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Steve Cross, The Tenant’s and Buyer’s Advocate, answers frequently asked questions about leasing and buying commercial real estate.

Can you also help renegotiate my existing lease?2020-01-16T21:25:03-07:00

Absolutely. Even if a business wishes to remain in its current space thorough due diligence should be conducted to confirm vacancies, terms and concessions available elsewhere. This information can then be used to negotiate the most favorable terms possible at the current location.

In short, a lease renegotiation should be treated as a new lease, where every term and condition is addressed and negotiated, and the process started no later than 6 to 9 months prior to the lease expiration date. Tips: Don’t’ wait for the landlord or property manager to contact you about exercising a renewal option or extending a lease. And never disclose your businesses’ circumstances or other buildings you may be looking at to the property manager, listing agent(s) or landlord.

Should my business lease space or purchase a property?2020-01-16T21:24:43-07:00
As a rule of thumb, once your business, or medical or dental practice, has established itself as a viable going-concern, and providing you can clearly anticipate your space requirements over the next 3 to 5 years, you should consider owning.
When should I start looking for space?2020-01-16T21:24:24-07:00
Done properly, the leasing or buying process generally takes 6 to 9 months to complete, including site research and selection, contract negotiations and constructing interior improvements. However, I suggest getting ahead of the matter by scheduling an annual review of your space requirements with your real estate advisor.
Aren’t commercial lease terms fairly standard?2020-01-16T21:24:04-07:00
Not at all. In fact, a commercial lease is a unique and complex transaction made up of many inter-related variables, each of which has an economic value and should be negotiated.  Negotiable terms include, but are not limited to: the initial rental rate, free rent period, rental escalations, lease term, renewal options, tenant improvements, fixturization period, commencement date, warranties, building signage, parking, operating expenses, early termination provisions, holdover provisions, assignment privileges, and personal guarantees.
Is the “market” rate the amount tenants and buyers generally pay?2020-01-16T21:23:46-07:00

The term “market rate” is synonymous with “asking” or “sticker” price, which is generally 10% to 25% higher than either the property owner or listing agent reasonably expects to receive.

Further, because the details of commercial leases are proprietary, the term “market rate” is nothing more than an opinion of value. I view “market rate” as the LOWEST price property owners will accept. Property owners, and their agents, brokers and property managers, see it as the HIGHEST price tenants and buyers will pay. Clearly, we have different ‘opinions’ of value.

What is a leasing “concession”?2020-01-16T21:23:30-07:00
A concession, or incentive, is any deviation from the property owner’s asking price. Of note is that concessions are seldom advertised or offered (read: they must always be negotiated.)
Is there a single source database showing commercial properties available for lease or purchase? If not, why?2020-01-16T21:23:14-07:00

Unlike the MLS system for residential real estate, commercial real estate listings are not available in a single source database. This intentional scarcity of information serves to benefit listing agents and property owners, who wish to control the leasing and buying process.

I maintain a proprietary database of every available space and property and know what terms and concessions can likely be achieved. Further, I have intimate knowledge about which property owners have the greatest urgency to lease or sell. Taken together, this information gives my clients invaluable leverage at the negotiating table

How are you paid?2020-01-16T21:22:51-07:00
On new leases and purchases I am typically compensated by sharing commissions received by the listing agent(s). I can also be paid by a flat fee or retainer, both of which are fully refundable in the event I collect a commission on the transaction. Of note is that even though the property owner writes the commission check, it is the tenant or buyer that ultimately pays the tab as part of their lease payments or the purchase price. Also, if you represent yourself the entire commission is retained by the listing agent(s) and you get no value from the commission that you funded. In my experience, commercial tenants and buyers that represent themselves typically overpay and overlook important aspects of the transaction.
Why should I choose you as my real estate advisor?2020-01-16T21:22:17-07:00

Your choice of advisors determines which properties you are shown and how much you will pay - and my specialty is solving the real estate problems of commercial tenants and buyers. Of note is that since 1984 I’ve helped over 2,700 business owners, medical doctors, dentists and corporate executives make fully-informed leasing or buying decisions and save hundreds of thousands of dollars on their real estate costs. While my maturity, knowledge and tactical acumen are strong indicators of my professional expertise, several things make me unique in the commercial real estate business:

First: I don’t list properties, ever. Benefit: The inevitable and unavoidable conflicts of interest that listing agents face are eliminated, and my Clients are assured of receiving unbiased, confidential and tenacious representation.

Second: I’ve leased space for my business and own commercial real estate. Benefit: I’ve taken every step my Clients are contemplating and have done so with my own money.

Third: I’m a numbers guy, with a degree in accounting and the elite CCIM designation. Benefit: I am skilled at making numbers-based, bottom-line decisions and negotiating favorable terms for my Clients, whether they prefer to lease or purchase commercial real estate.

What is the difference between commercial “advisors” and “agents”?2020-01-16T21:13:27-07:00
While they both are licensed professionals, true real estate “advisors” do not accept listings and can, therefore, provide unbiased, objective advice to their clients: the commercial tenant or buyer. Real estate “agents” typically list properties and are primarily sales people who have a fiduciary duty to protect the interests of their clients: landlords and property owners.
What is the difference between a “customer” and a “client”?2020-01-16T21:14:31-07:00
In real estate, another word for “customer” is “prospect”, and is the party owed the lowest legal standard of care. In practical terms, this means that everything the customer/prospect tells or shares with a listing agent can be shared with the property owner. It is the “client” that is owed the highest level of accountability and confidentiality, and is the party whose best interests are paramount and must be preserved and protected. Just as you would with an attorney, insist on a client relationship with your real estate advisor. Of note is that the client relationship must be established at the initial meeting or conversation and before any discussions occur.
What is a fiduciary duty?2020-01-16T21:15:06-07:00
The term “fiduciary duty” refers to the legal responsibilities an agent or advisor has to his client. Listing agents have a fiduciary duty to protect the rights of the property owner and make every effort obtain the highest price possible. As a real estate advisor representing tenants and buyers exclusively, my fiduciary duty to my clients is to protect their rights and use my best efforts to obtain the lowest price and most favorable terms possible. Real estate agents presenting themselves to be tenant or buyer representatives, but who also list properties, are generally acting as “dual agents” and should be avoided.
Define the concepts of “dual agent” and “dual agency” and explain why they should be avoided.2020-01-16T21:15:38-07:00

A "dual agent” is any real estate agent (or multiple agents from the same company) who represents both parties in the same transaction (think “double agent” for the true meaning). When this occurs a “dual agency” exists. Dual agency is the real estate industry’s dirty little secret and should never be tolerated by a commercial tenant or buyer. Here’s why: In practice, early in the process of looking for space to lease or property to purchase, tenants and buyers typically divulge confidential information to the real estate agent they perceive is representing their interests. This information can include how much they are willing to pay, when they need space, their target area, and other factors that, if known to potential property owners, would serve to dilute their negotiating leverage. Only when a lease or purchase contract is presented for them to sign do they discover the agent has also been representing the property owner. At that point it is generally too late to renegotiate the terms of the transaction, and the tenant or buyer may have run out of time to find alternate space.

Because a dual agency always favors the property owner (and self-dealing real estate agent, who will collect the entire commission), real estate agents desiring to act as a dual agent must disclose his or her fiduciary status at the time of the initial meeting or conversation with each party and obtain written permission to the arrangement from each. If the agent fails to properly inform both parties of his/her fiduciary status in a timely manner an undisclosed dual agency exists, which is viewed as an unethical practice and, if reported, subjects the agent, or agents, to possible disciplinary action by the Department of Real Estate.

Why should I use a tenant or buyer representative?2020-01-16T21:16:18-07:00
To insulate you from property owners and their agents and property managers, and protect your interests before, during and after the negotiations conclude. A true real estate advisors job is not over once the lease is signed - he should be at your side during the entire lease term to anticipate problems, answer questions and advise you on unfamiliar matters and changing market conditions.
What is the CCIM designation?2020-01-16T21:12:48-07:00

The CCIM (Certified Commercial Investment Member) designation is the commercial real estate equivalent of being a CPA in accounting. This credential certifies that I have the practical experience and working knowledge to be considered an expert in commercial real estate. Fewer than 5% of all commercial Realtors have earned this designation.

CCIMs have completed a designation curriculum that covers essential CCIM skill sets including ethics, interest-based negotiation, financial analysis, market analysis, user decision analysis, and investment analysis for commercial investment real estate. CCIMs have completed a portfolio demonstrating the depth of their commercial real estate experience. Finally, they have demonstrated their proficiency in the CCIM skill sets by successfully completing a comprehensive examination. Only then is a designation candidate awarded the coveted CCIM pin, joining the ranks of highly skilled commercial and investment real estate experts.

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Commercial Real Estate?

Please contact me to discuss your space requirements and how to lease space or purchase property at the lowest price possible.

I will offer expert opinions on renegotiating your current lease, relocating to another building or buying commercial property.

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