Entries Tagged as 'Lease Negotiations'
National Office Update & Office Tenant/ User Strategies PodCast
Original Air Date: 4/2/11
Very informative broadcast about the office market and office space strategies for office space tenants.
"The office user show provides a national office market update and best practices for corporate office users. Chris Macke, Senior Real Estate Strategist with CoStar Group provides an update on national office market performance including top cities for investment and markets prime economically for corporate headquarters. He also shares market advice for office users and expectations for 2011 and 2012.
Show host Michael Bull and industry leading guests cover current topics important for office users including strategic lease provisions for tenants, protecting lease rights before foreclosure, prevalent lease situations in this economy and the guests share best practices when renewing leases and securing new locations.
If your company uses office space or you advise companies that do, you will find this show very informative and enlightening."
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Atlanta Office Space , Dallas Office Space , Houston Office Space , Lease Negotiations , Los Angeles Office Space , Manhattan Office Space , Miami Office Space , Office Rental , Office Space , Office Space Negotiations , Office Vacancy Rate , Tenant Representation , Washington DC Office Space
According to a recent article in the Finance and Commerce CCIM Report "Nationally, office vacancy rates stood at 19.5 percent in the third quarter of 2010, about the same as in the second quarter and just 50 basis points above the rate in the third quarter a year ago. Vacancy and rental rates across all property types were in a stabilization pattern in the third quarter of 2010. Rents are now 6 percent to 18 percent below their prerecession peak... Office rents are down 12 percent."
More news to show that we have hit bottom in the office space market and will begin the slow climb out.
More information on Office Vacancy Rates
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Lease Negotiations , Office Space , Office Space Negotiations , Office Vacancy Rate
According to a recent report from Colliers International, it appears that the U.S. office space market has turned the corner and absorbed 6.5 million square feet of office space during the third quarter of 2010 compared to only 1.8 million sq. ft. of absorption activity for the previous quarter.
It was the major office space markets that showed the largest office leasing absorption for the quarter. Among those, the Washington, DC office space market showed over 882,000 square feet of net absorption during the quarter, resulting in an office space vacancy rate of only 11.6%, the lowest in the nation. The Washington, DC office rental rate increased to $52.32 per square foot, an increase of $1.06 over the previous quarter. The rental rate and absorption gains are mostly due to the addition of new government jobs and a limited supply of new office space coming on line during the quarter.
Also of interest, during the 3rd quarter the amount of sublease office space nationally continued to decrease, to only 7.6%of total office space vacancy compared with 8.2% at the end of the 2nd quarter.
The national office space vacancy rate decreased slightly from 16.3%to 16.2% during the third quarter, but it still is above the 16% at the end of the 3rd quarter 2009.
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Lease Negotiations , Office Space , Office Vacancy Rate , Sublease Office Space , Washington DC Office Space
In a recent Blog post by James Quinn, a senior director of strategic planning for a major university, the time period of the office space market recovery is questioned and predicted to be much longer than many industry experts predict. The main reason for his prediction is his belief that consumers are beginning to "Deleverage," spending less, and it will cause major changes in the economy over the next decade.
"They have no choice. Boomers have come to the shocking realization that you can’t get wealthy or retire by borrowing and spending."
His thoughts on the Office Space market:
"The current office vacancy rate of 17.5% is the highest since 1993 and is just below the all-time high 18.7% in 1992. The WSJ has concluded, with no data or analysis, that the vacancy rate has bottomed. As the employment data proves, companies are not hiring employees. New companies are not being formed. Government mandates and regulations regarding healthcare and uncertainty about taxes will keep the formation of new small companies at a minimum. Conglomerates continue to ship jobs overseas. Part 2 of this Depression will drive more companies out of business. Office vacancies will remain at record levels for the next five years."
On the other side the Wall Street Journal came out with an article, Signs of Recovery For Office Market, last week that predicts that the office space market has bottomed out and that we are starting see some stabilization in the market. They also state that the recovery will be a slow one, but don't define how long that could be.
For us at OfficeFinder.com, over the past 3 weeks we have seen a surge in closed deal reporting in the neighborhood of 2 - 3 times over those of the previous several months. These reports come through our network of office space tenant representatives and executive suite members. We are hoping this continues and identifies the start of the small business recovery.
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Commercial Real Estate , Lease Negotiations , Office Rental , Office Space Negotiations , Office Vacancy Rate
Maybe the landlord (or his broker) shouldn’t be considered an adversary when negotiating a lease. If you understand their needs and wants you may more likely be able to achieve a win-win for both parties. After all, you are both attempting to get the best deal for your respective side.
Tenants spend a lot of time, some more than others, on clearly defining their needs. They determine the location, size, build-out, cost, image and more. The key to a great deal is making sure what you want is what the particular landlord can deliver. Not all landlords have the same agenda or live by the same rules.
Have you ever been at a casual business lunch, maybe in the gym working hard to shed a few pounds or simply standing in line for that double mocha cappuccino when the guy next to you starts talking about his firm’s latest and greatest real estate deal? You can tell he’s proud of the results. Unfortunately, his knowledge of the deal may likely based on the abbreviated summary presented to him at the last manager or partner meeting. Unfortunately for you he just planted an annoying seed in your head. You stop thinking about anything but the deal your firm just signed and you can’t wait to get to the office to look at your new lease. The fact is, that guy may not have all the correct information and details about his deal but it sure set you off on an aimless journey. You now start to wonder if you really did you get as good a deal as you first thought.
The core of the problem is that no two deals are ever the same -- even in the same building. Although the monthly rents may be within pennies of each other, the deal points may vary across the spectrum. The differences often depend on specific issues known only to the Landlord. This can include idiosyncrasies of the particular suite, the building or maybe the landlord’s financing. It likely has nothing to do with you. So, don’t take it personally.
Several years ago we assisted a client in leasing a portion of an oddly built suite. The portion they intended to lease worked well for them if the landlord would just put up one wall, re-carpet and repaint the suite. Quick deal…done and done.
At the same time, I had another client looking for space about the size of the remaining portion. However, that section required a lot of improvements to meet most tenants’ needs. When I approached the landlord basically with two deals at the same time they were willing to do well over $45/SF in improvements, a high amount for a small space. From their perspective they were looking at what the cost would have been to do both suites while putting most of the cash into the odd shaped one. The win-win was that both clients got a space built out to their needs while the landlord signed two new tenants with minimal down time or lost rent.
In today’s market the concessions come in all sorts of shapes and forms. Some creative landlords offer reduced rent for the first year while others may offer abated rent. Others are more aggressive on their asking rates. The landlord was quite upfront in one recent renewal transaction we handled. He needed to keep his asking rate at a specific level based on the terms of his loan. With that in mind and knowing the market value as compared to other properties and other new deals recently completed in the same building we put a total dollar package together that would work for the landlord. We then used abated rent spread through the term so the total value of the transaction equaled fair market which worked for my client. The landlord got his rate and the client paid what was fair over the term.
The guy standing in the coffee line telling you about his deal may not even know the specific deal points of the lease and, in particular, how all the moving parts fit to make the deal work.
Every deal starts with a market value. That’s just the reality of real estate. Beyond the basics every deal has its uniqueness. If you can get answers to some issues it might help such as:
- Does the landlord own the building outright?
- If not, how flexible is his lender? Some lenders need to approve all deals, deals that impact loan to value while another may need approval of deals over a certain size which could impact the landlord’s flexibility.
- Does the owner tend to sell or keep their properties long term?
- How long has the particular suite been empty?
- Is the present build-out considered “standard” or would it require improvements for most any new tenant to occupy the space?
If you look at your business plan and carefully identify your real estate needs you can approach the landlord with the simple question, “Can you do this?” While the path to “yes” may not be a straight one, understand there are many issues facing the landlord which can allow them flexibility to make your deal or conversely become impediments forcing you to move on to another option. Be strong in your negotiations but also learn to be flexible.
Lease Negotiations , Office Leasing Tips , Office Space Negotiations , Orange County Office Space
Guest post by our Orange County, Ca Office Space Tenant Representative