StartUp PHX Challenge

5 myths about renewing your office lease

When renewing your office lease, there are some common myths floating around out there. Don’t fall for them.

1. MYTH: We have a great relationship with our landlord or landlord’s broker

FACT: The landlord’s objective is to maximize profits and shift economic and non-economic risk to the tenant. The landlord’s advisor has a fiduciary obligation to achieve the best deal for the landlord and does not represent the tenant’s best interests.

2. MYTH: Engaging a broker for a lease renewal will cost the tenant money by diminishing real estate savings

FACT: Brokerage fees are not additive to your real estate expense. They are already embedded and don’t disappear or reduce absent the engagement of a representing broker. The landlord’s broker receives a larger fee if the renewing tenant does not engage an advisor.

3. MYTH: We have no interest in relocating, we plan on simply renewing and do not need an advisor

FACT: An advisor’s sole objective is to drive the most aggressive economic and non-economic leasehold regardless of a renewal or relocation. Without an advisor, the landlord achieves the upper hand in negotiations.

4. MYTH: We are getting a good deal; the landlord reduced our rent and we are saving money

FACT: A good deal can only be benchmarked against relocation alternatives that have been brought to full economic and non-economic maturity pursuant to a methodical process of orchestrating competition for the tenant. Landlords do not give their best deals. Strategy and leverage define market reality (market maker vs. market taker approach).

5. MYTH: We already have a lease in place and have more than a year left in lease term

FACT: Tenants can strengthen their leasehold covenants to secure greater flexibility, costs containment and expense mitigation by leveraging the landlord. The existence of credible leverage delivers the opportunity to improve the tenant’s leasehold position to achieve unobvious savings and enhanced risk mitigation.

POSTED: . TAGS: , ,
AZRE

About AZRE

Pulling together the multiple facets of the commercial real estate industry in Arizona, AZRE: Arizona Commercial Real Estate Magazine reaches out to the largest local and national commercial real estate audience within the Grand Canyon State and beyond. AZRE covers up-to-date happenings within commercial development, brokerage, construction, investment, finance, architecture, property management, real estate law and more as it relates to Arizona. Additionally, AZRE is an active voice within the commercial industry, partnering with such organizations as NAIOP, ABA, ICSC AZ, AIA AZ and Valley Partnership.