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13:01 July 05, 2001


 

Lease is more
Don't let the clock be your worst enemy when negotiating a new lease.

By Morgan Lewis Jr.

 

John Tobin was a commercial real estate broker in New York City for six years and in San Francisco for another six before he arrived in Cleveland to negotiate top downtown office space like the National City Center and the East Ohio Building.

Tobin always knew how to get the best deal for the landlords he represented, and it wasn't with bulldog negotiations or high-pressure tactics. It was all about charm.

"I would take you to lunch; we're best buddies," Tobin says. "Maybe I meet your family or we go play tennis together. You really feel comfortable with me, which is great. I'm doing my job and you feel like you're doing your job, but you're not. You're not taking the time to reduce your occupancy costs."

After 17 years, Tobin switched teams and formed his own company to represent commercial real estate tenants instead of landlords in lease negotiations. His company, TENANT  rep .com, just released a software package called Swiftcalc®. The Microsoft Excel formatted software helps commercial real estate tenants in office, retail and industrial markets nationwide compare all the costs of potential leases.

"There are at least 20 key factors in any lease negotiation that affect the bottom line cost," says Tobin. "As a landlord representative, I had only one tenant over the thousands of prospective leases that I negotiated that actually used this type of comparison. That was the tenant that got the best deal because he could point to the facts."

Other than hiring a tenant representative and using lease comparison software like Swiftcalc, Tobin offers the following rules to negotiate or renegotiate a smart lease for your company.

 

START EARLY

Don't wait until a month before your lease is up to search for a new property or renew your current lease. Under time pressure, you allow the landlord to set the pace of the talks. If your landlord really wants to play hardball, he or she can tell you to move out or charge you a holdover fee after the lease expires, which is usually twice the cost of your monthly rent.

"In any lease, it can take up to three months to look for the space, and another three months to negotiate," says Tobin. "For a landlord, a deal is not a deal until it's signed. Someone else could come along and lease the space at a higher rate, and you have to start the process over again."

 

DON'T SHOW YOUR HAND

Never let landlords or brokers think their property is the only place you're considering. Pick at least 10 locations to start with, then narrow it down to five before doing an in-depth comparison.

"Landlords hire people like me who dress in blue suits with ties, make people feel comfortable, and sign up tenants.  No tenant really knows what the true bottom line cost is until they plug the numbers into a tenant software program like Swiftcalc," Tobin says. 

 

SWEETEN THE DEAL

The commercial real estate market is soft in the Cleveland area right now and landlords and their brokers are using more lease incentives to attract tenants. If you make landlords negotiate against each other, you could end up with some real cost savings on improvements like a telecommunications upgrade, an office redesign or a new security system.

"The landlord's job is to get the money up front so he can put the money in his stock index fund," Tobin says. "Most tenants don't analyze that. They just punch in the numbers, look at the absolute cost and get taken to the cleaners. If he's offering free rent, get it in the first month, not the 24th month."

 

MEASURE

Hire an architect to measure the usable square footage to find out if the landlord is fudging on the figures. Talk with other tenants to find out more about the landlord's reputation on management and improvements before you sign the contract.

Warns Tobin, "No matter how low the price is, you might not want to sign if you find out that the property is poorly managed." How to reach: TENANT  rep .com, (216) 858-1000 or www.TENANTrep.com or www.Swiftcalc.com

 

Morgan Lewis Jr. (mlewis@sbnnet.com) is a reporter at SBN Magazine.

 

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