At the start of my career in Commercial Real Estate (CRE) I was – I must admit on the other side of the fence. I started as a Landlord representative.
I learned a great deal about marketing a space or a property (actually it’s the what-not-to-do I learned). I sharpened my negotiation skills (when it comes to bluffing, my sonar system is unparalleled). I also learned when it’s time to walk away from the negotiation table. And I established a dense network of contacts amongst investors and local owners. Like in Monopoly, I know who-owns-what around town.
But I also lost a lot of sleep.
I lost sleep over intransigent Landlords whom I swear were taking decisions to make their Tenants sweat, as oppose to showing commercial acumen. After all, splitting a penny in half won’t give you two pennies. So after two years of sweating myself, I came to realize that Tenants are, as a general rule, alarmingly under represented.
Arguably most would tell me that their Lawyer reviewed their lease, made a few changes and voilà… the rest is history. Well here is what is wrong with this picture. And for those of you who are not working with a commercial Realtor nor a Lawyer, make yourself a cup of joe and read on.
Is your family doctor your dentist too?
Everyone has a speciality. That goes for Realtors. And Lawyers too.
I once was involved in a transaction where the Tenant was represented by their residential Realtor. The mistake: they did not counter-offer on the Landlord’s sign-back. They accepted every single thing the Landlord asked for. Cost of the mistake: >$10K. The Landlord would have removed the dirty carpet and paint the premises at his cost, and give them a couple months of free rent. The Landlord was laughing, but I was not. I felt terrible for this start-up business.
Avoid this mistake by mandating a commercial agent to represent you if you are Tenant / Business Owner / start-up Entrepreneur. Leave your home to the residential experts.
Same advice goes for your solicitor. One who specializes in family law, or wills and estates, is unlikely to be well versed in commercial leasing.
Did you know? We have a couple of top gun commercial real estate Lawyers in town. Call me if you need one.
Your Landlord is not your friend
This one is hard to swallow, I know.
While my calling card is collaborative relationships between Tenants and Landlords, I often time have to use my best kindergarten teacher’s voice and remind my clients that this is a business transaction.
Once the lease is signed, you have five years (if such is your term) to become friend with your Landlord. Buttering up the deal to your advantage by becoming friend with the Landlord or even worse, not working with a commercial Realtor (thinking you will get a better deal if you work directly with him) is a Titanic move. And you’ll be the Captain on that sinking ship.
Too often I hear stories of Tenants who now have to change an HVAC system or upgrade to a universal washroom or foot the bill of a graffiti-free front façade. These Tenants, now facing thousand of unforcasted dollars, were not represented and therefore not protected for all the “what-ifs”.
Did you know? Proper representation will put in place safety nets along the way.
I found the perfect space for my business – I don’t need a Realtor
For every listed unit, there is on average another two that are not. These are privately listed, or soon-to-become available, or simply not listed at all (read my other column here “What is wrong with this space?”).
In many instances, Tenants are referred to me because they have been looking for a space for months (on their own)… only to have a Lease in place within a few short weeks of being introduced.
Based on your wish list, I will challenge you to view other locations. Why? Because you can only choose which space is best for your business based on the scientific methodology of comparison.
There is a whole inventory out there to be discovered.
Did you know? Finding the right spot is only half of the battle. Negotiating terms that are not just Landlord-sided, and putting in place protections, are crucial to the long-term success of your business.
Best kept secret
A commercial Realtor will inevitably help you evaluate a location based on many variables such as consumer traffic, access and convenience, cost to operate in that specific area, type of lease (gross to triple-net). One you settle on the location, the other half of the battle is in structuring a deal to positively impact your bottom line.
Oh and speaking of bottom line…
Did you know? The commission fee in a commercial real estate transaction is paid by the Landlord (99.9% of the time). Yup! That’s right! Working with a Realtor doesn’t cost you a thing!