This week we have the pleasure of sharing another Q&A for our Broker Banter series, featuring Denver Broker Jason Bollhoefner. Similar to our previous conversation with Portland broker Kristi Ricker, we connected with Jason to get more insight into some key things that tenants should know before touring potential sites, selecting a space, and negotiating a lease.
OfficeSpace: What are some things that tenants typically overlook when looking for new space that they should be paying attention to?
Jason: Commercial leasing is a complex process, fraught with significant potential risks and liabilities, and should only be handled by a representative that has both the necessary experience and your best interests in place. I have found tenants tend to overlook the importance of their creditworthiness and the time required to bring a commercial lease transaction to close. Leasing commercial space is very comparable to getting a loan from a bank. Tenants should be prepared to share financial statements and to appropriately collateralize the lease transaction.
Commercial real estate transactions, even for a seemingly “simple” deal, may take a considerable amount of time to successfully complete. Having adequate time to identify, tour, design, price, negotiate terms on, construct or improve, and move into suitable commercial space helps to shift negotiating leverage to the tenant’s benefit. Start the process 4-8 months before you need to occupy your new space.
OfficeSpace: What are the best practices to selecting the best space?
Jason: The best space is the space which meets unique criteria that vary by industry, property type, the nature of the user’s business and their business plan, and location. I ensure a successful process by taking the time to understand the intricacies of my clients and their businesses up-front so the real estate supports these needs and requirements.
OfficeSpace: What are the best practices in negotiating my lease?
Jason: The best practices in negotiating a lease are summarized into 4 critical path items as follows:
- Start your needs analysis and discussion well before the need is estimated to commence.
- Engage an expert commercial real estate broker with proven experience and leverage their knowledge; we are here to help you starting with the needs analysis and continuing from occupancy throughout your lease term.
- Always have a solid back-up option at hand, especially in an improving real estate market. Being prepared to walk away is a very powerful aspect of successful negotiation.
- Engage a real estate attorney to provide counsel and revise the lease document.
OfficeSpace: What are the hidden costs in a lease?
Jason: Your real estate broker should be well versed and provide assistance in mitigating latent/hidden costs within the lease agreement. The primary area of hidden costs arise from Operating Expenses or Common Area Maintenance (CAM) charges and maintenance obligations. Other potential pitfalls include Tenant Restoration requirements, Tenant Alteration processes, landlord administrative markups, and property management fees. My experience negotiating thousands of lease agreements is invaluable to my clients in these areas.
OfficeSpace: What’s the best way to compare offers?
Jason: The best way to compare offers is on a Net Present Value (NPV) basis and $/RSF basis with a matrix for a side by side comparison. This analysis should also take into account intangibles such as building image, proximity to employees and clients, ease of ingress/egress, and the true cost of occupancy including any tenant contributions to build-out and relocation costs.
Jason Bollhoefner joined Corum Real Estate Group as a Leasing Agent in January 2001 and was promoted to Senior Leasing Agent in 2007 and to his current position as Assistant Vice President in 2008.
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