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13:01 July 05, 2001
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| Lease
is more Don't let the clock be your worst enemy when negotiating a new lease. By Morgan Lewis Jr. |
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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
Morgan Lewis Jr. (mlewis@sbnnet.com)
is a reporter at SBN Magazine. |