Inc.’s How To Get a Good Deal on a Lease
Inc. has a great article on the how-to’s of getting a good deal on a commercial lease.
[The article appeared in the May 2009 issue.]
Even though signs are showing that the residential real estate market may have already bottomed out and may be poised for slight upticks in certain markets, commercial real estate is becoming more and more a tenant’s market.
In the commercial real estate market, now may be the time to take a good look at that existing lease and renegotiate the terms.
From Inc.:
A commercial lease is a long and complex document, and negotiating one can be daunting. But a prospective tenant has a great deal of leverage at the moment. It has always been true in principle that everything in a lease is negotiable. Now, it’s true in practice, too.
This article gives some great advice for those of you not familiar with the structure of a commercial lease. Listed below are some things to consider before signing your lease (summarized from the article):
1. No matter how good a negotiator you are; don’t go it alone.
A good broker is essential, because he or she will know what landlords in your area have been offering to lure tenants, but you will also need a lawyer who knows commercial real estate.
Ned Harper, director of the Daytona State College SBDC:
“Brokers tend to like the lease — they don’t tend to bring things up unless you do.” A real estate attorney, on the other hand, “has seen what clauses are going into contracts. He’s the one who’s written them.”
2. Measure the space before you sign a lease.
Depending on how many times the space has been re-sized the floor plan used to determine the lease may be not accurate. Sometimes leases explicitly limit redress for a tenant that finds out after the fact that it’s paying for more space than it actually has.
3. Be aware of which expenses your landlord proposes to bill, particularly as part of CAM.
CAM = Common Area Maintenance. Some lease documents may include depreciation as a CAM expense. Ensure the right to see for yourself the expense budget, as well as which costs are actually incurred. Utilities are also borne by the tenants. In shopping centers, tenants are metered individually; in office buildings, utility costs are apportioned by square footage.
4. Maintenance Items…
You should get the HVAC systems inspected, along with the plumbing and electrical equipment. If you find problems, make it a point of negotiation.
5. Dont’ try to re-write the lease.
“Leases almost always favor the landlord. But you can build in clauses that level the playing field. Be strategic in setting priorities. “I try not to make wholesale changes, because they’re not likely to be accepted,” says Rick Gier, a lawyer in Overland Park, Kansas. “I’m more concerned with making four or five important changes than 20 small changes.”
6. Include a co-tenancy and exclusivity clause.
A co-tenancy clause lets a renter escape the lease if the landlord doesn’t replace the anchor in a specified period. An exclusivity clause guarantees a direct competitor won’t move into the same development.
7. Establish guaranteed selling points.
Landlords often make a selling point of high occupancy rates or a large number of monthly visitors. You should get these in writing and the exacting concessions (including the freedom to leave) if the landlord falls, say, 20 percent below the guarantees.
With the commercial real estate market taking a downward slide, now might be the best time to get a great deal on that space you have had your eye on for some time, or this might be the time when your lanlord will make consession on your current lease. Remeber: don’t swing for the fences in your lease negotiations, but rather try for a walk or a single. The landlord is in the game for the same reason your are…to make a profit. But short term consession might serve you both in the long run.
RCS Represents Developer in Lenoir City, TN Re-Zoning Meetings
REDBUD Construction Services’ Chief Manager, Shawn Van Dyke, recently represented The Tetra Companies (a Virgina Beach, VA based real-estate development firm) in several Loudon County Planning and Lenoir City Council Meetings for the purposes of re-zoning Tetra’s 267-acre Mixed-Use development, Town Creek Center.
Shawn appeared before the County and City Council and presented an overview of Tetra’s vision for Town Creek Center. An article appeared in The Loudon County News-Herald summarizing the specifics of the re-zoning request:
The first rezoning was of 189.51 acres R-3 and C-1 (high density residential and neighborhood business) to the C-3 highway commercial district. Secondly, 32.78 acres was rezoned from C-1 and O-1 (office professional) to the R-3 district to provide Tetra with an adequate plat to potentially construct medical offices — a complex of sorts — near and around planned apartments, which is the basis of the R-3 zoning request. Another 45.44 acres was rezoned from C-1 to O-1 in order to further plan the aforementioned medical complex.
Below is the Conceptual Site that was presented along with a Conceptual Landscape Buffer for the SW portion of the site.
REDBUD Construction Services is currently managing on-going construction activities at Town Creek Center which include the construction of Town Creek Parkway, the infrastructure and utilities, a $4M bridge over Town Creek, and prepping the site for a national Home Improvement retailer.
Privatizing Public Infrastructure
This article in the Business section of the New York Times reports on how you may begin to see many of those public infrastructure projects turn to private funds for financing.
Private funds’ “strategy is gaining steam in the United States as federal, state and local governments previously wary of private funds struggle under mounting deficits that have curbed their ability to improve crumbling roads, bridges and even airports with taxpayer money.”
Chicago’s Midway Airport and the Flordia Turnpike are two projects that could be partially funded with private monies. From the article:
“This fall, Midway Airport of Chicago could become the first to pass into the hands of private investors. Just outside the nation’s capital, a $1.9 billion public-private partnership will finance new high-occupancy toll lanes around Washington. This week, Florida gave the green light to six groups that included JPMorgan, Lehman Brothers and the Carlyle Group to bid for a 50- to 75 -year lease on Alligator Alley, a toll road known for sightings of sleeping alligators that stretches 78 miles down I-75 in South Florida.”
But how will taxpayers take to this method of financing public projects?
“And then there is the odd romance between Americans and their roads: they do not want anyone other than the government owning them. The specter of investors reaping huge fees by financing assets like the Pennsylvania Turnpike also touches a raw nerve among taxpayers, who already feel they are paying top dollar for the government to maintain roads and bridges. And with good reason: Private investors recoup their money by maximizing revenue — either making the infrastructure better to allow for more cars, for example, or by raising tolls. (Concession agreements dictate everything from toll increases to the amount of time dead animals can remain on the road before being cleared.)”
There’s a need out there and limited money to do it. According to the article, the ASCE…
…”estimates that the United States needs to invest at least $1.6 trillion over the next five years to maintain and expand its infrastructure. Last year, the Federal Highway Administration deemed 72,000 bridges, or more than 12 percent of the country’s total, “structurally deficient.” But the funds to fix them are shrinking: by the end of this year, the Highway Trust Fund will have a several billion dollar deficit.”
“The prospect of steady returns has drawn high-flying investors” , but time will tell whether the investment will be worth the wait on return and whether the politicians can get the public’s support.
Read the full article here.
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