Reviewing Your Commercial Lease can Uncover Savings!
When is the last time you reviewed your office, industrial or retail lease agreement? If the answer is "when I signed it a few years ago” don’t panic because you are in the majority. However, there is an opportunity to be in the minority and save thousands of dollars straight to your bottom line at no cost. So that begs the question “how can saving on your rent each month come at no cost?”
Leasing real estate is expensive!
Year after year leasing real estate remains the third largest business expense, after labor and healthcare. Yet, business owners rarely review their lease agreement to see if they can take advantage of current market conditions. The first step in the process is to become educated on the current market compared to your lease that was signed years ago. The best way of doing this is to engage a commercial real estate agent that specializes in tenant advisory services. Most companies cannot keep a Real Estate Director on staff and therefore fall short when in negotiations against a Landlord or its representation. A Tenant Advisor will work with you to understand your real estate needs and develop a real estate strategy that will meet your business’ needs.
How can a lease review help?
The same way financial advisers offer to review a potential client’s investment portfolio to uncover gaps in their path to financial freedom; is similar to how a forward thinking real estate agent can provide a lease abstract and analysis. As part of the process they can provide financial recovery modeling, lease-versus-purchase analysis, and other tools to help tenants better understand the financial impact of their real estate decisions. The goal is to help you, the tenant, save on your company’s third largest expense.
Lease analysis and abstracting involve integrating costs from tenant build-out to multi-locations to potential tax incentives; all factors that should be considered when beginning lease negotiations. A lease analysis also provides an advantage toward other concessions during the leasing negotiation process such as tenant improvement allowances, rental abatement and phased-in rent structure.
Typically, a lease is signed at what is then current market conditions with a percentage increase after each lease year (1.5-3% on average). Those increases, meant to compensate for inflation or increased operating expenses, can quickly lead to your rental rate being above market. If you’re halfway through a five-year lease you need to consider whether to relocate or renew in place. If you want to renew in place, it’s in your best interest to approach your landlord and renegotiate lease terms early (also known as blend & extend).
No cost solution!
In answer to the question posed earlier, there is no cost to have a lease reviewed by a real estate professional (not a lawyer) who understands the economics of the deal. The resulting effects to your bottom line is a no cost solution to you because the fee paid to the Landlord’s listing agent is split with your representative upon signing a renewed or new lease.
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