Displaying items by tag: commercial office space

Investing in commercial real estate (CRE) can yield secure but modest returns as well as high investment returns if you go about it strategically and understand the risks. Comparatively, U.S. Treasury yields are at/near all-time lows in 2020. In this article, we’ll cover the ins and outs of commercial property investment in Denver so you can determine if it’s right for you.

Let’s examine the different types of investment.

Published in Investment Properties

Like all complicated matters, you need countless hours of experience to be a phenom or expert. Commercial real estate lease transactions are no different. I occasionally speak with a tenant or occupier that feels prepared to handle their own commercial real estate transaction. In many cases, this decision maker doesn’t know what they don’t know as they consider forging into the uncharted territory of commercial real estate. Because commercial lease rental payments accounts for 1 of the top 3 expenses most companies face, an uninformed decision can be costly. To prevent wasted time and energy trying to handle a commercial real estate lease transaction without the guidance or support of an expert, you may want to consider what’s at stake prior to moving forward without a tenant broker. When you’re talking about one of your top expenses for your business, it just makes sense to have a experienced tenant broker on your side of the table. Let’s talk about the benefits you can leverage when you have an expert as your advocate.

Who Represents My Business During Commercial Real Estate Lease Transaction?

It is not uncommon for a landlord’s broker to put up a ‘for lease’ marketing sign, tour prospects through the available space, receive proposals, negotiate final deal terms and close the deal. Many tenants are affected by the common misconception that the commercial landlord’s broker has tenant’s best interests in mind when, in reality, the landlord’s broker ONLY represents the best interests of the landlord. Because of this, you want to clearly distinguish the roles of the broker or brokers involved in the transaction to ensure you have a representative advocating for your best interests as the tenant.

 

Consider this: How often does your commercial lease expire, forcing you to look at competitive offers and/or renew with your current landlord? Traditionally, commercial real estate leases are contracted for periods of three, five, seven, or ten years. If you were to go to court once every 5 years for litigation, would you feel comfortable providing your own legal representation knowing that your opponent, the attorney for the other side, works in the legal field every single day? You can apply the same mindset to a commercial lease real estate transaction. The market has likely changed dramatically since the last time you looked for commercial space and the nuances of the trade have likely not been a priority for you over the last few years. Your tenant broker, on the other hand, has spent the duration of your lease term living, eating, and breathing commercial real estate. If you want to position yourself to sign the best possible deal, entering battle alone probably won’t support that.

Commercial Real Estate - Landlord’s Broker Duties

The landlord’s broker has very specific interests when it comes to a commercial real estate lease transaction - to negotiate the best deal for the property owner. In order to facilitate conversations that offer that opportunity, they can market a property that’s for lease through on-property signs, direct mail, and online. If and when a tenant or occupier contacts landlord’s broker directly as a result of these efforts, it’s critical to understand that disclosure of any confidential or important information (such as lease expiration date, current lease rental rate, rental budget, willingness to provide personal guaranty, etc.) can be used to benefit landlord’s negotiating position. A landlord’s broker has a fiduciary obligation to represent the landlord’s best interest…period. The duty of a landlord’s broker includes working to achieve the highest lease rental rate, lowest tenant improvement allowance, and most favorable deal terms for the landlord.

 

As a tenant, it’s important to note that just because a broker is performing a task you’d consider to be the responsibility of a tenant representative, such as meeting for a property tour, does not mean that individual is looking out for your best interest. The landlord’s broker can:

  • Implement a marketing campaign for vacant lease space(s).
  • Tour prospective tenants/occupiers.
  • Submit proposals to tenant/tenant’s broker on landlord’s behalf.
  • Conduct back-and-forth lease negotiations - proposal to counter-proposal to counter-counter-proposal.
  • Arrange space planning services with landlord’s preferred architect.
  • Secure the best lease terms and highest rental rate.

The tenant experience, during a commercial real estate lease transaction can set up a business for success, when it’s approached with the right support. Let’s talk about the responsibilities and obligations of a tenant broker.

Commercial Real Estate – Tenant’s Broker Duties

A ‘Tenant Rep’ broker has a fiduciary obligation to represent the tenant or occupier’s best interests during lease negotiations. Aside from the business owner and related stakeholders, a tenant's broker is the only other person in a commercial real estate leasing transaction who is concerned with what is best for your business. Engaging a tenant representative at the very beginning of the process of lease renewal, lease space expansion, or relocation can offer you, as a business owner, a number of benefits that you may not even realize are available to you.

 

A tenant rep works with you from conception to completion of a commercial real estate lease transaction, offering their insight and expertise for you to leverage. A tenant broker will:

  • Lead search for suitable lease spaces for tenant’s potential relocation.
  • Provide the tenant a list of commercial space that match their needs.
  • Offer expert guidance regarding lease rental rates, landlord’s reputation, tenant improvement allowances, market conditions, building features (both positive and negative) etc.
  • Coordinate property tours & help tenant analyze each potential lease option.
  • Submit proposals to landlord/landlord’s broker on tenant’s behalf.
  • Conduct back-and-forth lease negotiations - proposal to counter-proposal to counter-counter-proposal.
  • Negotiate with each ‘short-listed’ landlord to achieve the best lease terms and lowest rental rate.
  • Review lease document and provide guidance in coordination with tenant’s real estate attorney.
  • Provide guidance regarding efficient use of commercial lease space, construction bids, relocation services, and change-management so employees greet the transition warmly.

All of the above services, as well as the rest of our tenant representation services, are done with expertise and the experience that most business owners simply don’t have because they have been busy focusing on their own businesses for the past 5+ years - not the changes and trends in the commercial real estate market.

Set Yourself Up For The Best Commercial Real Estate Lease Transaction Possible

Similar to a great defense attorney, the tenant’s broker practices their craft all day, every day and has hundreds of lease transactions under their belt. The revered Abraham Lincoln once said, “He who represents himself has a fool for a client.” Trust us when we tell you, a lot has happened in the commercial real estate space since the last time you leased space. Avoid being the fool and get sound guidance from an expert who has had their finger on the pulse of the commercial real estate market for many years.

If you company's commercial real estate lease is approaching expiration within the next 12-18 months and you want to position your business to make the best possible deal, contact our tenant rep broker at Fountainhead Commercial today.

Published in Tenant Representation