Common Real Estate Mistakes Made by Business Owners

10-Apr-2021

Making real estate decisions is not something that a typical business owner has to do on a regular basis. Ill-informed or ill-timed real estate decisions can cripple a business with excessive costs or lack of required flexibility. We’ve identified the three areas that offer the greatest opportunity for improvement.

• Relying on a broker with a conflict of interest, who represents both landlords and tenants.
  It is best practice for tenants to rely on commercial real estate brokers who primarily represent tenants. This practice ensures that brokers remain true to their fiduciary duty. You would not have one attorney representing both parties in a legal matter. When so much is at stake financially and legally, you shouldn’t have one broker representing both parties in an office lease transaction.
   
• Not developing legitimate alternatives to the first choice in a space search.
  The biggest mistake that tenants make is not developing legitimate alternatives to their first choice, whether they are interested in new space or a lease renewal. Brokers often hear, “I don’t want to move, and plan to renew my lease for another term.” Even if you don’t tell your landlord, he will often draw that conclusion from your actions. Once the landlord understands this, a tenant loses his negotiating leverage. Even tenants who have no reason to move must develop alternatives to their current situation. Otherwise they risk spending money needlessly because they have forfeited all leverage in negotiating the terms of their renewal.
   
• Not hiring a broker to help with a lease renewal.
  Tenants often say, “We don’t want to move and intend to renew our lease. Why would we need a broker?” Landlords hire professional leasing agents to negotiate the highest returns for the investment in their building. If the agent or landlord can sign a tenant at a higher rate, it improves the landlord’s bottom line. The key to a successful renewal negotiation is creating competition between your current landlord and surrounding landlords in the area, while maintaining a controlled and organized process. Tenants need to have an experienced advisor providing the proper market research and negotiating skill that will create leverage for them. Tenant representation brokers can save you significant amounts of time and money on lease renewals. The right broker will understand that you don’t want to damage your relationship with the landlord. He will deal with every landlord in an aggressive, yet fair and professional manner.

Contact Us – For any of your commercial real estate needs.

Steve Stoner
Managing Principal
SCGroup Real Estate
sstoner@scgroupre.com

Tel. 630-805-0497