The Eight Mistakes Tenants Make When Leasing Office Space

Everyone makes mistakes – Hey, we all make mistakes – BUT – when it comes to leasing office space for your business, mistakes equal dollars – sometimes big dollars. Here are the eight most common mistakes tenants make when renting office space, as well as an insider’s take on how to avoid making them.

1. Lack of Planning:

Since companies relocate at most once every 3 years, many tenants aren’t clear on what exactly they need. If you’re out looking for ten thousand feet but you actually need eight thousand, you are in trouble.

Atlanta Office Search TIP: have an architect do a space program and figure out what size you need, or use our office space calculator to give you a good guestimate.

A good Broker can bring to light things you might not be thinking about, like floor load capacity – do you have a safe or a lot of equipment – then you need re-enforced floors.

Do you need extra electricity to your space? Have special server or telecom needs? Knowing these details up front will save you time, money and aggravation down the road.

2. Lack of tenant representation:

If you were in a lawsuit, you would not use the same attorney as the other party. There’s really nothing better than hiring a Tenant Rep Broker to be on your side. A broker understands the ins and outs of the market; they can negotiate for you, and best of all, can narrow down the buildings that would be best for your particular business. Their know-how and advice are indispensible, and they can prevent you from leasing a space that you’ll just end up leaving a few months down the road. an attorney that understands the monster that is commercial real estate.

3. Lack of document inspection:

Commercial leases are LONG and each building has their own lease (ranging from 10 pages to over 150). One of the most common mistakes tenants make is that they’re not careful enough with what they sign.

Landlords think long and hard about how to make as much money as legally possible on their buildings. The long lease they give you is not designed to be fair. It is explicitly constructed to make them money.

Atlanta Office Search TIP: Have the HVAC (air and heat) unit in your space inspected before you sign the lease. Landlords will routinely say in the lease that the unit is in good working order. But they often presume this to be true but don’t actually check. If you take possession and the HVAC unit needs to be replaced, it will cost you a big chunk of change. Sometimes you can add Language to the Lease to cap your exposure to replacement/repair costs.

4. Rent and security deposit:

Prior to signing a Lease or Lease Renewal, many people do not benchmark similar properties, and end up paying rent through their nose. It is impossible to get a ‘market deal’ without knowing what other properties in the market would offer you. You will learn the going market rents and concessions being offered. It is important to find out this market information before entering into negotiations with the owner. This is basic knowledge for tenant rep brokers. Hire one – they know what they’re doing. The security deposit must also be based on demand, supply and the regular market norms. However, if the owner of the office space seems to be in a tearing hurry to rent out his place, you can always negotiate with him and save yourself some money. Again, this is where a tenant representative comes in handy; he/she will do all of this dirty work for you!

5. Not Checking Lease Terms:

A tenant must read and understand the lease terms carefully.

Are you comfortable with all of the notice period? Let’s say the landlord has the right to relocate you to another floor or space in the building (common for smaller deals) – how much notice do they need to give you?

What if the lease says 30 days…can you really pack up and execute a move of both your physical stuff and your technology in 30 days? Probably not.

Do you have a sublet and assignment provision? Is it fair?

Are your operating expense pass throughs capped?

6. Underestimation of Negotiating Leverage:

Tenants have a tendency to think that the landlord is all-powerful, but that’s not the case. Ultimately, a landlord is in a service business, and his business is to keep his building full. If this means he has to negotiate with his tenants to fill his spaces, he will.

Atlanta Office Search Tip: The only way to get to a Landlord’s ‘bottom dollar’ is to increase the risk of losing your business. A good Tenant Rep Broker can create competition between Landlords, and ensure no concessions are left on the table!

7. Working With a Biased Broker:

Tenants sometimes feel that if they’re hiring a big real estate company, they’ll be better represented. FALSE

Most small brokerage companies are made up of top producers that have decided to open their own shop.

The big firms that represent both tenants and landlords will argue that they know all the angles.

While this is true, if a Brokerage company has a fiduciary duty to represent you and represent the building, there is conflicting interest. If you do not work with us, we strongly suggest you work with a small to medium boutique shop that truly looks after your pocketbook.

8. Too Little Time:

Tenants drastically underestimate how long it takes to either renew a lease or to move. Depending on how much space you have and how complex your technology is, it could easily take 6-12 months to negotiate your deal – double or triple that if you’re really big.

If you will be leasing office space in the near future, looking for office space deals, let us help!

To find available office space, click Find Office Space

Posted on June 5, 2015 in Blog

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