May 06, 2020

10 CRE Myths Corporate Tenants Should Know

By Don Catalano

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10 CRE Myths Corporate Tenants Should Know
A lot of the conventional wisdom surrounding commercial leasing is just plain wrong, making it important that you get the facts straight before you begin the process. Here is the truth about 10 of the biggest commercial real estate myths.

 

1. Tenant Representatives Are a Major Expense

Tenant rep fees are covered by the landlord, not the tenant, but some still argue that those costs get passed through back to tenants one way or another. The truth is that an experienced tenant representative often saves clients enough money to more than offset any minor increase in rent rate the landlord may assess.

 

2. Getting the Lowest Rent Possible Is Top Priority

Saving $2 a square foot may not be the bargain you imagined if the office doesn't fit your needs, the location is inconvenient or the landlord isn't reputable. Also, be sure to consider all of the occupancy costs of any particular space, as the office with the lowest rent may have higher Common Area Maintenance fees.

 

3. Businesses Can Find Offices on Their Own Through Online Searches

Often, the best offices in prime locations are snatched up before they can even be added to online listings. That's why having a tenant rep broker is still the best way to find available spaces.

 

4. Brokers Are on the Landlord's Side

A tenant representative broker is there to represent your interests. They act as your advocate throughout the search process. Learn how a tenant rep broker can help you!

 

5. Offices Are a Thing of the Past

While it's true that technology is allowing more employees to work from home, most companies still require a traditional office for some members of their team. In addition, in the era of COVID-19, more companies are shying away from co-working setups due to concerns about social distancing.

 

6. Owning a Building is Better

Owning your own building does give your company an asset that can increase in value over time, but that doesn't mean that buying is better for all businesses. Many businesses are better served by keeping their money free to use as operating capital rather than locking it up in real estate.

 

7. Triple Net Leases Are Most Expensive

Triple net leases do require tenants to pay all of the operating costs for a building; however, the base rent is often lower with these types of agreements. Efficient tenants can also save money with this type of lease structure.

 

8. Traditional Office Buildings Are the Only Option

When you're searching for office space, don't limit yourself only to traditional office buildings. Increasingly, shopping malls and other retail sites are being converted into office space. You may find the rent much lower in these setups.

 

9. Renting Is Always Cheaper

Although renting involves fewer upfront costs, renting can be more expensive over time. That's why it's important to carefully weigh your options when you're ready to open a first or new office or to relocate your business.

 

10. The Landlord Is Helpful and Therefore Trustworthy

Landlords are out to protect their own interests, not yours. Although many are honest and straightforward, you should still approach them with polite skepticism and consider the first lease agreement you are presented with a rough draft open for negotiation.

 

Other commercial real estate articles to check out:

Managing Rent Escalations

Making the Lease vs. Purchase Decision

Ways to Avoid Leasing the Wrong Building

 

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Topics: commercial real estate

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Don Catalano

Don Catalano

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