International Tenant Representative Alliance announces a summertime bonanza for companies threatened by the current economy: Vast amounts of vacancies and subleases are driving down initial rents and lease renewals.
(PRWEB) July 29, 2009 -- According to Ross Selinger, Vice President of the International Tenant Representative Alliance, the current downturn in the economy provides a major advantage for market-savvy commercial real estate tenants; because of the large amount of vacant space. This summer offers an opportunity to strengthen the financial future of a company with a lease renewal.
Considering the recent changes in the national economy, Selinger clarifies what many know, but rarely take advantage of: "A renewing tenant gets shabbier treatment than a new one. Landlords often give new tenants free rent upfront, lower per square foot costs and the space built out for free." Renewing tenants receive very little, if anything, and are often assured a rent hike. Many astute commercial real estate tenants unfortunately choose to keep their expiring lease and "fail to choose market-savvy negotiation because the landlord or managing agent is nice to them." Too often, tenants like to renegotiate the lease themselves because, as Selinger reminds us, landlords make "renewing tenants feel they'll be taken care of," and because "tenants don't want to upset their relationship with the landlord; tenants think they are good negotiators and they'll save money on the broker's commission."
Unfortunately for the tenant, but very fortunately for the building owner, landlords view their existing tenants, as a "captive audience." Selinger reminds tenants that a "landlord can set his watch by the fact that most tenants don't like to move and will contact him about renewing their lease. Landlords also know from experience that Mr. or Ms. Tenant won't generally pursue other options or obtain knowledge about the current office leasing market; thus the tenant will have no leverage and is likely to agree to a modest rent increase."
But, Selinger warns, the best way to approach lease renewal is with a market-driven strategy. Selinger provides an apt example: "While it may feel good to negotiate yourself a $.75 PSF annual increase to renew your existing $26 PSF lease, the current market may only be demanding $22 PSF and offering tenant improvements and free rent concessions." The solution, Selinger claims, is to "hire a tenant broker who makes a living knowing the market. But not just any broker. Hire a tenant representative who does not represent landlords, has no conflicts of interest, and will never work for your landlord or any other landlord."
A landlord will only give a renewing tenant the same kind of deal new tenants get if he believes that you have alternative locations. So, according to Selinger, "when you approach the landlord with your tenant representative, the landlord will know that you've done your homework and created options, whether you use office space or industrial space, and that he has to compete with those options if he wants to keep you in his building. To further put the landlord in a 'hole', your tenant representative can convey to your landlord all of what you dislike about your present building. However, he can also convey that you are willing to stay if the landlord delivers a counter offer commensurate with the alternative locations the tenant rep has explored."
But, why act this summer, and not wait until next year? No one can guess that the current rate of vacancies will continue that long. And here's a final note of hope from Selinger: "A tenant broker can even negotiate the new term to begin upon the signing of the renewal, so the tenant doesn't have to wait for the previous lease to expire."
But it all starts with a market-based strategy developed with a savvy tenant representative . ITRA, comprised of senior brokers who are all tenant representatives, is perfectly situated to help companies take advantage of this summer's commercial real estate market bonanza.. ITRA has been advocating for large and small companies since 1992. Furthermore, ITRA is a global organization offering representation in major markets throughout the world. More information can be found at www.ITRAGlobal.com.
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