Wednesday, November 17, 2010

10 Leasing Insights - Tip #2

Dan Oster - Industrial SpecialistPosted by: Dan Oster

Industrial Specialist
775 336 4665

As a member of the Industrial Properties Group, Dan has participated in the sales and leasing of a wide variety of Industrial properties from 1,000 to 700,000 sqft in Northern Nevada. Dan's primary goal is to provide unsurpassed customer service to the clients he represents.

~10 Leasing Insights ~
Broker tips to better deals

Tip # 2
Fixed Rate Options:

Options in leases almost always favor tenants. Landlords know this all too well. In the negotiation process, tenants often ask for them and LLs often agree to them in order to get the deal. Fixed rate options, where an additional time period at an agreed upon price at the tenant’s sole election are built into the lease, are particularly difficult for a LL to accept. Why? When leases roll over and an option exists, tenants only exercise them when they are in their own favor. LLs know that when a lease rolls and the option rate is higher than the market, tenants usually shop for an alternative space and will renegotiate. When the option price is lower than the market rate, tenants hold the LL’s feet to the fire.

BROKER INSIGHT: Fixed rate options are great…if you can get one. Success will depend upon how much power you have in the negotiation or how much you are willing to pay from day one. If you want to control your lease expense farther into the future, consider extending the term of the lease. LLs almost always perceive a longer term favorably. You may use a longer term to win other concession in the deal.
Next Week.... Beneficial Occupancy vs. Free Rent

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