Common Mistakes Commercial Tenants Make
deBanked recently heard a live presentation given by Dale Willerton, “The Lease Coach.” Willerton is an expert in helping commercial retail tenants to find and negationate spaces. But much of his advice applies to commercial office tenants as well. Below are some common mistakes he urges tenants to avoid:
Not Looking at Multiple Spaces Simultaneously
You want the landlords pursuing you, not the other way around. Therefore, Willerton said that you want to see multiple spaces at once so that you have options and bargaining power. Particularly if you don’t have much time, you don’t want to be at the mercy of one landlord.
Making the First Offer
Let the landlord make the first offer, Willerton says. If you like a space, tell the broker or the landlord, “Why don’t you send me a proposal.” Otherwise, if you make the first offer, you could end up offering more than what the landlord was willing to accept.
Overpaying for Space
Commercial rent is often based on square footage. So if the space you’re looking at has an unusual configuration, or even if it doesn’t, measure it independently to make sure that you’re paying the correct amount. Even if you are already in the space, if you measure the space and see that you actually have less space than what you’re paying for, you can ask for money back from the landlord. Or at least a rent reduction moving forward.
Telegraphing Your Feelings/Intentions
Don’t let a landlord know that you really like their space or that you really want to renew a lease. It gives them leverage. They now know that you really want what they have and that gives them more negotiating power.
Not Walking Away from a Bad Deal
Like deals that include certain personal guarantees. Some tenants require a personal guarantee and others only ask for it. Find out which and avoid personal guarantees when possible.
Looking Too Successful
If the landlord sees that you’re now driving a Porsche to work, or that your 17-year-old daughter has her own Mercedes, he or she may assume that your business is doing very well and may increase your rent when it comes time for a lease renewal. You may, in fact, be doing well. Or you may just appear to be doing well and then get hurt by a rent increase. This doesn’t mean you shouldn’t drive a Porsche if you can afford it – just to fool your landlord. It’s just something to be aware of.
Not Doing Your Homework
Just as you would do your research on a merchant before funding them, research the building and the landlord. Try to find out how long previous tenants have stayed in the building. Why did the previous tenant leave? Are they expanding, or did they have a bad experience with the building or the landlord? Is the building up for sale? If a building changes ownership, that can impact tenants down the road.
Also, Be Mindful of Commercial Agents’ Motives
Willerton said he doesn’t believe that commercial agents are bad or are working against the tenant at all. But he said that if the agent is getting paid on commission by the landlord, it’s important to be mindful that their ultimate “boss” is the landlord and not you.
Last modified: March 8, 2019
Todd Stone was a reporter for deBanked.