the amount of construction dollars for new building installations and free rent reduced. We can clearly see that in many markets rents are heading toward historic levels. In Metro Park we have seen rents increase by a one third margin in just the last year from an average of $25 per square foot to over $35 per square foot, with no sign of slowing down.

So Larry, in a Landlord market what can a Tenant do to protect himself from sticker shock or worse? My advice is to pick your Landlord carefully. The reputation of a Landlord is one of most important and most overlooked factors to consider when negotiating for space. Operating overhead is the second largest expense that most companies must face, right behind the hiring of personnel, so it is easy to understand why dollars are important.  We tend to get so hung up on dollars, however, we may miss this vital factor.

Most office and industrial lease terms last 5 to 10 years or longer.  Leases establish a long term relationship, and you can’t simply put a dollar sign on the value of a relationship. So, what should you be looking for when evaluating Landlords?

Here are some factors to consider:

• Reputation: What is the reputation of the Landlord. Does he and his staff maintain the property? Does he treat his tenants well?  Does he negotiate leases fairly and take the time to explain his positions clearly?

• Financial Stability: Does the Landlord have financial stability to maintain the property in the long run? Does he own other properties?

• Structure: Is the Landlord a professional Landlord or are you leasing from a parttime Landlord? Is the Landlord local, or are they a National company that must hire an agent to run the property.   Is the business a REIT or a private group of investors?

• Longevity: The most successful Landlords have systems in place that make the operation run smoothly.

• Staff: When you have a problem, is there someone who will respond quickly? When you have a question about an invoice, will they take the time to explain the numbers and provide backup if necessary?

So, how can you find the answers to these and other important questions ?  We recommend that you work with an experienced Tenant Advisor who knows the market, knows the Landlords and is exclusively looking out for your interest.

Give us a call to find out why, at Dickstein Real Estate Services, “OUR DIFFERENCE IS YOUR ADVANTAGE®”.

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