Top 8 Tenant Mistakes in Commercial Real Estate

In my role advising tenants, I am often asked “what are the common pitfalls that they should try and avoid.” In CRE as an agent our primary goal is to work on behalf of our clients and assist them with their real estate needs. I have experienced many questions when working with tenants and I wanted to provide you with my top 8 mistakes I see tenants make.

1. Running out of time

Beginning negotiations for a renewal or a relocation too late – This is the biggest mistake I have witnessed. To make a long story short: I was recently looking for a 2k sqft office space for one of my clients and noticed my brokerage office space was listed and available. I immediately called my broker and said “Hey, when are we moving the office I see that its listed? He immediately was confused by my question and had a very panicked response WHATTTT?” We ended up renewing our lease with for one year at an increased rate…… If you start speaking with your landlord about renewing your lease a couple of months before the lease expires, he knows you do not have time to move out. Always give yourself our your client plenty of time to negotiate a new deal.

2. Not aligning business goals & real estate strategy

Ultimately the space you lease is there to allow you to focus on your core business competency, if that’s sales, R&D etc… Before making a real estate decision about whether to renew or relocate it is crucial, therefore, to understand the business goals. Be sure to speak to the end users that occupy the space and ask them what their goals are. If they need to increase sales it might be beneficial to relocate your office closer to the target customer? If they are concerned about recruitment maybe it’s time to spend some money and redesign the office to attract new employees or move the office closer to public transportation. Its really important for businesses to have road map to either assist their current situation or help a CRE agent find a desired location.

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3. Only considering the immediate financial impact

It’s important to understand the cost of a particular option, but the cheapest does not always mean the best for you or your business. Savings from being in a cheaper building can quickly eliminated if your sales or operations are impacted by being in that location. For you agents out there it might be important to share demographic statistics and potential development projects with your clients.

4. How many decision makers:

A real estate decision of whether you should stay or go will impact all staff. Clearly it makes sense to get opinions on what is important to the various business lines and stakeholders that will occupy the office. However, once the key selection criteria has been determined; it is important to identify a project leader. This person will make the final decision as to if you are staying put or moving locations.

5. Not considering future growth needs

Be sure to factor in future headcount growth and potential changes to the business needs during the lease term. By obtaining flexible terms which will allow the company to expand, downsize, or relocate as circumstances dictate, businesses can avoid unnecessary headaches and additional costs.

6. Not clearly understanding space metrics

It’s important to understand the difference between lettable, net, gross and “carpet” area. Many markets and landlords quote area on a different basis. Our office leasing guide has details of what exactly is included in each measurement so you can compare on an apples to apples basis. Sometimes tenants will pay for additional space without realizing that maybe half of their space isn’t usable sqft.

7. Relying only on the landlord’s word

Too many times we see negotiations carry on in good faith with certain issues being agreed to verbally. Either through an oversight, lack of time or purely because it is assumed the landlord’s word is good, items are not incorporated into the lease. Even if the landlord’s word is good, people move on from one company to the next and memories fade. Ultimately, if it matters to you, get it in writing.

8. Accepting that clauses are non-negotiable because they’re “standard”

This is what landlords might tell you, however, there’s really no such thing as a standard lease. Leases are negotiable, clause by clause, just make sure that you negotiate what you want before anything is binding or before you run out of time and have no leverage.

Many of these mistakes are learned after it is too late so it’s always really important to engage with a commercial broker sooner rather than later. I hope this provides value and helps you be aware and pay close attention to the real estate of your business. It could be the most important part of your business.

Blake Haggett

Boise and the surrounding metro is the fastest growing area in the US.

I’m Blake Haggett – I help business owners find the right space in the Treasure Valley.

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