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Maximize Savings on Your Commercial Real Estate Transaction

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Currently, there is excess office space inventory available in not only the Minneapolis commercial real estate market, but throughout the US and worldwide. This bodes well for anyone involved in leasing, acquisition or lease renewal, as sellers are anxious to dispose of their property. While current economic conditions are certainly favorable for acquisitions, good preparation and research can put you in even a better position to save money on your commercial property.

Timing

Time can be your ally or quickly become your enemy if you don't plan to use it correctly. Plan ahead and start searching for space early. It is best to start the search process at least 9 months in advance to uncover your best choices. For example waiting until you only have a three month minimum time frame limits your options as your best choice might not even be in play during this period. Not only does a minimal timeframe limit your choices, it reduces your ability to conduct an effective negotiation. Potential landlords and their brokers will sense or "read' your urgency with a short window and negotiate accordingly to achieve their best terms. When you have a longer time frame you can utilize time by effectively stringing out the negotiation and extracting additional concessions as you are in no rush to make a decision while the landlord's situation may require immediate tenancy.

Also note that if you are renewing, your current landlord will try to "string you along" to try to have you run out of time and force you to renew because there is not enough time to build out your new space before lease expiration. Time is your ally when you have it and your enemy when you are racing against it.

Options

It is always best to have three options or at least a good 2nd option when it comes to space alternatives. Use one to leverage the other to extract the best terms when negotiating. Don't be afraid to say "no" and walk away. Not having a good 2nd option minimizes the aggressiveness of your negotiation and can cost your firm money. Had you been able to "play hardball" and use leverage to its fullest potential, more economically favorable terms and concessions would have been achieved.

Representation

Having a knowledgeable, experienced representative can save you significant cost. Someone who regularly negotiates commercial real estate transactions knows the best negotiation tactics for your business and can uncover issues that can be used to your advantage. An experience professional won't be emotionally swayed in the heat of the moment.

Space Productivity and Efficiency

You need to clearly define your usage, budget and location. Efficient use of space will save you money. Apply BOMA standards to usable/ rentable space to make sure you are getting all the space you are paying for and are not paying for space you don't get.

For example, have your space planner verify measurements and be creative with design.

A creative design can place your productive people on the interior of a space rather than by window. Also, wonderful things can be done to the interior to create a great working environment even if the outside of a building may not be as appealing. A good architectural firm can convert most buildings to accomplish the environment you require, i.e. an Old Victorian to an Ad Agency.

Be flexible on other issues and the transaction will fall in place. Today, Landlords are less likely to pay for lavish tenant improvements, so efficient space usage and simple, but tasteful improvements are key. For example, you can present a high image to your visitors by focusing upgrades on your reception and common areas and still save money by staying basic with the individual offices and "back" areas.

Operating Expense

With an operating expense cost-pass-through, more rent will have to be paid as building operating expenses increase over a base year and cost-pass-through's take effect. By comparing previous years increases in your analysis of alternatives, you can make sure that your starting point is appropriate. It is very typical in today's market to request and receive CAMT Breakdown's from each landlord whose property you are considering. Try to negotiate some type of cap on annual increases, as costs (ie: energy; maintenance; materials just to name a few) tend to escalate at a rapid pace each year.

Be aware of categories that are typically included in CAM charges in your particular market vs. those that are not. For example, are light bulb and ballast replacement typical CAM charges in your market? Is a particular Landlord charging tenants for general capital improvements to the building or project vs. for only those capital improvements that are designed to reduce operating costs for the building or project?

Since CAMT charges range from $7.00 - $9.00 psf in Class B office buildings and from $10.00 - $13.50 psf in class A office buildings, it is imperative that you don't get charged for items that should not be charged for.

Summary:

With the current economic situation, you should be able to find and negotiate favorable commercial real estate deals, and you can save more money with better planning and strategy.

Guest post by our OfficeFinder Local Minneapolis representative

Minneapolis Office Space , Office Relocation , Office Rental , Office Space , Office Space Negotiations

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