In commercial real estate leasing there are many different factors that come into consideration with any lease negotiation. That being said, some stand out as the most common issues to be worked through by landlords and leasing brokers.
Initially the tenants ‘call the shots’ when it comes to starting a negotiation and making an offer on leasing office space. The essential ‘factors of attraction’ have to be there at the very start to get things moving. Typically those issues are:
- Occupancy costs – the rental spend has to be there at the beginning of any lease negotiation. Can the tenant afford the property given all the factors of occupancy? Remember that occupancy costs add up and include base rent, outgoings, electricity, water, communications costs, and maintenance. These are base building charges that exist in most leasing deals; look at the building budget for this year and understand how that budget will impact the property and the occupants. What are these costs with your quality lease listings? Can you provide a tenant with all of these facts?
- Technology support and integration – Most tenants in office space today want to integrate their business into the World Wide Web and global market place. That requirement could include high speed online portals, reliable telephone systems for both wired and mobile communication, data cabling, dedicated antennas for special tenant use, and secure risers for highly sensitive cabling and portal communication.
- Environmentally friendly occupancy – Most office tenants today will ask questions about natural light availability, energy costs for tenants, air conditioning quality and service, and the building compliance to environmental standards and safety support systems (fire, evacuation, bomb, and other modern day threats). You will need specialised consultant or engineering reports to provide these answers.
- Business location and proximity to other tenants – Some businesses like to know who and what other businesses occupy premises in the same location. There are sensitivities that can exist between tenant types and across tenant proximities.
- Branding – What image and branding can the tenant bring to the property? There will need to be strategies in place for directory boards, advertising, signage, and logos. In a building with multiple occupants, the strategies should be set. Each tenant will have certain branding demands; in some cases you can ask for extra rent to be paid for special considerations such as ‘naming rights’ and the directory signage.
- Landlord – Many tenants know all too well that a landlord can make or break comfortable lease occupancy. Some landlords are just too tough on tenant occupancy, fitout use or flexibility, and mid-term rental review negotiations. Over time that can make things really frustrating for tenants that just want to get on with business.
- Fitout – What will be the fitout requirements and specifications for any tenants? The landlord should determine what ‘standards should be set’ when it comes to tenant fitout and construction; in that way the quality of the building is maintained. The landlord should also determine what they will regard as ‘base building’ as any landlord cost in a fitout.
When you have these 7 factors under control for your lease listings, you have most of the lease momentum under control.