We all are aware that it is currently a “buyer’s market” in commercial real estate, and I spend time everyday trying to educate Tenants and Landlords on how their expectations compare to reality. Oftentimes I am explaining to Tenants why the rental rate is higher than expected.

A standard misconception in today’s economy is that rental rates have reduced as quickly as financial stocks over the last 12 months. To the contrary, in many cases rents have stayed fairly consistent over the last year. There are basic fundamentals of supply and demand that all Tenants understand, and this often leads to uneducated expectations for rental rates.

There was a recent post to this blog by Sean Link that sufficiently explained the issues with comparing rents of two buildings without appreciating the true occupancy costs associated with the two leases.

The Office Tenant Representatives at NAI Southern Real Estate have the expertise and experience necessary to structure the economics of a lease so that they are acceptable to Landlords and accomplish the goals of Tenants. In other words, we negotiate the “negotiable” terms of the lease while allowing the Landlord to stand firm on the economics of the lease that have the most sensitivity, mostly rental rate. It is important to understand that for every dollar the rental rate is reduced in a given year, the Landlord is giving up $10 in an eventual sale. For this reason most institutional owners try to keep rental rates as high as possible.

At NAI Southern Real Estate we have software that helps Tenants appreciate true occupancy costs over the term, and it is with this knowledge that we help our clients understand the impact additional Landlord concessions on the front end have on the overall occupancy costs over the term of the lease.

I oftentimes tell my clients to let the Landlord have the rental rate they need and reduce overall occupancy costs so that everyone feels good about signing the lease.

So your Landlord lives in Charlotte and doesn’t plan on selling………. Looks like we need to change the strategy.

Contact Vince Sumner by Email or call 704-375-1000