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Stephen A. Cross, CCIM - Advisor to Tenants, Buyers and Investors

Preparing to Lease Space

A significant part of my due diligence work is to identify those landlords who need tenants the most. Remember, the rent you pay is income to the landlord.

Landlords with current or anticipated vacancies are those most likely to agree to the lowest rental rates and greatest concessions (i.e., free rent, tenant improvements, etc.). Based on a landlord’s true (but many times undetected) needs, these concessions can be substantial.

Your negotiating leverage is largely based on the landlords’ perception of your businesses circumstances and your understanding of his or her true needs.
By ‘circumstances’ I mean any factor that can affect your leasing decision. For example, if the landlord knows that you do not have other viable leasing choices he/she will resist reducing the asking price or the granting of other concessions (i.e., free rent, tenant improvement allowance, free covered parking, shorter term, options to extend, etc.)

Therefore, the savvy business person NEVER allows his/her businesses circumstances to be known by the landlord or the landlord’s agent/broker.

Landlord’s have brokers who protect their interests…so should tenants!
Generally, building owners with vacancies (or upcoming vacancies) hire licensed real estate brokers to market their properties.

These brokers are agents of the landlord and have a fiduciary responsibility to protect the landlord’s interests. Their job is to lease the property for the highest amount possible and with the fewest concessions. Generally, brokers are middlemen and do not have decision making authority.

Perhaps the greatest value of employing a broker is in the ‘insulation’ value, i.e., the party with a broker is protected from having direct contact with the other side. With a broker you remain insulated and your underlying needs are not easily discovered by the landlord or his/her agents/brokers.

Just as in the legal system, each party should have its own, objective representation.

Choose your broker wisely.
Your choice of brokers determines not only which properties you are exposed to but also how much you will pay. Because ‘listing’ brokers always work in the landlord’s best interests, any information disclosed to them can and will be used against you at negotiating time.

Because I work exclusively for tenants, conflicts of interests are eliminated. Your businesses circumstances and strategies remain confidential…and that gives you leverage at the negotiating table.

Never accept ‘Dual’ agency representation.
Whenever one broker/agent, or more than one broker/agent from the same company, represents both Tenant and Landlord a dual agency exists. Clearly, the chief beneficiary of a dual agency is the broker/agent because their commission income is increased.

However, landlords benefit because the landlord’s broker ‘steered’ the tenant to his/her building. The tenant always loses in a dual agency by being exposed to fewer buildings and paying more than they otherwise would, had they been represented by their own experienced broker.