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Are Brokers Really Necessary When Negotiating a Lease Renewal?

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Some property owners of commercial real estate may not understand the reasoning behind why a tenant who has been renting a retail or industrial space for some time, perhaps 5 or 10 years, would want to include a commercial real estate broker tenant representative as an advisor when it is time to renew the lease, change the lease to include an expansion, or agree upon some other transaction with the landlord.

If you think about it, how is a renewal any different than an initial lease transaction? Does the commercial lease not need the same expertise, market and lease knowledge, and experience that can only be assured by engaging a professional advisor? Craig Trbovich, Sales and Leasing Advisor at Commercial Properties, Inc. commented in a LinkedIn Discussion Group, “Even if you have real estate and contract experience, it’s current market knowledge that will be invaluable. And being in the trenches every day is the only way to be current.”

Today, it is critical for top corporate executive to provide the company’s stakeholders with only the best financial decisions to ensure maximum profitability. Yet, a small business or corporate executive is not an expert on negotiating leases for commercial real estate. A professional advisor can help the tenant best determine the answer to questions such as:

·         How large should the leased facility be to need the tenant’s needs?

·         Exactly what configuration of space bets suits the business’s needs?

·         What interior improvements need to be performed and who will pay for these changes?

·         What is the best length of lease term is optimal for the tenant?

·         Should the tenant secure rights for expansion or consolidation?

·         What other options should be negotiated into the lease?

·         Can a period of free rent be rolled into the negotiations?

·         Is the landlord and building in good financial condition?

·         Should relocation be seriously considered?

The owner of the commercial real estate being leased would probably quite pleased if the leasing business does not want a tenant representative because negotiations will likely be very easy and the landlord will get options that benefit them rather than the business. Daniel Rudd, Executive Vice President and Office Broker at Colliers International states, “It is short sighted for a tenant not to have representation and the tenant is ceding the landlord an incredible amount of leverage.”  With a broker, the tenant can be assured they have someone fighting for their right and making sure their best interests are covered. 

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Lease Negotiations , Office Leasing Tips , Office Relocation , Office Space Negotiations , Tenant Representation

1 response to “Are Brokers Really Necessary When Negotiating a Lease Renewal?”

  1. Brad Says:
    All of the more sophisticated companies know to use a broker when acquiring new space or renewing their lease because it does not cost them anything and all that the broker can do is save them money and time. Commercial real estate brokers know the concessions that landlords are willing to offer, they know when you need to sign a 10 year lease or if you would be better off only signing a 3 yr lease, and they know which landlords are good and which ones you may not want to enter into a long term relationship with. The deal normally gets better when the tenant has a broker involved because the landlord assumes that when you have a broker representing you, the broker is showing you every building in town and they have to be more competitive to get you as a tenant. In Columbus Ohio, there is a lot of commercial real estate available (like most cities) and a good broker can help you wade through the exhaustive list of available spaces and quickly short list the properties that should focus on which saves you time so that you can focus on your business.