The time to begin the process depends on the market conditions and the size of your requirement. Typically, in a stabilized 90% occupied market, the best time to begin looking for 1,000-3,000 SF is 3-6 months before your lease expires; for 3,000-10,000 SF requirements, 6-12 months; and for requirements in excess of 10,000 SF, 12-18 months is the most effective time-frame. When tenants have time on their side, they are not at the mercy of landlords and are not considered by them to be a “captive market”. The best deals are struck far in advance of the target lease commencement date. Many corporate executives miss the proverbial boat – and all the potential incentives – because they have begun negotiations too late in the process and squandered their high ground. When landlords know that your timing is tight, they will frequently exploit this perceived weakness and capitalize on it by demanding their quoted terms, and become inflexible when negotiating the lease document.
Tenant Representatives and co-brokers simply share in the landlord’s agent’s structured fee arrangement, that is already built into the Landlord’s anticipated expenses. In fact, brokers for the Tenant can typically negotiate much more favorable deals for the tenant because they know the building’s vacancy and projected future vacancy – as well as what incentives are being offered in comparable buildings in the same market. Additionally, when a prospective tenant is represented by a broker, the landlord knows that the prospective tenant is considering other options and that the landlord must be competitive with their rates and incentives. The client ends up getting a better deal when working with a representative because they are shown numerous alternatives and a competitive bidding environment is structured. The tenant benefits from the broker’s many years of experience regarding market conditions, negotiation terms and overall transaction strategy.
The landlord’s agent’s job – enforced by a listing contract, is to get the best terms possible for the landlord – not you. Landlords’ agents cannot simultaneously protect your best interest and not undermine their contracted client, the landlord. Many companies drive by buildings & respond to availability signs and solicit information from the internet. They think that by doing this themselves and not engaging an agent, they save money. In actuality, companies save thousands to hundreds of thousands of dollars and dozens of precious hours – plus freedom from aggravation, by utilizing the knowledge and experience possessed by a professional Tenant Representative.
Tenant Representatives have important local market knowledge that attorneys do not. Most leases are written by landlords and are accordingly very favorable towards the landlord. Attorneys primarily provide protection for the legal issues and often elect to remain uninvolved in the business terms – as that is not their area of expertise. A very important part of a tenant representative’s job is to know the market conditions well, and to educate their client about the best business terms they can obtain. Also, a Tenant Representative can foresee issues that may not be apparent at the time, but need to be negotiated for future protection of the client.
Sophisticated landlords often recognize and compensate Tenant Representatives when negotiating lease renewals as an ‘insurance policy’, and it just makes sense. If a tenant representative relocates the tenant, the landlord’s cost to acquire a new transaction will likely be much higher. Some of the landlord’s costs include a full tenant improvement allowance to retrofit the space for a new tenant’s use, rental losses during the marketing of the space and construction of the improvements, and marketing costs that may include a full commission as opposed to a fractional fee – typical of renewals. Landlords almost always prefer to pay a modest commission to retain a tenant than to re-let vacant space. The client, of course, benefits because they get the education of what other spaces are available, confidence that they have made the right decision to stay, and all the benefits of Tenant Representation at no cost, and no additional cost.
Landlords wants to keep good tenants. When push comes to shove – especially in a soft market, landlords – under the right circumstances, will likely grant numerous concessions to tenants in exchange for a meaningful extension of term. For example, if your building were 20% vacant, and you occupy 10% of the building, you have 1.5 years remaining on your lease term, and you offered to commit to a brand new 5-year term now in exchange for a reduced rate, refurbishment including fresh paint and new carpeting, and a month free from rent – and assuming you’re working with a Tenant Representative that is showing you alternatives in the market, your landlord would be wise to grant you these terms and conditions. A looming block of potentially vacant space in a building that already has more than 15% vacant is an opportunity for tenants that approach the landlord properly – with expert representation.