With the above title, you are probably thinking that there is some negotiating technique you are about to learn that will make the landlord drop his draws to the basement. What I am going to tell you is that making that "killer" deal could actually be a bad thing for you and your company. Here's why... Every building has operating expenses, real estate taxes and a mortgage to pay. Every deal has its costs, like tenant improvements, legal expenses, brokerage fees, architects fees, construction permit fees and construction management fees. So after the deal costs are paid out of the landlord's pocket, the rent has to cover the operating expenses, real estate taxes and mortgage and at a bare minimum show a modest profit for the fresh capital invested in the transaction cost. When leases are signed in multi-tenanted office buildings and there isn't sufficient rental income to cover the costs the landlord must then find a way to reduce his costs, especially if there is vacant space in the building, so that he can minimize his losses. This will be felt by each and every tenant in the building as services are cut back, supplies are cut back, capital expenditures are curtailed and eventually that "killer" deal will kill the building and you and your employees will feel like they are in a sinking ship.
What's the alternative...Make a Fair Deal. How do you know what's fair? That's where a truly professional broker can make a big difference. You need to ask your broker about the prospective buildings you are considering from a financial perspective. Who is the ownership? What type of owner is it? What other properties do they own? How much of a mortgage do they have on the property and when does it expire? What is the occupancy level of the prospective building and the other buildings in their portfolio? Ask about the real estate taxes and operating expenses and about the costs of making your deal. Once your broker has all this information he can predict a fair rental rate. Since your lease will typically run for five years, there are lots of creative ways of making a deal work for both parties. It's very important that your broker acquire the above knowledge so that he can adjust the terms of the transaction to best meet your needs and the needs of the landlord. That is the win-win approach that you should be striving for. If your business can't sustain the minimal difference that it generally makes to get to a fair deal in the building of your choice, perhaps you should consider another building. Also, consider this, if the landlord is so desperate that he will make a bad deal, what kind of businessman are you getting involved with for the next five years?
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