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5 Tenant Considerations Prior to Executing a Lease

navpoint  /   February 27, 2012

You are the real estate decision maker for your company.  At the end of the day your employees, colleagues and superiors rely on you to provide sound guidance on how your company spends a significant portion of its monthly budget on its real estate.  There are some fundamentals to ensuring that you are mitigating your risk and maximizing your economic opportunity on your next lease or renewal.  Here they are:

 

1.      Make sure you are getting a fair market deal.

Whether you are set to execute a new lease, renew an existing lease or expand or downsize in your current property you need to know if the economics you have discussed with the Landlord (or even agreed to) are fair and reasonable based on the current commercial real estate marketplace in your area.

1)  Lease rate; ensure that the rate and annual escalations you are about to obligate yourself to are in line with where the market is for comparable space in your geographic location.

2) Landlord Concessions;  Again make certain that you are receiving market amounts of abated rent and tenant improvement allowance (don’t think that just because you’re renewing your lease you don’t have the right to be represented and secondly don’t have a right to ask for some abated rent and new carpet or paint in your space)

 

2.      Know (because you ask) about the financial condition of the Landlord and the Property you are about to lease.

Most Landlords ask prospective tenants for multiple years of company financials to fully underwrite a tenant’s ability to perform on a lease.  This is certainly fair and allows a Landlord to make a sound decision when it comes time to spend money on TI’s and marketing commissions.    Given that the Tenant’s financial commitment in virtually all cases is more significant in terms of gross dollars committed than the Landlord’s the Tenant should ask the question “May I see your financials for this property Mr. Landlord? Please show me that you have $XXX to complete the tenant finish work you have committed to me. I would also like to get a letter from your lender acknowledging that your loan is performing



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