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Fair is a pretty relative term in commercial real estate leasing. It depends on which side of the transaction you are on, as to what your perception of fair might be.
In regard to commercial leasing, does fair apply to the landlord or tenant?
There are many nuances that go into an offer to lease negotiation. Expectations of the outcome can vary quite a bit depending on which side of the transaction you’re sitting on.
In an ideal universe, everyone leaves a lease negotiation feeling like they got a good deal.
Leasing reality check for tenants
Some tenancies are going to be more desirable than others. They are not all made alike.
Tenants with proven track records and an excellent financial covenant will generally find themselves sought-after by landlords. They can negotiate more incentives such as free rent or a tenant improvement allowance, because the landlord knows what he or she is getting.
In a scenario where the tenant is unproven and possibly brand new, the landlord could understandably be cautious.
Even the best-laid plans can go sideways, so the landlord will measure the risk of taking on a new venture over what he or she is willing to give away in concessions.
Buck stops with the landlord
Ultimately, the buck stops with the landlord. Whether a tenant succeeds or fails, it directly impacts the landlord’s investment.
It’s not unreasonable to suggest that a landlord may have to offer free rent or amortize tenant expenses into their lease rate for the bigger picture, in a pay-to-play business mentality.
Every day a space is sitting vacant it’s not only a loss of income for a landlord, but it’s a loss of expense recovery for commercial real estate investors.
Often showing a landlord the cold hard truth of what a space is ultimately costing them, over their lease rate expectations at the offer stage, can help them determine where their money is best spent.
Each side of a real estate transaction should be negotiated fairly, and although each side is vested in their own best interests. it does help to see the picture from both sides.
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