Almost everyone has been in a situation where they needed to either break or amend a property lease. In commercial real estate, there are four main reasons a company may have to sublet their space. The first two reasons are fairly obvious and usually have to do with company size and business trajectory; a company is outgrowing the space, or a company is not using the space.
The second two issues may not be as widely known, but that’s not to say they aren’t common. Should you be faced with either, use the below tactics and solutions to ensure an easy transition and fair break from your lease.
This is not an uncommon case in Chicago and other metropolitan areas. When this does happen, there are certain steps to take, to ensure a smooth transition. Any lease will be honored despite new ownership or change in the buildings purpose. If you’re ever threatened to get kicked out because the building has been taken over, you actually have the upper hand.
In the case of a building being converted into a hotel or residential space, keep in mind that the lease terms you signed are still valid, and many times hotels or residential owners will need to pay you a hefty premium to move. If you get offered a buyout from the new lease group, make sure you do your research about market rates, but more importantly, you should consult a broker. Brokers are essential because they have dealt with these issues before and they know about moving costs, cash buyouts, relocation fees, or subsidizing new work spaces.
One of the trickier aspects of buying or renting properties is the possibility of Eminent Domain. This is where the government essentially states they are taking over a certain area for a project, and giving you a set, non-negotiable buyout for your property (the terms are fair market value for your area). While this is a fairly rare occurrence, it can often times be unexpected and force a quick move to a new location.
While Eminent Domain does not have as many options for negotiation, the result will be fair. A great solution in this case, and for a quick (temporary) move are shared spaces. This is a particularly attractive alternative especially when you’re in a transition period. It allows you time to find a more reasonably priced relocation period, without being rushed out or continuing your current lease
The commercial real estate market, as with all industries, is constantly evolving and shaping itself to stay current with the advancement of new technology available for business owners to gather information. This newfound wealth of public knowledge can be helpful, however attempting to charter these waters alone can prove costly. For a variety of reasons, commercial real estate brokers still hold the keys to finding the right space at the right price for companies in the market for a new home.
Here are three essential areas where a broker will bring serious value to your company’s next real estate search.
Finding a Fair Deal
The most important aspect of real estate that both buyers and sellers can agree on, is finding a fair deal. Because “fair” is subjective based on whether you are buying or selling, the lessee or the lessor, a broker is used to find intermediate pricing to help both parties.
Brokers commonly use average rental market rates as a tool that shows average pricing per square foot based on neighborhoods, accessibility, building conditions and a variety of other factors. However, people are unaware that brokers go much more in-depth with their research. They also include tenant improvement allowances, securitization and rights to terminate, and free rent. In many cases, these factors make brokers more specialized than attorneys who may know the legal aspect of real estate terms, yet are unfamiliar with the fair business terms.
Off Market Opportunities
In both commercial and residential real estate, tools like Zillow, Craigslist and Loop.net have helped buyers see current activity. While this has been able to help with more transparency, on many occasions, not all opportunities are listed on these sites.
If you have an informed broker who is up-to-date on the market, they will be able to offer you off market opportunities. Active brokers should be in constant communication with leasing agents and owners to see any upcoming spaces that have yet to hit the market. Because so many cities are incredibly competitive in real estate, off market opportunities are able to increase your odds of finding a place by lowering the number of potential bidders.
Brokers bring a necessary closing speed to transactions. Due to the increasingly rapid pace with which today’ market is operating, quality spaces do not sit on the real estate market very long. There are certain relationships that must be formed in order for the finalized deal to be made between landlord and tenant.
Listing agents are that first point of contact in the cycle and experienced brokers will have an ingrained trust with these men and women. This serves to help you get the first rights to a space. The other major player in the process is the landlord. Having a broker by your side will ensure that he/she does not play games or try to sneak anything through a contract that can cause delays or headaches down the line. Because brokers know how to navigate smoothly through the entire transaction process, they will be far more efficient at doing so than a tenant who chooses to go it alone.
All businessmen and women know that a baseline of trust between parties is critical to the success of any negotiation. But within the course of business dealings, how do you build that trust? What active steps can you take to raise the chances of a positive outcome for both sides? Instead of simply hoping that your personality and that of the other party mesh well, go out of your way to make your next negotiation flow smoothly.
Here are a few key action items that, if handled well, can set a positive tone for a great business meeting.
Being guarded with a lot of information is a quick way to ruin a potential negotiation. Open up to the other party and inform them of what you are looking to get out of this resolution. This is not to say that you have to divulge any and all trade secrets to every new business partner. However, sharing your overall goals for the process will open up the lines of communication and make sure all other efforts are not fruitless.
The tone of the meeting is extremely important and also very malleable. Your body language and the pace that you set can be determining factors in how comfortable it feels on the other side of the table from you. Allowing emotions into a negotiation often carries a negative connotation. However, bringing positive attitude and connecting emotionally to your counterpart is essential to developing a strong bond of trust. Actively listen to what he/she is looking for and show an eagerness to bring both sides closer to a compromise.
Timing and Location
Seemingly minute details such as the time and location of a negotiation can actually add up to a success or disaster depending on how well they are handled. Try and find a time that both parties will not be interrupted by the endless distractions that professional (and personal) lives can attract. Ensure that both sides have blocked out this time, as these distractions can innately create a more stressful environment. Along with the right time, find the right place. To help establish trust, either defer the location choice to the person you are meeting with or choose somewhere that will be convenient and comfortable for everyone.