Leasing Office Space - Expenses

By Author: Patrick Oconnor
Total Articles: 42
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Leasing office space is time-consuming, complex and can divert attention from the primary functions of the business. Steps in the process of leasing office space include selecting a tenant rep broker, location, researching options, selecting the best options, negotiating the primary business terms, selecting an attorney and negotiating the details of the lease.

Tenant Rep Brokers

Begin your search for office space begin by selecting a tenant rep broker. You may initially wonder, "should I skip the broker, and save the fee?" The reality is the cost of office space will be about the same whether or not you use a tenant rep broker. The landlord's broker is paid 4% if he negotiates a leased directly (with the tenant) and 2% if an outside broker is involved. If a tenant rep broker is involved, he would typically be paid 4% of the gross total payments over the term of the lease. Unless you are quite knowledgeable regarding real estate leases, you are well advised to utilize a broker. (Our firm does not provide this service and in no way benefits if you use a broker.)

Specialized Issues and Terms

There are ...
... nuances in the process for which guidance and counsel is invaluable. These include what is and is not negotiable, and the reputations of the landlords and management companies. Even if you negotiate what is perceived to be an incredible deal, is it really a "good deal" if the landlord provides terrible maintenance and service? Is it a great deal if your space is not available until 4 months after the agreed upon date?

Right Tool for the Job

Tenant rep brokers are a great option for your office space search. Their fee is paid by the landlord in most markets. They are office space experts. Every day, they work on finding and negotiating agreements regarding office space. Even if you started the office space search within online search service, using an office tenant rep broker will probably generate the most cost-effective office space for your business. Brokers know which landlords are most negotiable and how to structure the transaction to obtain the lowest cost.

Get an Expert!

If you select a tenant rep broker to help find your office space, find an expert. Do not hire the person who helped you purchase your house. Office space tenant rep brokers are full-time experts. It is a very specialized area.

Identify Tenant Rep Brokers

Ask business acquaintances for office tenant rep broker referrals.

Use a search engine to identify perhaps five or 10 office tenant rep brokers in your area. Do your initial research by reviewing their website. Are they office space experts? Call and interview perhaps five to seven by phone.

Phone Interviews

In addition to basic information regarding their company, and references, you'll want to ask some of the following questions:

Do you typically represent tenants or building owners in lease negotiations?
What other commitments do you have at this point?
Do you have time to properly represent me?
What is your experience in leasing office space?
How many years experience in leasing office space?
How many transactions have you completed?
What is the total amount of office space?
I'm thinking about leasing space downtown. Have you recently done any transactions in that area?
What is your approach to negotiating? Is it to extract every possible concession? Is it to negotiate a commercially reasonable transaction in an expeditious period of time? (Which of these is more consistent with your approach?)
What are the market conditions and trends in the area I'm considering? Should I be considering a short-term lease or a long-term lease?
How are you compensated? If you're paid by the office building owner, what communications with your confidential and which ones will you be communicating to the office building owner? Are you my representative or the representative of the office building owner?

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