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Cleveland, OH 44114
Phone 216-858-1000

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TOP TEN COMMERCIAL REAL ESTATE LEASE NEGOTIATION TIPS

(From a former landlord negotiator)

 

1)    Begin the process early.  This provides negotiating leverage and wiggle room.  Start at least 18 months prior to your lease ending date.  Researching the alternatives can take 3 months, negotiating a lease can take 3 months,   and constructing new improvements at another location can take 3 months.  Allow a generous amount of additional time for unexpected delays in the leasing process.


 

"John Tobin's article Top Ten Commercial Real Estate Negotiation Tips provides straightforward measures to help corporate real estate directors and other tenant types bargain for the best deal." Industrial Asset Management Council, 5/1/2007. 

 

2)    Never give any landlord the sense that their space is the only one that works for your company.  That is when the landlord pushes the profit button.  You will never get the best deal available.

 

3)    Always create several truly viable leasing alternatives.  Get proposals from each.  Donít give a positive indication to any landlord until you have in your hands a fully executed new lease, lease renewal or lease expansion document.

 

4)    Always use a tenant cost comparison spreadsheet.  Make the prospective landlords fully aware that you will be instantly weighing and comparing their lease proposals with a customized Excel spreadsheet.  Input the key factors from your various lease proposals.  Use the resulting bottom line cost comparison as your primary negotiating lever with each landlord to bring down the cost of the competing sites.

 

5)    When using a tenant cost comparison spreadsheet, ensure that the landlord at each leasing alternative is providing you with all the key cost factors you need.  If it is clear that any landlord is holding back cost comparison information, simply remove that property from the list of competing alternatives.

 

6)    When using a tenant cost comparison spreadsheet, pay close attention to the landlord profit centers:  A) Input key factors on base rent increases, tax and operating escalations, and other cost areas that increase over time.  B) Actively use the instant cost comparison in your negotiations to eliminate, reduce, or cap the landlord profit centers.

 

7)    Before beginning the process, consider engaging an expert office tenant representative broker.  If you are an expert in your business, you are probably not an expert in the commercial real estate office leasing business.  Market dynamics change daily.  An expert tenant lease negotiator is much better equipped to manipulate the market to the tenantís financial advantage.  Expect each prospective landlord to be an expert landlord lease negotiator, manipulating the office leasing market to the landlordís financial advantage.

 

8)    If you decide to engage a tenant representative, consider choosing one from an exclusive tenant rep commercial real estate firm.  There are many firms in the commercial real estate industry who represent both landlords and tenants.  This practice is viewed by many tenants as a major conflictAn exclusive tenant representation firm never wears the landlord hat.  It is solely focused on negotiating the best terms for tenants at every building in the local market.

 

9)    Ask your office tenant representative broker about ďcompsĒ (financial details on recent office leasing transactions in your local office market).  The more comps your tenant rep broker has to reference, the more effective he or she will be in manipulating the local office market. 

 

10A) Engage your own commercial real estate architect to verify the accuracy of the stated usable square footage of the office space.

 

10B) Talk to other office tenants directly regarding a prospective landlordís reputation in the areas of office building management and fair dealing.

 

10C)  A Letter of Intent negotiated by your expert tenant rep and detailing all critical business terms to be reflected in the lease is essential.  Thereafter, always engage a commercial real estate attorney to review and negotiate the language in the landlord proposed lease draft.  An expert office tenant representative broker will also weigh heavily in the lease language negotiation.  He or she will work in tandem with the tenant's attorney to the tenant's great advantage.

 

From 1989 to 1998 John Tobin was an in-house landlord lease negotiator for two of the largest office building landlords at that time:  JMB Properties Company and Heitman Properties Ltd.  Since 1999 John Tobin has been a Partner of TENANT   rep .com, which specializes in national office tenant representation for major corporations.  TENANT   rep .com provides one trusted point of contact nationwide, John Tobin, supported by strategic partnering with the best local tenant rep brokers across the country.  Mr. Tobin can be contacted at (216) 858-1000.  

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