Leasing. It’s Complicated.
Written By Mark Hulsey, Managing Broker
Landlord and Tenant Representation is a core practice at RE/MAX Results Commercial Group for retail, office, and industrial property leasing. Unless a commercial broker is working everyday in the Twin Cities leasing market, it’s hard to know what you just don’t know.
While there are commercial real estate (CRE) industry standards & protocol for leasing within each product category (office vs. industrial vs. retail), every leasing assignment is unique. Every Landlord and Tenant are unique in their approach, objective, or financial position. Unrealistic expectations, negotiating styles, financial contributions, personal guarantees, timing, or site use, can all kill the deal. And, that’s just the tip of the iceberg.
How about the types of leases? Net-lease, modified net, gross, modified gross, or ground lease. What’s it cost? Base rate + CAM + Operating Expense + Tax? What’s included in operating expenses in the modified gross lease? And how did you come up with that CAM (Common Area Maintenance) number? You get the point.
It’s complicated. There can be very significant financial risk for both the Landlord and the Tenant in a lease transaction.
In lease negotiations, there are some customary, yet negotiable, expectations when it comes to Landlord or Tenant responsibilities, Tenant improvement allowances, rent escalations, HVAC, ADA compliance, or brokerage fees. Since there are no ‘standard commercial leases’ per se, every leasing contract is different and requires a real property attorney that understands commercial leasing to work through the final stages of the contracts.
When it comes to Tenant Representation, the most common lease term for brokers to represent a Tenant is a 5 year lease minimum. But, there are plenty of 3 year and 10 year lease deals done too. Options to renew, market lease rate resets, right of first refusal, parking rights, or lease with an option to purchase are a few of examples of additional elements that can enter into lease negotiations. CRE Landlords are usually very picky about who they want as a Tenant. Most seasoned Landlords have learned the hard lessons over the years and understand a vacancy can be much better than over-investing in a Tenant whose business will not survive. Tenants should be equally discerning with who they want to work with in a Landlord, location, or the type of space required to be successful.
Contact RE/MAX Results Commercial Group for Landlord and Tenant leasing assignments and referrals. We can quickly determine if a leasing assignment is a good fit, advise on feasibility, and market trends.