Don't Just Lease the Space, Sell the Tenancy

Negotiating a great office leasing outcome requires engagement with multiple prospective landlords over multiple rounds of negotiation.? It’s not just about?having?options; it’s about using them to create leverage.

The first step in a good process is to identify the right options.? Sometimes, this is counter intuitive in that it calls for the inclusion of buildings a tenant would not otherwise consider, options which impart specific strategic value.? It’s these building options, the ones a tenant may prefer not to occupy, which may have the greatest impact on value creation.

For tenants, it’s important to realize leasing office space is more about selling the occupancy than leasing the space.? The role of a good tenant broker is to orchestrate the occupancy selling process, to compel landlords to compete for the tenancy by offering incrementally better terms.? A good tenant broker is like a good auctioneer, able to drive others to offer increasingly more value.

Options are also useful for a host of other reasons.? For example, unless and until a binding document is fully executed by landlord and tenant, the subject space may be leased to a 3rd?party.? Or, through the due diligence process, tenants may discover unfixable flaws, causing a building to drop from consideration.? When tenants focus exclusively on one option, they fail to harness leverage, and expose?themselves to the possibility of losing a space late in their negotiating window which can have negative cost implications.?

Don’t lease space.? Identify the right options, sell your occupancy, and choose the best bid.

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Ask TenantSee

Every week we receive questions about real estate; this week we chose the following. If you have a question you'd like us to answer, please send it to [email protected] . ?

We did minor construction on our space before we moved in (some new offices, moved a few walls, and cosmetic stuff).? We’ve been in the space for 2 years now and we can’t seem to ever get the temperature right.? Do some buildings have more temperature issues than others??

Sorry to hear you’re experiencing that – especially with all the heat lately!? The short answer to your question is: Yes, the ability to control the temperature within your space can vary by building based on the age and type of mechanical system.? Of course, some San Francisco buildings have no A/C at all and rely exclusively on operable windows.? I suspect the issue you’re experiencing relates to the changes you made to your space prior to moving in, which (likely) did not include a review of the existing mechanical system.? When offices are added and walls are moved, it changes the way air flows within the space, in addition to changing the areas in which higher levels of BTUs are being generated (e.g., conference rooms, etc.).? The distribution of the mechanical system is typically done to meet a specific use case and layout.? However, it’s (unfortunately) common for tenants to negotiate a lease without assessing what’s going on above the ceiling.? The landlord is likely disinclined to raise the issue as it would result in added deal costs (something landlords really want to avoid in this market).? The tenant’s solution to this is to always include a review of the mechanical system prior to signing a lease (or even before agreeing to terms).?