Why Landlords Only Want Tenants to Focus on Lease Rate

Nov 12, 2016

The average lease contains 25,000 words, so why
do many tenants only focus on one?

Rate. Landlords focus tenants on the rate, and as a result, the rate is the most common term tenants and their business advisers focus on when discussing their leases with each other. Tenants need to go beyond landlord marketing tactics to understand the other 24,999 words in a lease that can cost them money.

We’ve discussed some of the important clauses that tenants need to have negotiated long before they ever get to an initial lease draft, so this article will discuss why landlords get away with conditioning some tenants into focusing on the rate. Landlords view real estate as a commodity; in other words, they own their buildings and want to lease them in ways that maximize their proformas. To do so, landlords try to convince tenants that they should treat real estate as a commodity as well. Landlords know that many tenants may opt for the path of least resistance, rather than professionally evaluating their real estate to maximize savings and mitigate risk; therefore, landlords quote rental rates without any explanation for how the facility is measured, what additional future costs may be applicable and what upfront buildout costs may be hidden.

The solution to landlords’ ostensibly simple but actually time-consuming strategy is to treat real estate as a process integral to your business. Here are a few basic steps to demonstrate to your landlord through your actions that you’re taking the process seriously:

Have your lease, facility & operating expenses professionally analyzed
Program future needs against your existing plan to understand efficiency
Study the landlord’s portfolio & debt to gauge potential renegotiation success
By treating your real estate as an integral business process, you will not only save money, improve your facility and mitigate your risk via the other 24,999 words in the lease, but also save time. Landlords, by design, make the leasing process seem simple initially then stall during negotiations knowing that time is on their side. By taking the process seriously, you will ultimately save time by forcing the landlord to take you seriously as well.

This post courtesy of Exis Global