Tenant Representation and Commercial Leases

May 2016
Business Success
Brought to You By: Randy Elgin

Randy Elgin
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How to Win Big in Today’s Economy

The altered economic landscape presents innovative and nimble businesses with opportunities to thrive.

Find out how by requesting my free report “How to Win Big in Today’s Economy.”

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Worth Reading

The Biggest Wastes of Time We Regret When We Get Older
By Kristin Wong

Lifehacker

We spend money and energy on shortcuts to save time, but the biggest time sinks are actually our own bad habits. According to Wong, some of these major time-wasters are not asking for help, dwelling on past mistakes and shortcomings, and worrying about what other people think. Learn from your experiences, Wong advises, but don’t waste your time worrying about them.

Facing a Difficult Problem at Work? Try This New Strategy
By Ryan Holmes

LinkedIn Pulse

Taking time to mull over the consequences of decisions pays off. The brain’s impulsive decision-making mechanism is unreliable when faced with complicated decisions, and the best solutions come when you distance yourself from or stop thinking about a problem. Holmes quotes Sigmund Freud: “In vital matters… the decision should come from the unconscious, from somewhere within ourselves.”

Winning Back Lost Customers
By HBR staff

Harvard Business Review

For service companies that bill on a recurring basis, rate of churn is a key profitability factor. However, V. Kumar, a marketing professor at Georgia State University, believes companies should focus their marketing efforts on lapsed customers whose prior behaviors and reasons for leaving indicate a predisposition to return. Firms can target these customers with advanced analytics.


LINKS YOU CAN USE
This Month: Customer Retention

Your customers are the lifeblood of your company. Without customer retention, you’re dead in the water. How can you stay afloat? These resources may help ensure your customers come back. And back…

Details matter. Find out here which matter most in this Inc. article

Tips on Increasing Customer Retention and Renewal Rates

Increasing customer retention by just 5 percent can increase profits by 95 percent. Discover what else data-driven marketers are saying about customer retention.

7 Customer Retention Tips for Today’s Data-Driven Marketers

For expert advice, go to the experts. Forty-two customer retention experts offer tips on what your business can do to cultivate long-term customer relationships.

How To Improve Customer Retention

How strong is your branding? Check out these tips for branding that retains customers.

Why Branding Is Key For Customer Retention

REAL ESTATE
Looking for Space? Your Broker Can Be Your Best Friend

Today’s North American commercial real estate market is full of opportunities for companies looking for space. However, finding and leasing office space can be more of a hassle than most potential tenants need. To take full advantage of market forces, commercial real estate experts advise businesses to work with an experienced commercial real estate broker when looking for commercial office space.

According to San Francisco real estate attorney Janet Portman, there are important reasons why North American companies should consider working with a tenant-representative broker.

The tenant doesn’t pay the real estate agent’s commission: While many people believe that tenants must foot the bill when securing a broker, that’s not the case. The landlord or owner pays the tenant’s broker once the contract has been signed.

Brokers are “in the know”: Commercial real estate brokers are “the” source for industry information. A good broker can be instrumental in finding an “off market” space that is not advertised or identifying an appropriate space that is about to be listed.

Your agent knows the market: There is more to a lease than rent and associated costs. A good broker will also be aware of public transportation, parking, and nearby amenities.

Brokers are great negotiators: Today’s tenant-rep brokers are among the best negotiators in the world. They can negotiate lower rental rates and higher tenant improvement allowances, and, most important, they can guide you through the subtleties of contract clauses and provisions that most business owners are unlikely to understand-a very valuable service indeed.


HOT BIZ TRENDS
Technology Is Forcing Change – in a Good Way

Tech Change In the past few years, technology has been disrupting global commerce. But, as it turns out, that’s not a negative.

Some call it “creative disruption,” and it means breaking long-held patterns to encourage positive change.

In LinkedIn Pulse, Devin Wenig, president and CEO of eBay, writes, “The transformative effect of smartphones and tablets, not just on our business, but also on the entire retail sector, has been staggering. Nobody understood the degree to which these devices would explode distribution and access points, and fundamentally change commerce… But what we’ve seen is only the beginning.”

Wenig predicts that, over the next five years, technology will further disrupt our world, by:

    • creating a “deeply customized shopping experience” for customers
    • reinventing the traditional supply chain,
    • using virtual and augmented reality that will help customers experience what they’re buying… before they buy, and
    • enhancing the sustainable shopping experience (buy now; resell later).

 

The result will be “true global commerce,” suggests Wenig, which will be free from the barriers that have made achieving real globalization impossible. Propelled by technological change and driven by creative forces, the world will finally become a global marketplace, with all companies, even the smallest, able to access it.

In the next five years, creative disruption through technology will provide us with undreamed-of latitude in selling and buying. Wenig suggests that some $14 trillion in opportunities are waiting to be tapped. And disruptive or not, for small business that’s the kind of transformation to look forward to – with anticipation!


ENTREPRENEURS
Looking for a New Home for Your Growing Small Business?

Moving Day Has the best-before date expired on the space where you started your business? Do you now need a bigger office or more warehouse space? If the answer is yes, it may be time to purchase a commercial property to house your growing business… time to consider a commercial mortgage.

A commercial mortgage enables you to finance a real estate purchase without tying up short-term credit or diverting cash flow needed to operate the business. Plus, once you have a commercial mortgage, you can leverage the equity you build up to use as a source of funds to finance future growth

When shopping for a commercial mortgage, consider both short-term and long-term needs. Here are some things you’ll need to know in order to make the decision that’s right for your small business:

    • The total loan amount necessary to acquire and customize the premise
    • Costs associated with securing the loan, including fees and environmental assessments if needed
    • The down payment amount
    • Prepayment flexibility
    • Interest rate options (fixed or floating)
    • The loan term and amortization schedule
    • Is the loan assumable?
    • Will there be a balloon payment?

 

Be aware that commercial loans undergo extensive underwriting and due diligence prior to closing, and there may be ongoing reporting requirements to maintain the loan in good standing. Also note there are lending practice differences between banks and private lenders; in considering your options, it’s important to do your research.

The benefits of owning commercial real estate can be significant. These include tax advantages, predictable overhead costs, and asset appreciation. However, be sure you know what you’re getting into. An experienced commercial real estate agent can help you size up your situation and recommend some next steps.

 


REAL ESTATE
Soft CRE Market Is Good News for Tenants-to-Be

There is both good and bad news surrounding North America’s commercial real estate (CRE) market.

First, the bad news: the combination of rising vacancy rates and an abundance of recently built office space has created one of the softest rental markets for owners and investors in nearly two decades.

Now the good news: current market conditions have created amazing opportunities for small, medium, and large businesses wanting to expand, renew a long-term lease, or relocate.

According to commercial real estate writer Mariwyn Evans, tenants should take full advantage of current market fundamentals by leveraging their positions to the fullest.

“If you’re lucky enough to be on the tenant side of the commercial real estate market these days, you… are sitting pretty. Even smaller tenants are in a position…to receive some of the best leasing deals seen for two decades,” says Evans.

Most commercial real estate experts agree that, when vacancy rates rise above 10 percent, the market equilibrium shifts significantly toward the renter.

According to a 2016 market forecast report by Jones Lang LaSalle, the vacancy rate across all major central business districts (CBDs) in the U.S. is currently 12.1 percent.

So how can tenants leverage these commercial real estate dynamics to their advantage?

Commercial real estate brokers explain the best way for tenants to navigate today’s market forces is to understand there can be some great bottom-line benefits and golden opportunities for companies looking for commercial office space.

Specifically, today’s business owners should consider these three strategies when navigating today’s commercial real estate market:

Tons of choice from which to select

It doesn’t matter whether you are a small tenant looking for 5,000 square feet (465 square meters) or a larger tenant seeking something along the lines of a custom-designed low-rise campus; today’s tenants have lots of great spaces available to them. The options are so numerous that every major market can offer the perfect location for today’s expanding business. The key is to know what you want and where to look.

Owners will consider tenant improvement allowances

Every company has unique office needs. Sometimes this means a high-tech conference room, or an open floor plan that can accommodate hundreds of cubicles. Businesses that are preparing to sign a lease should negotiate with the owner for costs associated with any build-out. These building costs, called tenant improvement (TI) allowances, can be expensive. So ask the owner for a generous TI allowance. Given current market conditions, he or she will likely agree.

Consider build-to-suit strategy

This option is particularly attractive to larger tenants that are in the market for a new location. By working directly with a developer, tenants can negotiate a beautiful build-to-suit arrangement that can be far more cost-efficient than a traditional lease, while also providing customization that will fit specific requirements.

The forecast for CRE for the remainder of 2016 points to continuing good news-at least from the tenant’s perspective. If you’re in the market for space, it’s time to take advantage of market conditions.

 

This newsletter and any information contained herein are intended for general informational purposes only and should not be construed as legal, financial or medical advice. The publisher takes great efforts to ensure the accuracy of information contained in this newsletter. However, we will not be responsible at any time for any errors or omissions or any damages, howsoever caused, that result from its use. Seek competent professional advice and/or legal counsel with respect to any matter discussed or published in this newsletter. This newsletter is not intended to solicit properties currently for sale.
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