Leasing or buying commercial real estate is completely different from your typical real estate experience buying a home. Office leasing brokers specialize in office leasing and know the ins and outs of the local office market, the negotiation process and understand how to negotiate the key points savvy tenants should consider in making a “tenant friendly” commercial real estate decision. For the same reason you would not have the same attorney representing both parties in a legal transaction, brokers are hired to represent specific parties and more often than not their client’s goals are in direct conflict with the other side’s goals and objectives. Real estate occupancy costs are second only to payroll for most companies and once the lease is negotiated there is no going back and trying to get concessions and better terms later. A good tenant representative will create the leverage needed at the beginning of the process so you have strength in the negotiation to get the benefit the market at large has to offer.
Landlords are in the commercial real estate game 24/7/365 and hire professional leasing agents to negotiate the highest returns for the investments in their buildings. If the agent or landlord can sign a tenant at a higher rate, it improves the landlord’s bottom line. On the contrary, many business owners (tenants) don’t look at the leasing market on a regular basis, in fact it might be as infrequently as once every 5-7 years. A lot can change even in the course of a few months in Chicago’s vibrant and ever changing commercial real estate arena and its best to have a pro with on the ground intel to assist you in determining whether your lease renewal beats, meets or exceeds the market rate and terms.
The key to a successful renewal negotiation is creating competition between your current landlord and surrounding landlords in the area, while maintaining a controlled, non-emotional and organized process. Tenants need to have an experienced advisor providing the proper market research and negotiating skill that will create leverage for them. Our team specializes exclusively in tenant representation and can save you significant amounts of time and money on lease renewals.
We are aware that most tenants don’t want to damage their relationship with the landlord because after the lease is signed they will end up in an on-going relationship with that landlord. That’s why our philosophy is to approach and deal with every landlord in an aggressive, yet fair and professional manner, so that the issues are properly addressed and negotiated but any impressions or hard feelings they may have over our tough negotiating tactics are left with us, your broker, not you the tenant.
Our team at Jameson is very experienced in tenant representation and we have over 100 years of combined experience focused exclusively in the Chicago metropolitan area. Our agents do at times, work with landlords on the leasing and sale of their properties, however, prior to engaging in any tenant representation services with a potential client, we clear all potential conflicts of interest that the agent may have with any landlords we have relationships with before we start down the path of tenant representation with that client. If the conflict of interest cant be resolved then another member of our team that has no conflict of interest will get involved to ensure that each party is properly represented in the transaction.
Aside from relying on an attorney for market advice and not hiring a tenant advocate to represent their interests, the biggest mistake that tenants make is not taking the appropriate amount of time to develop legitimate competitive leverage by sourcing viable alternatives for the new space being considered or a lease renewal. Another big mistake is not starting the process early enough. There is a balance of negotiating strength that happens in every lease transaction whereby when your lease is a couple of years away from expiration you don’t have much leverage, but as it gets closer to ending your leverage in the negotiation increases solely due to the fact that the landlord has less time to find an alternate tenant that could potentially compete with you for the space and it becomes more beneficial for them to get more aggressive rather than face an extended vacancy. Provided you don’t wait until the last minute (60-90 days before expiration) when the landlord will have maximum leverage, you can take advantage of the market by timing your approach to your landlord and the market so that you are exploring alternatives 12-18 months in advance of your lease expiring and talking to your landlord about the credible alternative that exist in the market that could potentially attract your business if the landlord can’t make the right deal for you to stay.
Our services are free to the tenant/business owner. In most cases, the landlord has their own agent or manager responsible for leasing the property and in their listing agreement has already agreed to pay their leasing agent a fee that includes a fee for an outside/tenant broker. Its customary in the market that the leasing agent will share that fee with us. We typically ask landlords to pay us a flat fee based on the amount of space and term of the lease proposed. By approaching our fee in this manner vs asking for a percentage of the rent paid by the tenant, we keep our interests aligned with our tenant client because our fee doesn’t increase or decrease based on rent or concessions. They represent the landlord while we represent you, the tenant. In the event you do not have your own broker representation, the entire fee will be paid to his own leasing agent. Bear in mind where that leasing agent’s loyalties lie when he represents a property owner. His job is to get the best possible terms for his principal — the landlord and keep the concessions and buildout at a minimum while simultaneously seeking the highest rate, escalation and security deposit for his clients benefit. Our job as your tenant representative is to create leverage that will ensure that each of our clients gets the best possible terms available in any given market.
It depends on current office market conditions, the size and complexity of the transaction, and option notice dates can help determine when to begin the process of evaluating your office lease. Time should be your ally, not your enemy during negotiations with any landlord. There are also certain times of year when its disadvantageous to plan a move, the timing of the lease discussion should be planned so the tenant doesn’t have to rush to get a deal done over a holiday weekend or during a time when many attorneys, contractors and consultants are traveling.
Depending on the size and complexity of your office space requirement you should allow, at a minimum, the following lead times to negotiate your office lease:
We recommend to all clients before beginning the search process, that they meet with one of our architects or space planners to go through their ideal requirement and create a space plan program that outlines very specifically what their office needs are and what growth will need to be factored in for future hires. The planner will do the initial program and be paid for this work by the landlord. The space plan program document will give us the road map of what you need with in the space. In todays real estate environment where costs are high and space is tight, many companies are opting for more open environments with smaller private offices and buildings that offer amenities like conference, fitness rooms, outdoor decks and break rooms. These shared areas are usually wifi enabled and allow tenants the ability to work outside the office without leaving the building. These amenities can help reduce the tenants space requirements and bring the monthly costs down as compared to buildings that don’t have amenities.