Mythbusters take on Lease Renewal Myths
Fact or Fiction?
Lease renewals are full of myths and misconceptions. There are those who look out for landlords’ interests and those who look out for the best interests of tenants. Don’t be mislead into thinking that one broker or brokerage company can do both or that you’ll get the best lease if you deal directly with the landlord.
Myth #1: “The broker listing the space I am interested in can represent me as well as the landlord.”
This is what is called “conflict of interest”. If you’re interested in getting the best lease terms, you must avoid this like the plague. Certainly if you were involved in a lawsuit, you would never hire the same attorney as your opponent. Both sides need their own representation. The same holds true for handling your real estate needs.
Myth #1 BUSTED!
Myth #2: “My renewal will be the same as my original lease, but at the current market rate.”
This is a common misconception. To start with...what is market rate? Don’t be misled by looking at a few “asking prices” on brokers flyers or seeing a brokers sign advertising a particular rental rate.
Advertised rates may or may not include tenant improvements, a lease concession allowance and marketing costs. To determine a reasonable market rate, requires a complete financial analysis so that you are comparing apples to apples and looking at the whole picture.
The dollar rate for a renewal isn’t the only important criteria. The terms of your current lease do not necessarily need to roll over into the renewal. At the time of a lease renewal, tenants have an opportunity to correct unfavorable lease provisions such as shifting financial risk from the tenant to the landlord. This unique window comes once every 3 to 5 years and should be taken advantage of. Recently we had a client that had a leaky roof which had posed problems to their warehouse distribution operation. Within their lease, the landlord could replace the roof, but charge the tenant the amortized cost of the roof, or another $4.00 /sf over the term of the lease. In the lease renewal negotiation, we were successful in removing this costly lease provision and forcing the landlord to replace the roof.
Myth #2 BUSTED!
Myth #3: “I’ve been a tenant here a long time and have a good relationship with the Landlord. He will take care of me.”
Don’t be fooled! We’ve all seen the chronic sale at the local furniture store or jewelry boutique. Truth be known, they mark up the product by 200 % and give you a 50% off sale. Tenant beware...its not uncommon for landlords to do the same. Of course they will represent that they have the best space in the market and give you a long list of reasons why it’s worth every penny of the rent they’re charging. Analyze! Compare! Do your homework!! Landlords are looking out for #1!
Keep in mind that landlords love good credit tenants that have been stable for many years and hate to lose them. Actually, landlords win big when a tenant renews, by avoiding vacancy downtime, tenant improvement costs and bonus commissions. Use this information to your advantage!
Myth #3 BUSTED!!
These common misconceptions or “myths” only confirm that no matter what your business, unless it’s commercial real estate, everyone needs a little help; someone to look out for their interests, especially when it comes to real estate leasing. There are great deals to be made and big savings to be realized but only one way to be sure that you, the tenant, are getting the very best lease terms.
Get someone on your side!
If you have questions about your exact situation, we are happy to answer questions or help you find the right professional that can. Give us a call anytime @ (719) 634-9000.
866.799.8732 | 719.634.9000 (o) | 719.448.0500 (f)