1/7 Know your leverage
Leverage means the exertion of force by means of a lever. So what I mean is what power do you as a potential tenant have in this office space market? Its a soft buyers market, any landlord should bend over backwards, offer a multitude of incentives for the honour and privilege of letting you into their building right?
The signs on office towers are plentiful, the real estate internet sites are bulging with new and old listings and the vacancy rates are inching upwards. The economy is still just bumping along, the world scene looks worse and there are still more pessimists than optimists out there so the outlook for building owners and their bankers is one of hard times now and for the foreseeable future. So why wouldn’t any landlord salivate at the prospect of your business?
Cutting to the chase your welcome will be in direct proportion to the benefit the addition of your lease income brings to the landlord and each have different criteria and motivations. So how do you determine that? Well quite simply the number of good options for office available to you is all the information you need. If after a reasonable search you have 0 or 20 options which are suitable for your ‘needs’ then you know how competitive a landlord needs to be and how much they might want your rental income. And for all your needs I mean the complete package; the quality of building, the standard of fittings on the floor, the total area is right, the rental budget, the lease terms and the right location with proximity to either or both your clients or transport hubs or parks for staff.
The reality is that for smaller tenants (and I mean 100m2 or smaller) there are sometimes no perfect matches to their requirements and for medium to larger tenants (above 300m2) then there can be a dozen or more.
It’s only natural to push for a good deal, it makes sound business sense and haggling is built into the DNA of many us but folks if you ask for a discounted rental, free fitout and any other inducements totalling the equivalent 2 years rent free on 3 year lease then you will lose credibility with your prospective landlord, your real estate agent will give up on you and you will have WASTED YOUR TIME.
So whats a good deal then? Well thats a “how long is a piece of string” question but at a full ‘market’ rent then the equivalent of 2 months rent free for each year of term certain (the length of lease before renewals) is very very good. And that includes the value of fitout and partitioning which is existing. But don’t let me put you off, be bold, you might be surprised what a good deal you can achieve in this market! Call me if you want some perspective on your leverage.