Friday, March 30, 2012

Leasing Series - It's a Wrap

Over the past months, we’ve tried to cover in a ‘soup-to-nuts’ fashion the area of real estate commercial leasing. Our perspective is from that of a real estate broker, and we certainly recommend that you seek competent legal advice in any leasing transaction you pursue. The content and topics covered in this series, we hope give both Tenants and Landlords some key input, as they review their leasing objectives. If you are active on a specific lease deal, there may be a topic that applies directly to your situation and perhaps offers some perspective on it.

Within our blog archive, topics are posted weekly and titled according to the subject – which makes for easy reference. If upon reviewing the topics you cannot find the subject you require, feel free to contact us and we will be more than happy to respond. Again, bear in mind that we operate out of the Windsor-Essex, Ontario (Canada) real estate market, and our perspective is based on our regional market. But if we cannot help, we will try to put you in touch with someone in your area who can.

Just some final thoughts on commercial leasing and some friendly advice as you set out to either secure tenants (Landlord) or find premises (Tenant) - “Know Your Market” or better yet, make sure your broker “Knows Your Market”. Real estate has always been viewed as ‘local’ and the leasing market is no different. It’s most important to understand the current rental rate environment, market trends, and vacancy factors. Sometimes the data is hard to get, and maybe less readily available than with the residential market -- but it is out there, and you need to be up on it!

Again, seek out experienced commercial realtors with strong leasing backgrounds to assist you in your area – do not go it alone! To look at our current retail property listing, click here .

We are moving on -- next week we begin a new series on 'commercial building acquistions' for owner-users.

Friday, March 23, 2012

Negotiate, Negotiate, Negotiate

Just ahead of summarizing everything we have covered over the past 6 months, in concluding our series on ‘Commercial Leasing’ (our final post next week), let’s take a look specifically at the area of ‘negotiation’. There is an old adage which goes something like...‘successful business people do not get what they deserve, but rather what they negotiate’. Truer words were never spoken, and they very much apply to the area of commercial leasing.

In the case of Tenants, on an initial basis you need to understand the general terms and requirements as set forth by the Landlord. Once you have that outline, you need to consider your priorities/expectations, to see what sort of fit exists on this particular location. When differences are then identified, it’s time to get your ‘hardhat’ on and begin to see what sort of changes can be achieved with the Landlord.

This may be on the dollars and cents, but should include everything else important to your operation/business plan -- including lease term, restrictive convenants, first right on adjoining space, parking, signage, early termination provisions, rent-free periods, tenant allowances, change of use options, etc. Now is the time to have all of this on the table and negotiate all of the terms (beyond the dollars), which are key to your requirements going forward.

Similarly with the Landlord, they need to review the covenant/qualifications of the Tenant to see what sort of fit they have for their property. Areas such as -- corporate/personal guarantees, amortization of Tenant improvement costs, signage approval rights, sublet provisions, parking allocation, terms of renewal, and chargeback rights on major capital improvements are a short list of examples. Again, now is the time to have all of these key points on the table, so that they can be negotiated as a basis for a lease agreement.

A final note here and going back to the way in which deals get papered (Letter of Intent vs. Agreement to Lease, click here to refresh your memory), make sure that all key points are included clearly in either format. Leaving major points out at this stage only create problems later on, and often deals are lost as a result. Lease signings on a 30-40-50 page document can be challenging enough, without having major differences crop up which should have been upfront and negotiated at the outset.

Again seek out experienced commercial leasing specialists in your market, who can NEGOTIATE-NEGOTIATE-NEGOTIATE, on all the key terms required. To check out our largest office complex that we represent, click here.

Thursday, March 15, 2012

For Landlords Only - Landlord Representation

Landlords need to review their options - meaning qualified commercial leasing practitioners - in choosing the best brokerage to market their space. Beyond having a strong background in your market, their services should include much of the following.

Services Check List:

1) A solid analysis of current market conditions and trends
2) Supporting data regarding base/additional rental rate comparisons
3) A specific marketing plan for targeting the space (incl. target markets/users)
4) Promotional plans including – website marketing, signage, flyers
5) Market based expectations on incentives (ie.rent-free, TI.allowances)
6) Strategies for negotiation on the landlord’s behalf
7) Working arrangement with the local broker community & co-operating plan
8) Ability to service premises tours/viewings
9) Documentation expertise and preparation abilities
10) References that can be reviewed and called upon

Beyond the services, a discussion of brokerage fees involved is certainly appropriate and timely at this point. This could involve a % fee structure based on the rental due over a fixed lease term, or based on $ amount per ft. applied against the premises area being leased. This will vary from broker to broker, and based on your specific market. However, it is most important to understand how the fee is based, when it’s to be paid, and any future fees which may apply to extensions/options at later stages.

Although not necessarily a complete list of services required, the above gives you a sound basis to interview candidates. At the end of the day, a Landlord must be confident in the ability of the broker to ‘GET THE JOB DONE'.

Again, seek out experienced commercial leasing brokers within your market, to best represent your interests in marketing your premises. To learn more about our experience and background, click here.

Thursday, March 8, 2012

Signage - Issues For Both Landlord & Tenant

Commercial tenants often require signage, to promote both their brand and to identify themselves within the office/retail center. The signage issues needs to be ‘front & center' for the sake of both landlord & tenant, to ensure their expectations can be met. It should really be included at the site evaluation stage, prior to getting to a formal Agreement to Lease or Letter of Intent.

From a landlord’s perspective, they often have their own set of priorities with respect to property signage. They can include the following:

1) Monthly charges for a panel on a pylon or building mounted signboard
2) On-going maintenance costs
3) Ensuring conformity with the building fa├žade/architecture
4) Consistency with other tenants in the center
5) Complying with municipal sign bylaws
6) Effectiveness of signage in marketing the overall center.

It is important to note that the landlord maintains the right of approval on any tenant sign submission, and approval may be denied if the design is contrary to and does not meet the signage requirements as set out by the landlord.

With respect to the tenant, their requirements for signage are often based on the following:
1) Standardized branding (in the case of a national/multi-store operation)
2) Optimal or preferred positioning on a pylon/sign board (top billing)
3) Specific design requirements involving certain colours/unique fonts
4) Requirement for a separate/independent signage position
5) Specific visibility requirements

Much of this is and can be driven by a corporate requirement, which must be met. Otherwise, the center may be ruled out, based on not being able to meet the signage requirements.

It is easy to see how the parties can get to ‘cross-purposes’ rather quickly on the issue
of signage. Best practices is for the tenant to ensure their specific signage needs can be accommodated as early as possible in the process.

Again, seek out experienced commercial leasing brokers within your market, to work through your signage requirements and as they relate to the site options being considered. To check out our current inventory of retail properties, click here.

Thursday, March 1, 2012

For Tenants Only – Benefits of Exclusive Representation

Tenants undertaking a commercial premises search should insist on Exclusive Representation in working through a Broker on their requirements. As the old adage goes – DON’T GO IT ALONE - and there are a host of benefits which should be gained by working with a broker on an Exclusive Representation (ER) basis.

Here are some key areas to focus on as you interview candidates for your assignment:

i) Market Knowledge/Competence - the agent(s) should be able to be able to provide good advice concerning market availability, locational/market trends, building options, base rate/operating cost analysis, and landlord background, as a most basic initial starting point. References and resumes most often speak for themselves and should be requested to confirm the qualifications advertised.

ii) Representation – major landlords/developers often have their own exclusive leasing staff representing their interests. Tenants need similar representation.

iii) Savings – Tenant saves time and money, as the Agent develops the list of building/locational options, arranges the property tours, solicits landlord proposals, assists in space planning, and coordinates detailed negotiations on the selected property. These are the key elements needed in any successful ER.

iv) Brokerage Fees – depending on the jurisdication and the market, most often the Landlord will agree to pay the fees due to a Tenant Representative, and will build it into the lease transaction itself. Insist that the Agent’s fudiciary responsibility remains to you (the Tenant) in any ER Agreement which is entered into.

v) Privacy - ER can protect your privacy and confidentiality as you move through the market process, engage landlords/other brokers, and eliminate any adverse publicity on an impending move.

vi) Timing on ER Agreement – can vary depending on the specific needs of the Tenant and the realities of the marketplace. Both parties must agree on a realistic time period - but more importantly, have a clear understanding of expectations relating to the services being provided, regular communication & reporting, and feedback mechanisms.

Although not necessarily a complete list of requirements, the above gives you a sound basis to interview candidates for an ER Mandate. At the end of the day, a Tenant must be confident in the ability of the Agent to ‘GET THE JOB DONE’.

As always, seek out experienced commercial realtors with successful leasing backgrounds, to provide you with Exclusive Representation on your next move. To learn more about our Tenant Representation services, click here.