In last month’s newsletter we sounded an alarm, warning about the return of the Landlord market here in the Garden State.  A Landlord market occurs when the perceived negotiating leverage in a lease transaction swings toward the Landlord. An unfortunate consequence of this event is the unanticipated high stress levels that business owners face.

Landlord markets, especially when they occur suddenly and unexpectedly, can cause real anxiety amongst business owners who are looking to renew a lease or relocate the office.

Imagine you are the owner of a company that has finally convinced the majority of its employees to return to the office, albeit on a more flexible work schedule.  As you start to weigh your options between renewing the lease for your current location or relocating the office to a new one, you are suddenly faced with a new reality. 

It seems that all your assumptions about the cost of constructing a new space are wrong.  You learn how a turnkey office that cost $25-$35 per square foot for your last lease, today costs more than four times that, or $100-$150 per square foot to create a new one.

With these higher costs, you learn that to construct a turnkey office in today’s world will require a much longer-term commitment of a decade or more in order to amortize the high cost of tenant improvements.  You also learn that you are in a real competition.  Because of the great office consolidation, the surviving Landlords are today seeing several tenants looking at every available space out there, and these Landlords now can pick and choose which tenant and which transaction works best for them.

To make matters worse, you discover that not all Landlords are alike. Some of them are well capitalized and still able to construct a turnkey office. There are others that are barely able to provide carpet and paint for a new tenant, leasing the space mostly “as is” and offering new tenants little or no improvements.

Finally, you learn that most leases have annual rent bumps of 3% per annum and that flat rent common in the past has disappeared. 

How do business owners negotiate an office lease in a high stress environment?  We strongly recommend that they find a tenant advisor, one who understands how to motivate the Landlord to create a harmonious outcome.

In any competitive market, the first thing a tenant advisor will do is organize your approach.  Tenant advisors start by asking you the right questions BEFORE you start looking at properties.  They will help you prepare a space program to show exactly what you are looking for.  A program will provide the count and dimensions for each office, with an understanding of the flow and adjacencies and who need to work with whom.  They help you get ready with a financial statement that Landlords need to establish your stability.

Understanding the geographic parameters, usage of space and budgets are critical components.  I always say that it is so much easier to find a space if you know what it is that you are looking for.  Once you understand your needs, a good tenant advisor will have a complete database of all of the available space options out there.

After you have surveyed the available space options, Tenant advisors will show you how to structure lease Proposals and Requests for Proposals.  Good tenant advisors can help you understand and thoroughly explain the business terms and conditions that need to be addressed.  They will show you proven strategies for success and ways to achieve a win-win scenario.

A good tenant advisor will allow you to sleep at night, knowing that you have a trusted expert on your team to help you achieve your goals.

Did you know that there is usually no cost to hire a tenant advisor, that tenant advisors are paid by the Landlord out of fees that are already structured in the deal?

If you would like to eliminate stress and succeed in a highly competitive environment, why not give us a call, and find out, why, at Dickstein Real Estate Services, OUR DIFFERENCE IS YOUR ADVANTAGE®.

Regards,

Lawrence Dickstein