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6 Ways to Save On a CRE Lease

July 12, 2017

6 Ways to Save On a CRE Lease on morrissegroup.com

Because everyone loves a good bargain – if the space is right

“Man is an animal that makes bargains; no other animal does this – no dog exchanges bones with another.”

Economist Adam Smith wrote these words in 1776 in his seminal Wealth of Nations, and this macroeconomic maxim is just as appropriate for today’s CRE market. Everyone loves a good bargain, from BOGOs at their local grocery store to businesses looking to lease office space.

Bargain hunting, however, is easier said than done. While not impossible, it takes due diligence and negotiation before signing on the dotted line, as well as an honest evaluation of whether a bargain is truly a bargain, long-term.

1. Make sure that Time is on your side

Saving money on an office lease requires a degree of homework. Rather than waiting to do it just before your current lease is set to expire, take advantage of the stretch of time that’s given to you before renewal. The size and complexity of your business will dictate the approximate length of time necessary to evaluate the current lease and to consider options and alternatives to better meet your needs:

  • Smaller businesses should set aside 6 months for this process.
  • Medium businesses usually require 12 – 18 months.
  • Large, complex businesses can take 2 – 3 years.

With time on your side, you can now begin the task of looking into the following cost-saving tips.

2. Know your market

Landlords know that most tenants will take the path of least resistance and renew a lease. This equation changes, though, if that landlord believes you can and will relocate. To that end, it’s important that you know what else is available so you:

  • Have some leverage in the negotiation;
  • Have a Plan B in case Plan A falls apart; or
  • Have viable options when there is a true desire to relocate.

While evaluating available properties, keep an eye open for unique opportunities. If a company is shutting its office with years left on its lease, a landlord may be willing to offer the space for a reduced price. In addition, many municipalities offer tax incentives and low interest loans to attract businesses to redevelopment zones.

3. Be realistic

It’s one thing to want all the bells and whistles; it’s quite another to be able to afford them. Keep your overhead in check by not going overboard.

It’s also a good idea to be aware of cost-saving real estate trends. For example, thanks to more efficient furnishings and technologies, the required square footage for each employee is  shrinking – from an average of 225 square feet in 2010 to 176 square feet in 2012 to just 151 square feet in 2017. This trend is likely to continue with the adoption of automation technology in the office and industrial workspace.

4. Share and share alike

When considering real estate trends, take a look at one of the hottest ones: collaborative workspaces. This idea means at least two companies can work independently while sharing common spaces, such as the reception area and break room. Frugal companies that are willing and able to share without compromising privacy or brand image can reap significant discounts.

5. Go green and save green

Some commercial spaces have received a Leadership in Energy and Environmental Design (LEED) certification. Through the use of smart design and green technology, landlords and tenants alike can realize significant utility savings, not to mention the appeal and positive branding associated with working in an energy-efficient space.

6. Hire a tenant representative

Another way to save money and a tremendous amount of time – and to avoid doing a lot of the homework listed above – is to hire a professional tenant representative. Quality reps are intimately aware of local and national CRE opportunities, availabilities, and trends, and they will negotiate with landlords on your behalf. A quality tenant rep also thoroughly gets to know your company and its needs, applying to them to find the right space.

In addition, these professionals can spot when a bargain isn’t really a bargain. For examples, a low price per square foot will actually wind up costing money in the long run if:

  • The location will drive down foot traffic for a retail store
  • The image of the building will turn off a company’s customers and employees
  • An industrial space lacks the necessary infrastructure and will wind up needing expensive modifications or other work-arounds
  • The area is poised for economic growth – or a significant slowdown. The former may be good for the local economy and your specific business, but it could also presage an increase in rent once a shorter-term lease is up. In contrast, a slowdown within a specific location may cripple a business, regardless of the savings on a lease or the physical suitability of the space.

These are just a few of the factors that a tenant representative will take into account when finding a bargain for your business – determining if any deal is simply too good to be true.

For more than 40 years, Morris Southeast Group has negotiated office leases throughout South Florida and the entire United States. We’ve seen the CRE market in the best of times and the worst of times; we’ve seen trends come and go. Through it all, we have successfully met the needs of countless tenants, landlords, and owners.

If you’re looking for a tenant representative who can help you negotiate your next office lease, call Morris Southeast Group at 954.474.1776 for a free consultation. You can also reach Ken Morris directly at 954.240.4400 or via email at kenmorris@morrissegroup.com.

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