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How a Broker Successfully Negotiates the Commercial Real Estate Lease

This is my third article in a series where I give insight into the world of a California commercial real estate broker. A commercial real estate broker leases/buys/sells commercial real estate (CRE) for the client (tenant/buyer/seller). Commercial real estate is defined for this article as office, retail and industrial spaces.

As reminder from last time, there are four main things a good CRE broker does. They: find suitable locations, negotiate the offer, negotiate the lease itself (the many clauses) and are there when the client needs help thereafter. The first article I wrote was about finding locations; the second about negotiating the major deal points and this third one will discuss negotiating the lease.

Most brokers and even many attorneys don’t negotiate the lease properly.  Why?  For brokers, many of them simply don’t know what most of the clauses mean and/or simply don’t have the experience to negotiate them properly.  For attorneys, it usually has to do with them not specializing in lease contracts and, again, not having enough experience and knowledge to do it properly.   Both brokers and attorneys many times specialize in only one area, like office or retail or industrial leases, but not all of them so it’s best to get one that specializes in the lease you are negotiating.

The main problem with using a broker or attorney that isn’t experienced and knowledgeable enough at negotiating a lease is that it will usually cost the tenant money and/or problems later on.  There are many clauses in leases that can bankrupt a tenant even when their rent is low like only $1,000 per month. These include insurance clauses, indemnification clauses, operating expense share clauses, maintenance provisions and more.  Therefore, it’s not the size of the deal that matters, it’s what was agreed to in the lease that matters.  A tenant should tread carefully here. I recommend using both an experienced broker and a specific commercial real estate attorney for a lease. In cases like this, two sets of experienced eyes are better than one.  I have saved my clients a lot of money by doing the lease review first and then sending it to their attorney to review thereafter.

After negotiating over 1,000 leases, and over 100 leases per year for many years, I have the experience to really help a tenant in this area.  It’s not something most brokers can do.  Pick a broker that can help you  properly in this area and you will sleep much better at night. When searching, you will find that the list of brokers with this type of expertise is very narrow.  Landlords  usually have a good real estate attorney create their lease and the bigger ones have their attorneys negotiate the lease clauses. Because of this, you really need to even the odds and have someone that specializes in lease negotiating on your side.

Picking the right broker is the key to getting your best deal. You can never do as well, or even come close, if you try and negotiate the deal without a good broker.

Next time, in the final article in this series, we will discuss how a broker can help their client after a lease is signed for items like construction, moving, landlord disputes, terminating a lease early, etc.  Most brokers, unfortunately, cannot do much here as they simply lack the experience and/or knowledge to do so.

If you have questions about any of the above topics or have any CRE needs, please contact David Massie at david@djmcre.com or 805-217-0791.

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Successfully Negotiating the Commercial Real Estate Lease

This is my second article where I give insight into the world of a California commercial real estate broker. A commercial real estate broker leases/buys/sells commercial real estate (“CRE”) for you, the client (tenant/buyer/seller) of CRE space generally defined as office, retail and industrial.

As reminder from last time, there are four main things a good CRE broker does. They: find suitable locations, negotiate the offer, negotiate the lease itself (the many clauses), and are there when the client needs help thereafter with matters like construction, moving, future landlord disputes, terminating a lease early, etc.  The first article I wrote was about finding locations and this one will discuss negotiating the deal.

What makes a broker a good negotiator?  Knowledge and experience are the primary factors.  Most brokers simply don’t have successful negotiating experience and don’t know how to get the information they need to make the deal better for their clients.  They may have negotiated hundreds of deals, but if they didn’t do it correctly then they never learned the art of successful negotiation.  Too many brokers simply want to make a quick commission and move on to the next deal. This is especially true of those that have a quota to meet because they work for a large brokerage. An example of a negotiation I have done will explain this best.

On one large lease deal of about 50,000 sf I was hired to co-represent a tenant along with another broker they had already hired.  They did this primarily because they didn’t have full confidence in the other broker.  After I was hired, I saved over one million dollars and made about 80 lease changes in my client’s favor that were accepted by the landlord.  Why was I able to do this when the other broker wasn’t (even though this broker has been in business a long time)?  Because I had negotiated against this landlord before and knew where his bottom line was for the economics and lease clauses.  I had also worked hard at gathering information from other sources about the landlord. I gathered information about other deals he had made for both the economics and lease clause changes he had given to other tenants.  Finally, I postured that my client might relocate to another project if the landlord wasn’t fair. I went so far as to actually show my client other buildings to lease and/or even buy. This really worked to put some fear into the landlord and cause him to make my client a very good deal.

The size of the deal doesn’t matter and it works for both large and small deals.  Picking the right broker is the key to getting your best deal. You can never do as good, or even come close, if you try and negotiate the deal without a good broker.

Next time we will discuss successfully negotiating the clauses of the lease and what goes into that.  Most brokers and even attorneys don’t usually do this right; find out why.

If you have questions about any of the above topics or have any CRE needs please contact David Massie at david@djmcre.com or 805-217-0791.

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Why Use a Commercial Real Estate Broker (and what they actually do for you…)

In this series, I will be giving insight into the world of a California commercial real estate broker that leases, buys or sells commercial real estate (CRE) for you, the client. The client is the tenant, buyer or seller of CRE space generally defined as office, retail and industrial.

There are four main things a good CRE broker does: They find suitable locations, negotiate the offer, negotiate the lease clauses, and are there when the client needs help thereafter with matters like construction, moving, future landlord disputes, terminating a lease early, etc.

The first thing a CRE broker does that might seem obvious and easy is finding you locations that fit your criteria.  We normally go on a proprietary website like CoStar that the client doesn’t have access to (a subscription to Costar is expensive and you have to learn how to use the software) and run a search for what you are looking for.  This isn’t as easy as it sounds.  If a broker doesn’t know how to use the software correctly and set up the searches correctly (including keeping a search active so that if a new listing appears that fits your criteria the broker is alerted right away), you won’t find all the possible locations.  Also, consider that many listing brokers for landlords/sellers don’t input the information correctly into the software or even keep the information updated. This makes it difficult to then find applicable properties for a client correctly.  It takes quite a bit of time to do a search correctly.

Seems easy enough; why can’t a client simply find a website like CoStar and do this search themselves?  After all, there are CRE oriented websites like Loopnet or City Feet or Office.com and others that state they have the CRE listings available at no cost, right?  The main problem with these sites is that they don’t have anywhere near all of the listings that CoStar does.  Loopnet, for example, is now owned by CoStar and Loopnet makes brokers and landlords pay to have their properties listed on this site so this site doesn’t list the properties available for those that aren’t willing to pay to do so.  Also, for whatever reason, sites other than CoStar simply aren’t used by CRE brokers because CoStar pretty much has a monopoly on most all listings and other kinds of data like comps.  So, if the client wants to do it themselves they won’t be able to find all of the available properties but only a small fraction thereof.

Then there are the off market non listed properties that you can’t find even on CoStar or other websites.  A good broker has connections to landlords/sellers and other brokers that don’t use listing services or that simply haven’t listed the location yet.  Staying in touch with the aforementioned people pays high dividends to my clients, but again it takes quite a bit of time and good record keeping to do so.

A good broker truly does use their expertise, experience and connections to get you the very best outcome. Next time, our topic will focus on successfully negotiating the deal and what goes into that.  Negotiating correctly is an art unto itself.

If you have questions about any of the above topics or have any CRE needs please contact David Massie at david@djmcre.com or 805-217-0791.

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West Coast Real Estate, Will it Continue to Boom or Will it Bust?

History would say that West Coast commercial real estate market success should be ending very soon. Kevin Shannon, co-head of U.S. Capital Markets for Newmark Knight Frank, has a different opinion:

If there is a downturn, Shannon does not expect it to be as “dramatic” as it was a decade ago. “When the game ends, it will be a short spring training, and we’ll be back playing ball again,” Shannon added. […] “If you look at the engines of real estate on the West Coast: If you build it, they will come,” he said. As long as things continue to go well, Shannon said he thinks next June would mark the longest recovery in history. […] The West Coast commercial real estate market is faring well, and the good news does not appear to be ending very soon, according to some of Los Angeles’ top commercial real estate experts.

I wholeheartedly disagree with the view posed here. This broker from CBRE thinks that the buying and selling market for commercial real estate (CRE) is in the 7th inning, but I think it’s in the 12th inning.  If you want to learn more about buying or selling CRE at the right time and why brokers like this think it’s always a good time to buy or sell CRE (why not, they make a commission whether you the buyer or seller lose money or not) contact David Massie at david@djmcre.com for more details.  I have successfully bought and sold properties ranging in size from about 1,000 sf to millions of square feet and ranging in price from about $100,000 to $100 million.

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Negotiating Your Lease: Why You Need a Good Broker

We read an article recently on what tenants should not be missing in their leases. This brought us back to one of our previous blogs, “Commercial Leasing: Hidden Tenant Costs That Tenants Shouldn’t Pay” that stresses the importance of having a good broker who understands these items and can negotiate them on the tenant’s behalf. This new article, from Retail Real Estate Law, talks about why landlords should be “elephants” in the lease drafting process.

The article is encouraging landlords to save money and headaches by creating versions of the lease provisions in a more favorable way by facing reality and starting with a complete lease form. It’s another example though of why tenants have to be careful of what they could be missing in their leases. It’s also another example of the importance of having a good broker to negotiate these lease terms for you.

From our previous blog on the topic:

“When leasing commercial real estate space of any type, there are many ways for landlords to hide extra costs from tenants that tenants are usually not aware of. […] If tenants aren’t careful to use a broker that understands the operating expense share, this cost to the tenant can be quite large during the lease term.  Many times this costs starts out low and then later on in the lease gets quite high.  It is best, in my opinion, to negotiate an overall annual cap and also have a list of expense exclusions that aren’t reasonable for a landlord to include as part of the tenant’s share. […]Measuring the building is another area where landlords can pad the numbers that will result in a higher rent to the tenant without a tenant even knowing it’s happening and this happens most commonly in office buildings.”

Retail Real Estate Law’s article adds to these thoughts:

“We suggest the following. These items are going to be added to any decent, important lease. Why not pay once to have them included in the lease instead of paying, each and every time a lease is negotiated? And, deny it as people may, the person whose lease form is used controls the outcome. When a provision is not in the form lease and everyone knows that it will wind up there before execution, why should the landlord (who invested) in a lease form in the first place, cede control over the “missing” provisions to the tenant. After all, if the lease is missing something that’s going to be in there at the end of the day, the tenant will supply the initial draft and thereby control the negotiation.”

If you want to learn more about your specific situation and why a good broker will be the difference for you, contact David Massie at DJM Commercial at 805-217-0791 or david@djmcre.com – we can help! For more details from Retail Real Estate law, read the full article here.

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Should You be Buying or Leasing Office Space?

We read an article recently on whether to buy or lease office space. This brought us back to one of our previous blogs, “Is it Better to Buy or Lease Commercial Real Estate?” This new article, from BisNow, highlights the factors and considerations a person should make before deciding whether leasing office space or buying office space for their company is the better option.

From our previous blog on the topic:

“Clients ask me this question quite a bit.  The answer depends on many factors and it is different for each client depending upon the current market parameters and their unique circumstances.

Right now, the California commercial real estate market for retail, office and industrial properties for sale and for lease in which I specialize in is pretty hot and has been for many years.  Prices for both sales and leasing have exceeded all-time highs historically in most California cities especially in Southern California where most of my transactions take place.  So, when prices are high it means that it’s not a good time to buy or lease, right?  Not necessarily.  And what if you have a business and have to do one or the other, which one do you choose?”

BisNow’s article agrees with the consideration of the state that you’re living in:

“One factor companies should consider is the state of the office market. Conditions like vacancies and interest rates can impact the decision to buy or rent. The company’s level of flexibility in terms of timing can also be important. For example, a company that needs to move immediately would have different considerations and more pressure than a company that has time to weigh these options.  Many businesses also work alongside a real estate representative who understands the company’s needs and can help make the right call. This representative works to find a location that fits the company’s needs and negotiates a reasonable deal.”

If you want to learn more about your specific situation and whether you should be leasing or buying a space, contact David Massie at DJM Commercial at 805-217-0791 or david@djmcre.com – we can help! For more details from BisNow, read the full article here.

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Landlord Rents are Falling: National Office Vacancy Climbs 

We recently read an article in Connect Commercial Real Estate highlighting how national office vacancy continues to climb. Rent growth, on the other hand, has headed into an incline in the last two quarters. This means that there is potential for tenants to lease office space for less than before.

From Connect Commercial Real Estate:

“The national office vacancy rate climbed 0.1% to 16.6% in the second quarter, according to research by Reis. Vacancy increased in 39 of 79 metros in the quarter, with just two metros posting a decline in effective rent, as the gap between the “better” office markets and lagging ones widens and gets more pronounced. […] Rent growth, in contrast, was healthier in the last two quarters than in the previous seven, as a number of metros had rent growth of 1% or more in the quarter and 4% for the year. The stronger metros helped buoy the national average more so than in previous quarters.”

This article is a great example of how a landlord rents are falling. If you want to learn how to lease space for less as a tenant, contact David Massie at DJM Commercial at 805-217-0791 or david@djmcre.com – we can help! For more details, read the full article here.

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How Retail Tenants are Saving on Rent Right Now

We recently read an article in Bis Now highlighting how small retailers are finding their opening while old giants shrink. The general premise is that retail landlords are willing, more and more, to take on smaller retailers by dividing up their spaces and leasing them out where they can instead of holding off for the big fish that probably isn’t coming.

From Bis Now:

“As the country’s largest retailers struggle to adapt to 21st century consumer demands, retail landlords are increasingly willing to slice up their space, take on riskier tenant options and offer flexible lease terms — and smaller retailers are reaping the benefits. […] The market has been marred with a number of big-name store closures in the city. But brokers said the conditions are paving the way for smaller retailers to get their foot in the door, as increasingly desperate landlords stop holding out for the national operators with established track records.”

This article is a great example of how a retail tenant can save on rent right now. Even better news? We can help. Contact David Massie at 805-217-0791 or david@djmcre.com if you are a retail tenant and you want to find a great deal on a retail space like mentioned in the article. For more details, read the full article here.

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Westlake Village Medical, Dental or Office Space for Lease in Prime Location

We have a fantastic property for lease currently. This existing dental office is in a prime Westlake Village location and the price was just reduced from $1.95/SF/month to $1.50/SF/month. This space is not limited to dental office use though. The office can be used for dental, medical or even office uses.

This amazing location has the best of both worlds. It sits appealingly at end of a quiet cul de sac while also being walking distance to retail, the post office and many other amenities nearby.

There are several opportunities with this location as the landlord will allow new prospective tenants to sublease all or part of the space. The landlord is also giving the option to have the lease assigned or do a direct lease, your choice.

This really is the perfect opportunity to dive in on a prime Westlake Village location with a sublease or a direct lease with low rent for dental, medical or office space. Interested in learning more? Full property details can be found by clicking here.

Contact us today for more information! Call 805-217-0791 or email david@djmcre.com

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Agoura Hills City Mall Retail Spaces for Lease!

If you have a retail business, including a restaurant, and would like to join existing successful tenants with a great location, this is a great opportunity for you! The Agoura Hills City Mall currently has openings for new retail spaces. Most recently, there is new restaurant space available at what is now a current Pizza Hut and a new location for a smoothie / yogurt / coffee or dessert location available!

A few of the already established and thriving businesses in this shopping center include: Agoura’s Famous Deli, Vincitori, Sushi Wasabi, Maral Cuisine, Citibank, Kanan Pharmacy, California Dance Theatre, I Love Kickboxing, Journey Martial Arts, Agoura Mexican Café and more!

The landlord has agreed to give a reasonable amount of time for you to construct your retail space, without having to pay rent! This location comes with a new common area, improvements and renovations. Some of the spaces have outdoor patios. The space is great, but the location is truly what can’t be beat.

The Agoura Hills City Mall is adjacent to two major retail centers anchored by large grocery and drug stores. The location also includes great signage that is visible from Kanan Road. It’s located on Kanan Road near Thousand Oaks Boulevard. This is a main and busy intersection that’s less than one mile north of the Ventura Freeway (101) on Kanan Road for easy access! For those that don’t know, Kanan Road is the main road in Agoura Hills linking to the Ventura (101) Freeway. The shopping mall is centered in an area with great demographics; there are over 100,000 people in a 5 mile radius. Click here for more property listing details and additional photos.

Contact us today for more information about introducing your business to this busy retail center with great traffic from local residents as well as the nearby schools! 805-217-0791 or david@djmcre.com