Leasing Strategies for Commercial Real Estate Agents Today

It is an interesting fact that most property solicitors acting on behalf of a client in a leasing situation will never really visit the subject property to understand the factors of occupancy and property performance.  They simply create a lease based on previous standards and their experience as a property solicitor.

This is not to say that solicitors don’t know what they’re doing, but it is to suggest that some solicitors need to take more time in understanding the properties that the client owns.  Every property should be regarded as unique and different.  The factors of occupancy that apply to each tenancy can be quite specific.

Here are some factors that would apply to a standard lease situation:

1. Decisions need to be made regards the rental type to be used in the lease.  The rental type could be either gross or net, and that will have impact on the recovery of outgoings for the landlord.
2. The the amount and recovery of outgoings in the property will change over time given the age of the premises and the value of the property.  The lease document needs to allow for these two factors.
3. Each vacant space will have unique factors of presentation and remediation.  At the end of the lease there will also be issues relating to the making good of the premises.  The make good clause should specifically talk to the factors that the particular tenancy and occupancy create.
4. In every lease occupancy, careful consideration should be given to the time frames that apply to negotiating rent reviews and lease options.  Both of these issues create critical dates that will need action and response by the landlord and the tenant.  Failure to act and respond by those critical dates can expose either of the parties to unnecessary risk and obligations.
5. The duration of a lease will have a direct relation to the cash flow for the landlord.  In a property with multiple tenancies, there can be a potential threat of vacancies occurring at the same time in close proximity to each other.  Excessive vacancy in the one property and at the same time, can frustrate the leasing process, increase vacancy downtime, and increase the financial impact of incentive on the landlord.
6. Incentives are usually required for the leasing of premises to new tenants.  That being said, the landlord needs to discuss with their solicitor the best types of incentive that will suit the property and the investment over time.

So there are a number of factors to consider when it comes to leasing vacant premises.  On that basis the landlord should be encouraged to select the correct solicitor who has the time to investigate the attributes and pressures that apply to each particular property.  In that way the landlord will get a lease that clearly matches the investment cycle and the cash flow that they require.  This will also help the commercial property agent when it comes to lease negotiation with potential new tenants.