FISCHBACH TENANT REPRESENTATION

Lawyers and landlords are working hard to make a lease agreement as complicated as the Internal Revenue tax code.

For example two landlords offer commercial space for an annual rate of $20 a square foot. Landlord X bills his new tenant for $1666 per month for rent.^? Landlord Z bills YOU $2000 per month.

All for the same 1000 sq. ft. at $20 per foot

How does Landlord Z get away with this?

Usable space

You think you need 1000 sq ft to effectively manage your business. You want to rent 1000 sq ft. This is usable space. Space that satisfies the needs of your business to operate and grow.

Rentable space

In addition, the landlord has other space that is not primary to your needs, but definitely necessary. This space might include corridors, bathrooms, lobbies, landscaped approaches. However, sometimes landlords take liberties. Some even bill for city sidewalk space. There are lots creative addon space concepts. You get the idea.

So the Landlord Z is billing you for rentable space, which in this case is 25% more than the tenant's usable space. And landlord Z is perfectly within his rights to do that.

You're thinking, "that's just not right." And it's not if you sign a lease containing addons that you are not aware of.

What to do?

The first task in clarifying the usable/rentable maze is to figure out exactly how much usable space you need, now and in the future. Then you have a benchmark base figure to work with when the landlord quotes you his rate and addons. And a way to compare them to the competition.

The best way to be sure about your space needs is to sit down with an expert and discuss in detail the day-to-day flow of your business. Fischbach Tenant Representation provides space evaluation services through Tang Studios, a Tampa Bay architectural firm. Most often this cost is born by the tenant representative^?'s commission, essentially free to the prospective tenant.

Knowing precisely what your space needs are provides a firm base to begin negotiations with the future landlord.

Large class^? A buildings tend to stay firm on their addon costs as spelled out in the rent. These landlords' negotiating concssions will probably be in the form of constructions allowances and free sign-up bonus rent and the like.

The addons will eventually appear in your rent bill. But believe me, it's a lot better if you've thoroughly veted the issue, know it's coming and have done everything you can to mitigate the consequences.

Using a tenant representative^? and office space rep like myself is a win/win. Well not exactly. In a typical game the tenant wins in at least four ways while the landlord wins in one.

Planning
Failure to quantify space needs is the most expensive mistake that tenants make. This is a very important point that a tenant rep can score for you.

What are the prospects for growth? What are storage and circulation^? needs? What sort of arrangement of personnel makes your business culture hum along most productively? Will there be lots of off-hours use of the space?

To implement this important task, I recently added Cornell-educated architect Tang Fang to our team. She is especially good with space utilization and as an integral and free part of our service; we now routinely program a client's current and future space requirements. Then, by planning in each property prospect, Tang and I can accurately verify and recommend which property works best.

Exclusive Representation
Unlike most so-called tenant reps, I provide you with exclusive representation. My firm does not work for landlords. My incentive is to show you situations that benefit you the most. I have no other commitment.

Commercial leasing expertise
When a landlord presents you with a 40+ page lease agreement, believe me, it was not written with your best interests at heart. I've experienced 100s of leases in my career and can come up with many advantageous changes that you and your lawyer should look at and act upon.

Save money
It's still a tenants' market and landlords are offering incentives, what I call "concessions baskets" to attract good tenants. Author Michael DiMasi in a recent article in the Tampa Bay Business Journal said: 

To fill empty space, many landlords are offering incentives that go beyond cutting the lease rate. Free rent^?, whether for one month or more, has become increasingly common.

Another example is a more generous allowance^? for tenant improvements. Landlords pay for improvements to get space ready for tenants up to a certain amount, say $10 per square foot. If the cost exceeds the allowance, the burden falls on the tenant to pay the difference.

By offering a bigger allowance, the landlord is shouldering more of the up-front cost.

I'm in the commercial leasing market day in and day out. I know what space is worth and so does your new landlord. I also know the size and shape of landlords' "concession baskets," those creative bundles of goodies like free-rent months and landlord property improvements that lower your occupancy cost^?. I know where to look and what to ask for. You will save money.

What about the landlord?
So you are wondering what's in it for the landlord? How does the landlord benefit from using a tenant representative? Surely he deserves something. After all, he's paying my tenant representative fee out of the leasing broker's commission.

Like any business person, landlords have a cost of business acquisition. Believe it or not, a tenant representative can lower those costs. How? by bringing the landlord pre-qualified prospects along with the experience to close the deal in the most efficient way.

Hence a typical game: Tenant 4, Landlord 1.

In a career in real estate that spans 30 plus years in New York, New Orleans and Tampa Bay, I have never known of a tenant filing an insurance claim against a policy mandated by a lease. That doesn't mean that there have not been any claims. It's just that I have never seen one.

What I have seen is tenants buying landlord-required coverage way beyond what is necessary or by being hooked into bundled deals.

As you know, Fischbach represents tenants to their landlords in lease negotiations. I understand what the lease says about insurance and what it requires and I know how to fulfill that requirement for the least amount of money.

My goal is to help tenants save money on rents. Why not help them save money on insurance costs as well?

Adding insurance as an offering in my tenant-services real estate firm seems pretty natural.

Office and commercial real estate is in gradual recovery after years of falling tenant occupancy. But the massive blocks of sublease^? and unanticipated available space leftover from our halcyon days remain a drag on the office space market. With little hope of leasing those massive spaces as is, landlords are forced to subdivide, and this is where I have negotiated many a client’s ideal custom-designed space at a bargain-basement rent.^?

To answer the question: "how much can I save?", I developed the little gadget you see to your left. For your part, just fill out the form. For my part I input rental rates based on leases that I'm seeing.

Of course it's a rough guide. But if you signed a lease more than a couple of years ago, it will tell a story about the leasing market that you are going to want to hear.

Let me know if you think there is anything I can do to improve the form.

Leases are confusing. Most business owners have to deal with a lease only every five years or so, which makes the confusion all the more aggravating. You've got plenty to do other than go to "Lease School."

On the other hand your landlord deals with leases every day and could teach at "Lease School." Not a fair fight. But no worries. As a tenant rep, I deal with leases every day too and can put you on a fair footing with any landlord regarding any issue.

I get a lot of questions about types and names of leases. These are basically just different ways in which you hand over your money to the landlord. There is no way around paying the landlord, but leases can often be structured to fit the tenant's needs and save money. It's worth looking at the options.

Gross Rent

Most Class^? A & B office buildings quote on a "Gross Rent" basis, sometimes called "Full Service". This is an all inclusive rent.^? Nothing left out of the rent check each month. For most business people this is a good arrangement. The landlord takes care of your janitorial services and your power and water. You pay him a single check and you're done. If something breaks, you call the landlord to come fix it.

This would be an ideal arrangement if it weren't for sales tax. Tenants must pay seven percent sales tax in Florida, not only on the rent, but also on the maintenance and utility costs that the landlord is simply passing through.

Yes. It's double taxation. The state collects when the janitorial service and utilities sell to the landlord. The state collects again when the landlord sells these services to you. Bummer.

Modified Gross

You can see where some tenants might do better. Suppose your brother-in-law has a cleaning service. He might offer you a contract that's cheaper than what the landlord is offering. In addition, you'd save money on sales tax.

In this case you'd be inclined to negotiate a gross lease^? with your landlord modified by your providing janitorial services and not him, a Modified Gross Lease.

Net Rent

Net Rent includes no services or utilities, but does include the landlord/owner paying property taxes, property maintenance (sometimes to a varying degree) and property insurance. The tenant is paying even less sales tax

NNN or Triple Net

Or "Absolute Rent"; everything... all building maintenance, capital improvements, insurance, property taxes, utilities and services are the tenant's responsibility just as if the tenant owned the property. In this case the tenant is paying sales tax only on the rent. Triple net leases are usually favored by large branded companies looking for long-term arrangements.

No Bad Guys

None of these lease concepts are bad, unless they are completely ill-suited to your business needs. They are just different and each has its place. So how to decide?

When my clients get close to deciding on a building or buildings to lease, I even-up all the interesting offers and considerations on a not-complicated spreadsheets. They can confidently compare. Bottom-line occupancy cost^? for each lease type will be clear and un-muddied by in-crowd jargon.

You're in and out of "Lease School" with straight "A's."