Competent Landlord Brokers generally do an outstanding job representing Landlords. Regardless of the relationship between you and building management, Landlord Reps work for the Landlord, not you.

Here are a few of the most common misconceptions Tenants have when dealing with a relocation or renegotiation:

1.     “We have a longstanding relationship with the Landlord.  I know we will get a good deal when our lease expires.”

Tenants whom I represent typically spend 25% to 50% of their revenue on their lease.  Relationships are significant in any business transaction. However, negotiating a superior lease agreement is accomplished by stipulating adequate performance standards for the Landlord.  As your Broker, I ensure that you the Tenant is represented.

2.     “Our firm Represents Landlords and Tenants”

I spent years at one of the largest commercial real estate firms in the world.  The big Brokerage houses have divisions that represent the Landlord and the Tenant. I know that it is nearly impossible to not have a serious conflict of interest if every Landlord you encounter is a current client or a prospective client.  Big Brokerage houses cannot aggressively protect you as a Tenant because it jeopardizes the lucrative Landlord side of the business. From my experience, satisfied Tenants worked with Brokers that dedicated their practice toward protecting Tenants.

3.     “If I use a broker they will increase my rent to cover your commission, right?”

When the Landlord Broker is “hired” to list an office building the owner of that property signs a listing agreement.  Within this listing agreement a fee or commission is paid to the Landlord Broker if a Tenant uses a Broker or not.

“Landlords respect Tenants that have competent Representation, know their rights, and pursue their interests in a structured, methodical way.”

Landlords understand that the Tenants that I represent have multiple Landlords bidding for their dollars.  Because of this added “buying power”, I enjoy much more leverage than a single Tenant going at it alone.

4.     “The Landlord has told me if I don’t make a decision to renew my lease soon, he will put my office back on the market.”

Tenants will call me at my office telling me that they just received a call from the Landlord Broker pushing them to renew their lease without knowing the market.
Understandably, Tenants get nervous and fall for the old rope-a-dope. By rushing into a deal you risk overlooking several factors such as hidden drawbacks in a building, neglecting comprehensive due diligence, failing to analyze all of the risk and total cost of a Landlord’s proposal. All of this translates into signing up for a commitment which can become a serious, even fatal liability to your business.

5.     “I am a very large/small Tenant, so there are not a lot of options for me in this market.”

I always start my very large/small Tenants deal process at least one year before lease expiration.  Starting early means you’ll be able to see more spaces and include options that require building from scratch as well as different options for leasing versus owning.

6.     “Isn’t this just a Standard Lease?”

Standard or “boilerplate” terms equal pro-Landlord terms. Many times I have had to bust up a lease whose “standard terms” included operating expense loopholes, vague Landlord performance standards and other Tenant budget busters. I make sure that you’re not pressured into accepting “standard” terms unless those terms benefit you as the Tenant.  Remember there is a multitude of significant non-rent cost in a typical lease, many are hidden.  It’s contrary to the interests of the Landlord Broker to display these cost to you the Tenant.  I know where to look for these hidden costs and I’m able to bring them to your attention so that we can address them in negotiations. I’ve toured many buildings in the Houston market and have a database of detailed notes of my office visits.  Last year I represented a financial firm looking for space in a 50,000 ft. building.  Provisions in the lease provided for a $45 per hour surcharge for after hours cooling.  The only problem with this provision is that each suite was outfitted with an AC unit as opposed to a chiller seen on many much larger buildings.  Striking this provision alone saved my client potentially thousands of dollars over the course of their lease.  This would not have been possible without a comprehensive analysis (including a tour) of the building.

7.  “No thanks, I can handle the lease myself.”

The best Brokers are not just smart, they are experienced.  Most business owners are savvy enough to understand the general business points and intent of a lease document.  They may pick up a market report from a Broker or website and decide that they have all the information they need to get a deal done. As I Broker, I look at more leases in a week than a Tenant would see in their lifetime.  Without knowledge and experience it is impossible to negotiate the best deal.  As your Broker, I provide you the Tenant with the necessary information to commit to a lease term with confidence knowing that you got the best terms for your business. The truest measure of success for a Broker is what quantifiable actions did we take to protect the Tenant’s interests.

Here are some strategies to ensure you’re not taken for granted.

1. Leverage time to your advantage.
When you take into account all the phases of a possible relocation; the site selection, financial negotiation, the market analysis, lease negotiations, you’re looking at a time frame anywhere from six months to a one year plus period  before your target move in or renewal date.  I’ve represented several clients who allowed their renewal date to creep up on them and pass.  Landlords become much more aggressive in negotiations when they know you just don’t have the time to get another deal done.  I’ve seen it all over Houston’s major office markets – Greenway Plaza, Downtown, Westchase, Galleria.  Landlords withdrew major concessions because the tenant passed the point where they could not go anywhere else.

2. Understand all your options.
Don’t feel bad if you don’t know the specifics about your office market.  That’s what  I’m here for.  The climate is constantly changing and it’s a full-time job just to keep track of what deals are getting done in the various markets in Houston area.  What is key here however is not knowing where the market is at any particular point but knowing how to use market information as leverage to create the best deal possible for you as the tenant.  Low rental rates are not the only indicator of value.  Operating expenses, electricity clauses, sublease clauses, LEED certifications all play a major role in the true value of a building in your market.  Considering the fact that most office tenants spend 25% to 50% of their revenue on their real estate expense, ignoring these factors could be a very expensive lesson.

3. Get the inside scoop.
As your Broker, you will have the keys to secure improved lease terms.  I know the physical characteristics of most buildings in the Houston market and how they have functioned in the past.  I can tell you from my time talking to other tenants whether or not they are dissatisfied with common areas, bathrooms, elevator waiting times, excessive utility cost, capital improvements etc. Information such as this is critical when negotiating a lease.

4.  Realize the Landlord is not your friend.
Realize the Landlord may be nice, but he is not your friend. I can’t tell you how many times I’ve come across tenants who were extremely timid when it came to dealing with the current Landlord.  Some tenants believe that giving the Landlord the impression that they are the only option will get them a better deal. They think that having that impression will give them a better deal because the Landlord “likes” them. This is a lot like expecting to go to the grocery store and get a 25% discount because the store manager likes you.  Your lease renewal is a business transaction – plain and simple. The Landlord’s Broker has the obligation to use information  at his disposal to better position the Landlord.  In layman’s terms that means if you appear to not have any options, you will get a deal that reflects a weaker position than if the Landlord knew other properties were actively competing for your dollars in the open market.  Hiring me as your Broker is one of the strongest methods of communicating to the Landlord that you want to know what the potential value is for your office space. One of the most common complaints that I have heard from tenants when dealing with renegotiation with their Landlord is they are always dealt the phrase, “You are already here, and you shouldn’t need anything else.”  As your Broker, it’s my job to let the owner know that we expect your dollars to purchase just as much lease value as a new tenant’s and if we don’t get that value too, you are prepared to see the most cost effective alternative in the marketplace. From my experience, once the Landlords understand that you have me as your Broker or any Broker for that matter to objectively evaluate the marketplace, they become more realistic about renewing your lease at a very competitive rate.
6.     Travel light.
Always stay committed to getting the best terms the market will allow, even if it means you have to relocate.  In this area, my work is to show you all the angles in the marketplace.  When I talk to tenants in the market that already are leasing space, many tenants initially believe that I’m there to “take them out of their current space”.  That is a misconception.  Last year when the market was tighter, relocating for marginal savings like 1% – 2% usually doesn’t warrant a relocation. However, if I identify options in your market and have a projected savings of 5% or more it’s very likely that I would recommend we seriously consider those options in our site selection process.  Everything comes down to numbers, no matter how specialized your current facility is, a comprehensive site selection process, financial and lease analysis, and cost-to-build show that you can get better terms somewhere else.

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