Now is the Time for a Closer Look at Your Real Estate Strategy
In our recent posts and blogs, we have been talking about the need to “Rethink” your office space in the Post-Covid environment. Your company may be in a position that needs a change with your real estate or office space strategy. Our team at Cresa specializes in taking a closer look at your real estate strategies and we can run a lease audit that will evaluate the cost of your space against the rapid rise of remote work culture. Please visit www.tenant-broker.com to start a conversation with me or to learn more about our lease audit services. In this blog, we will present information from an article written by Nick Markel, Vice President of our New York City office.
Many businesses are in the throes of re-evaluating their
real estate needs as they weigh the cost of their space against the rapid rise
of remote work culture. While many are opting to sublease, those that are
choosing to maintain offices are looking for ways to take pressure off their balance
sheets and ride out the downturn.
Strategies for the
Current Market
Fourth quarter market data and early first quarter 2021
activity show signs that tenants have increased leverage with options like
short-term leases and free rent. So now
is a critical time to review your lease (or leases) and ensure your real estate
portfolio is optimized to mitigate operating expense pass-through exposure.
A forensic lease audit offers tenants the
opportunity to identify errors and recover overcharges. Operating expense
exclusions, incorrect accounting methodology, calendar vs. fiscal year taxes
and incorrect sublandlord billings are examples of common errors that can have
impact on a tenant’s business. The
COVID-19 pandemic may also give tenants the opportunity to challenge common
area maintenance (CAM) charges or improper gross-up calculations based on
unoccupied offices.
For businesses with a multi-location real estate
portfolio, lease administration and strategic planning services can
help businesses visualize their full portfolio to ensure that critical dates
aren’t missed in strategic planning, monthly rent schedules are planned
properly and that landlords and occupiers are in compliance. These services not
only take the stress off of in-house teams, they can uncover hidden costs.
Navigating with an Unbiased Advocate
Occupiers who hire tenant-only advisors benefit from certain
strategic advantages in lease negotiations. Because these advisors are not bound
by any obligations to a landlord, they are positioned to negotiate more
aggressively. How? They keep your desired outcome completely confidential,
offer unbiased opinions on your situation and can leverage competitive offers
from multiple landlords. All of this gives the tenant maximum leverage in
negotiations, resulting in a real estate strategy that better supports your
business.
Occupier Negotiation Points
Occupiers around the world are asking: how should we modify
our real estate strategy for the months ahead? What is our plan for today and
how does it change as vacancy increases and landlords become more willing to
negotiate?
Our answer is: “that depends.” Whether you are renegotiating
an existing lease, looking for new space or considering subleasing space, time
is on your side. We recommend discussing these points of negotiation with your
attorney and local Cresa advisor.
Reduce Cost
Rental RateLeverage market conditions for a more favorable rent structure
Base Rent Escalation
Reduce the rate of escalation to lower your fixed costs
Rent Abatement
Delay rent to start, offsetting costs
Tenant Improvement Allowances
Reduce exposure by reducing capital expenses
Security Deposits
Use your cash to support your business
Base Year
Minimize expenses over the long term
Audit Rights
Landlord mistakes are unintentional, but inevitable
Repair & Maintenance
Keep the landlord accountable
Operating Expenses
Ensure you get what you pay for
Maximize Flexibility
Length of Lease
Is shorter really better?
Renewal Options
Renew all or part of your space with less notice
Termination Rights
Only you should decide how long your space works for you
Mitigate Risk
Holdover
Planning for the unexpected
Subleasing & Recapture
Rights Use your space your way
Landlord Default
Protect yourself from overleveraged landlords
Abandonment
Reserve the right to work where you want, when you want
Notice Provisions
Secure communication timeframes that meet your needs
Force Majeure Rent
protection from the unknown (e.g. pandemics)
If you have
significant questions about your current real estate strategy, it may be time
for a lease audit. Once we have done the
audit, we can create a strategy to look at your business operations and
current space and then craft up a plan to find something that is a great fit in
the area. With the current vacancies and
inventory, we will work with you to get the best deal. We represent tenants ONLY, so you can feel
comfortable that we are working for your business 100%. If we can help you by being your tenant
broker in the DC, Maryland, or Northern Virginia area, visit my website or call me at
301-841-6542. Make sure to follow all my
social efforts by clicking on the links below.
exclusively representing corporate tenants on all commercial real estate needs.
Commercial Tenant Broker
2 Bethesda Metro Center, Suite 900
Bethesda, MD 20814
301-842-6542
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