by Phill Tomlinson | Sep 6, 2021 | All Articles
While negotiation involves making compromises, it’s essential to ensure that your commercial lease isn’t entirely in the landlord’s favor. To help you get the best deal when leasing commercial real estate, follow these 10 tips:
A tenant rep broker can protect your interests during negotiations. These brokers are experts in commercial real estate and know about the commercial lease. They can advise you when you have a fair deal. Best of all, the landlord typically pays the broker’s fees, so their services come at no cost to you.
2. Think Beyond the Initial Contract
When presented with an initial contract, landlords may claim it’s standard and suggest no negotiation is necessary. Don’t be fooled by this tactic. The first version of the contract favors the landlord. Consider it a starting point for negotiations.
3. Calculate All Costs for Commercial Lease
Never focus solely on the rent. You must also factor in Common Area Maintenance (CAM) fees and other potential costs. Make sure your total monthly payment aligns with your budget and is fair.
4. Start Early
Begin your search for commercial office space as early as possible. Having time on your side gives you an advantage. When you’re not rushed, the landlord can’t exploit a sense of urgency. Plus, you’ll have time to explore other options if you can’t reach a favorable agreement.
5. Review the Entire Contract
Read every line of the contract carefully. Ensure you understand all terms and ask for clarification on anything that seems confusing before signing.
6. Prioritize Your Requests
Make a list of the amendments and concessions you want before negotiating. Rank them by importance. Decide which are deal-breakers and which you can compromise on. This will help you stay focused during the negotiation process.
7. Know the Market
Research the local market to understand what other tenants are paying and what contract terms are genuinely standard. If you don’t use a broker, ensure you’re well-informed to back up your requests.
8. Involve Your Team
Before signing the contract, have your management, finance, legal, and operations teams review it. Fresh perspectives may uncover details you missed.
9. Fight for Flexibility
Negotiate for flexibility in your lease. For example, include subletting clauses or the ability to renegotiate or end the lease early. This can save you from future headaches if your business needs change.
10. Be Prepared to Walk Away
The most important tip is to be willing to walk away. If the landlord isn’t willing to meet you halfway on key concessions, it’s better to explore other options. You’ll find a fairer deal that fits your business needs elsewhere.
Even after outlining all the information above, deciding whether to go for a 1031 Exchange or a Cash Refinancing can still seem daunting. That’s why the LeveragedCRE Investment Team at Commercial Properties, Inc. is here to help you achieve your business and investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com.
by Phill Tomlinson | Sep 6, 2021 | All Articles, Leasing
Tenant improvements refer to customizations made to a leased space to meet the tenant’s specific needs. A tenant improvement allowance is a sum of money that the landlord provides to help offset the cost of these modifications. To fully understand tenant improvement allowances, it’s important to know how they work in both new and existing spaces.
Tenant Improvements in New Spaces
Office spaces are typically delivered in shell condition. This means that while common areas might be complete, individual spaces are often unfinished. From a developer’s perspective, this makes sense. They don’t know if a tenant will lease an entire floor or just part of it, nor can they predict how the tenant will want the space built out.
Leaving the space unfinished allows tenants to customize their portion of the floor according to their needs. This flexibility is a major advantage, especially when you want to design your office with specific materials and layout preferences. Additionally, customizing a new space is often less expensive than altering an existing one.
Tenant Improvements in Existing Spaces
Most available office spaces will already have been built out with tenant improvements for the previous occupant. While these spaces may not perfectly match your needs, they can offer opportunities. If you find a pre-built space that aligns with your requirements, you can save thousands in occupancy costs. You won’t need to spend much, if anything, on customization, and the landlord avoids the cost of demolition and renovation.
However, taking an existing space and reconfiguring it can be costly. Besides construction expenses, you’ll need to account for demolishing the previous tenant’s improvements. Be sure to evaluate what can be reused, such as ceiling grids, tiles, or doors. These seemingly minor elements can save multiple dollars per square foot, allowing you to stretch your tenant improvement budget.
Tenant Improvement Allowances
In many cases, landlords will help tenants cover the cost of customizations. Tenant improvement (TI) allowances are standard for new spaces, as they are part of finishing the building. These allowances are also common for pre-configured spaces in many markets. However, the amount of the TI allowance depends on several factors:
- New spaces usually offer more generous allowances than pre-built spaces.
- Leases with higher rents or longer terms typically receive more TI money.
- Landlords tend to offer larger allowances in markets with higher vacancy rates.
If your landlord provides a TI allowance, read the fine print carefully. Requirements like using specific contractors or materials can impact how much value you get from the budget. Consulting with an experienced tenant representative can help ensure you secure the best deal.
Even after outlining all the information above, deciding whether to go for a 1031 Exchange or a Cash Refinancing can still seem daunting. That’s why the LeveragedCRE Investment Team at Commercial Properties, Inc. is here to help you achieve your business and investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com.
by Phill Tomlinson | Sep 6, 2021 | All Articles, Leasing
With rents rising and interest rates still near historic lows, the balance might seem to favor purchasing. However, leasing remains a strong option for many companies. Let’s explore key factors to help you decide which option is best for your business.
Reasons to Purchase
Purchasing becomes more attractive when your company’s needs are stable and predictable for the long term. If you know what your business requires now and won’t need changes for a decade or more, purchasing might be a wise choice. Owning the space gives you total control over its use and provides long-term certainty.
Additionally, purchasing allows you to benefit from potential property appreciation. While appreciation can be valuable, tying up capital in real estate may outweigh the benefits for many businesses. However, if you plan to use appreciated property as an exit strategy or need to control prime real estate, purchasing could make sense.
Benefits of Leasing
Many of America’s most successful companies choose to lease for several reasons. Leasing is generally more flexible, less capital intensive, and provides more options.
Leasing offers flexibility in several ways. Although you can technically sell a building you own, finding a buyer can take months or even years. On the other hand, with a lease, you can move out once it expires. You also leave any necessary building work to the landlord. Additionally, if you have a lease with renewal options, you gain more control by extending the lease.
Leasing Conserves Capital
Leasing helps businesses conserve capital in three primary ways:
- Lower upfront costs: Leasing typically requires a smaller initial investment compared to purchasing. Rent and security deposits are usually less than loan costs and down payments.
- Lower payments: Lease payments are often cheaper than mortgage payments.
- Balance sheet benefits: Even with accounting changes, leases still offer advantages compared to building ownership when considering your business’s balance sheet.
Need Help Deciding?
If you’re weighing the lease vs. purchase decision or need commercial space, contact us anytime. We’re here to help! Reach out to us at (480) 330-8897 or via email at request@leveragedcre.com.
Even after outlining all the information above, writing a letter of intent (LOI) can still seem daunting. That’s why the Leveraged CRE Team at Commercial Properties, Inc. is here to help locate commercial space for lease and assist in using a letter of intent to land such space. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
by Phill Tomlinson | Sep 6, 2021 | All Articles, Leasing
Recent developments in commercial real estate might suggest that leasing is becoming less attractive. With ongoing low-interest rates, purchasing has become more affordable. Additionally, skyrocketing property values in some markets may make it feel like you’re missing out if you don’t own. Changes to lease accounting standards have also removed some financial benefits of leasing.
However, these shifts don’t mean it’s a bad time to be a tenant—or even a landlord. While owning property might seem better in some cases, leasing can still be the best option depending on your needs. Let’s explore why leasing remains a smart choice.
Why Leasing Space is Beneficial
The first advantage of leasing space is that it is often less expensive than buying. While you’ll incur some costs for deposits and tenant improvements, they are minimal compared to a down payment or the expenses of customizing a purchased property. Additionally, if you need a smaller or specialized space—like a Class A high-rise office or industrial property—leasing often provides more flexibility in size and type.
More Options with Leasing
Another reason to lease is the variety of options it offers. In most central business districts, the majority of available office space is for lease. Suburban markets may offer more owned space, but this is often limited to large vacant campuses or small neighborhood offices and condos. These extremes usually don’t fit the needs of most tenants, making leasing a more viable choice.
Flexibility and Freedom
Leasing also provides flexibility. When your lease expires, you can move on without the burden of selling a building. Selling a vacant property can take a lot of time, especially if you’re unwilling to drop the price. With leasing, you can quickly adjust your space to match your business’s evolving needs.
This flexibility also extends to maintenance and expenses. If your leased space requires significant tenant improvements, you can move to a new building and let the new landlord cover those costs as part of your lease agreement. If your current building needs repairs, your landlord is responsible. If they aren’t willing to address the issues, you can simply move when your lease ends, avoiding the need to invest capital in repairs.
Building Community and Networking
Another often-overlooked benefit of leasing is the community aspect. Sharing space with other businesses allows for networking opportunities. You can build relationships with vendors, and your employees can connect with others in the building, creating a sense of community that reduces turnover. Owning a standalone building can make it harder to access these locational benefits.
Leasing: Still the Best Option?
All these factors make leasing an excellent option, even in a changing real estate market. While lease accounting standards and the broader economy may change, if leasing matches your business’s needs, it’s likely still your best choice.
If you have any questions or need assistance finding commercial space, contact us anytime at (480) 330-8897 or via email at request@leveragedcre.com. We’re happy to help!
Even after outlining all the information above, writing a letter of intent (LOI) can still seem daunting. That’s why the Leveraged CRE Team at Commercial Properties, Inc. is here to help locate commercial space for lease and assist in using a letter of intent to land such space. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!
We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.
Meet The LeveragedCRE Investment Team
Phill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets.
The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.
Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market!
by Phill Tomlinson | Sep 6, 2021 | All Articles, Leasing
Commercial leases are often lengthy and complex documents that can be overwhelming to read. However, it’s essential to carefully review every part of the lease before signing. While every term is important, certain sections of a standard commercial lease require extra attention. Here are the key areas you should focus on:
The length of your lease plays a critical role in your business’s stability. A longer lease may offer the benefit of a lower monthly rent since landlords prefer tenants who commit to extended terms. This helps them avoid frequent vacancies or renegotiations. However, if your business needs are likely to change soon, a shorter lease might be the safer choice. This way, you can avoid paying for unused space or dealing with costly penalties for breaking the lease. Including a sublease option can also provide flexibility, allowing you to rent out any unneeded portion of the space.
Rent and Security Deposit Terms
One of the most important parts of your lease is the rent and security deposit section. Don’t just look at the monthly rental rate. Instead, check for details about when rent increases might occur and by how much. Also, take note of any additional fees, your share of operating costs, and any allowances for improvements to the space.Regarding the security deposit, see if you can negotiate its terms. In some cases, offering a letter of credit from a financial institution might allow you to waive the security deposit altogether.
Premises Terms
Many business owners overlook the premises terms in their commercial lease. This section defines exactly what part of the building you’re renting. For example, if you’re only renting a portion of the building, ensure that the contract includes access to shared spaces such as parking, storage rooms, lobbies, waiting areas, and conference rooms.
Use Terms
The use terms outline the rules governing what type of business activities you can conduct on the premises. It’s important to check for any restrictions that might limit your operations. For instance, other tenants may have exclusive rights that prevent competitors from being located in the same building. These clauses could block your plans to expand into other business lines in the future. Additionally, review the terms related to signage and advertising to understand the limitations on your branding efforts within the property.
Negotiation is Expected
Remember, the first draft of the lease is often crafted with the landlord’s interests in mind. However, this doesn’t mean you have to accept everything as-is. Landlords expect negotiation, so don’t hesitate to discuss adjustments that could benefit both parties and create a fairer contract.
Even after outlining all the information above, writing a letter of intent (LOI) can still seem daunting. That’s why the Leveraged CRE Team at Commercial Properties, Inc. is here to help locate commercial space for lease and assist in using a letter of intent to land such space. Contact us at (480) 330-8897 or send us an email at
request@leveragedcre.com.
Need assistance with your 1031 Exchange or DST? We’ve got you covered!We’ve prepared a comprehensive, free e-book designed to guide you in achieving your long-term business goals or acquiring that dream property you’ve been eyeing.Meet The LeveragedCRE Investment TeamPhill Tomlinson and Eric Butler are seasoned commercial real estate brokers with over 44 years of combined experience. They lead the LeveragedCRE Investment Team at Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, specializing in investment sales and tenant/landlord representation across the Phoenix and Scottsdale submarkets. The team leverages their extensive knowledge and expertise to help investors and property owners maximize their returns and navigate complex real estate transactions with confidence.Stay informed with the latest in Commercial Real Estate strategies designed to enhance your income property investment results by bookmarking www.leveragedcre.com. Let us help you stay ahead in the market! 
