Please Rotate Your Device
Here are the most common lies commercial landlords tell in order to secure tenancies and maximize revenue:
This is easily the grandfather of all landlord lies. While sometimes it can backfire if the prospective tenant does not want to enter a competitive bidding process, generally interest from a third party will improve the perceived value of the space.
We spoke with a retired commercial real estate agent from the second largest worldwide brokerage. "It used to be on about every other tour that we would mention we were expecting an offer" he said.
"People are a little more concerned today with what they say, but it is still very prevalent in the market. Less so with large landlords as those leasing reps are salaried people, but amongst small landlords and the listing agents they employ it is a common tactic to turn up the heat on a prospect's decision making. It is used because it was effective."
Landlords often re-measure space and it almost always increases. It does not make sense to spend thousands of dollars measuring space just to be fair about it. Landlords are not out seeking the truth ? they are seeking a revenue increase.
The problem with renewing your lease without a broker is that you end up receiving your market knowledge from your landlord.
While you may have a great relationship with your landlord, you still have completely opposing objectives in your renewal negotiation. The omission of key details about other renewing tenants could really cost you.
For example, your landlord could inform you that the last 3 renewals were done at $24, $25 and $26 net rent. But what if:
Tenant 1 achieved a $20 per square foot tenant allowance
Tenant 2 received 5 months of gross free rent
Tenant 3 was completely out of time and suitable alternatives
These are details that are typically not volunteered by your landlord.
When you are a prospective tenant a landlord plays nice and makes campaign promises.
Often is the case that "We can do that work within the rental rate" turns into "Well, the construction budget came in a little high."
Sometimes this is legitimate.
Other times it is a padded budget that is designed to make the landlord look good when he figures out how to make everything work.
Tenants tend to have a perception that having the landlord do the construction is a way to save money since the landlord knows the building better than anyone. However, to hand over the construction job to the landlord is only competing with himself - he is not the hungry contractor willing to bid aggressively for the project.
That is one reason why many tenants prefer to negotiate a tenant allowance and complete the leasehold improvements on their own.
Most leases come with the tenant burden of having to restore the premises to a base building shell at the end of the lease term. As most tenants who move a new location also move on with life, they rarely come back to see their old premises.
Untrustworthy landlords have been known to "double dip" - charge for the restoration of the space (typically $5-$10 per square foot), and then they lease the suite to the next tenant on an as-is basis.
It makes sense that if a landlord has to compensate a commercial real estate agent that represents you, the fee has to be incorporated into the rental rate. No broker, no fee, and a lower rent.
But it could be that the listing agent?s contract states that there is an increase in fees to him if no co-operating broker is involved.
What about the value your agent will add? If the landlord simply charged you more in rent for agent's fee, then should the landlord not then be neutral about this. He is not out anything - he gets a higher rent, which also provides a nice boost to the value of the property.
The real reason the landlord would prefer to not see an agent your side of the table is the rent will likely end up being lower and other terms and conditions of the lease will end up being more tenant-friendly as well.
While operating costs do tend to generally increase over time (if for no other reason than inflation), they are a murky category with many small items adding up to the final tally.
This makes it a little easy for landlords to stuff cost items that should not be rolling into this category.
For example, most tenants are responsible for paying for their own signage. Although this is not expensive item, it could also be a charge also being rolled into operating costs.
What if the landlord owns a few buildings and has one management office. Is the cost of that management office being divided amongst the buildings or is it being charged to each building (for instance, the cost of one management office that services 10 buildings should be charging 10% for each building)?
We reviewed a lease last week that stated that the landlord's management fee is 15% of operating costs or 4% of the gross revenue, whichever is greater.
In this case if they find a big tenant who is willing to pay an above market rental rate, that could actually increase the additional rent for the other tenants in the building. Either way that revenue model actually rewards the landlord for poorly managing the building and allowing operating costs to increase.
Still stuck? Consider an online commercial lease review.