Dayton, OH, USA

Here’s something every prospective tenant should know before signing a commercial lease: Everything is negotiable.

That’s according to Karen Penafiel, vice president of Building Owners and Managers Association International. She said standard leases aren’t so standard after all and often can be tweaked to meet the needs of everyone involved.

She advises would-be tenants go into meetings with commercial landlords with eyes wide open, ask lots of questions and be ready to negotiate to get what you want and need in office, industrial, retail or warehouse space. Your business depends on it.

“Everything is negotiable, and the landlord knows that, too,” said Penafiel, whose group is a network of professionals involved in building ownership, management, development and leasing. “When they go into a lease negotiation, they might start with their standard lease document. It might be something that their company uses. It might be based on the BOMA standard lease guide. Who knows? They will come in with their standard lease, but everything is negotiable, just like any contract.

“Now, some leases are much harder to negotiate than others,” Penafiel said. “But a tenant should definitely go into it asking questions and making sure it is in their best interest and, if it isn’t, seeing if there is some middle ground.”

The century-old trade association represents more than 17,000 members that collectively own or manage properties totaling 9 billion square feet.

“We have members that manage every kind of property from warehouse to retail, but our primary niche is the multi-tenant, commercial office building — from 50,000 square feet to skyscrapers,” Penafiel said.

In late December 2008, she said BOMA saw stable occupancy in the national real estate market, but the weak economy has some members struggling and worried about what 2009 will bring.

The bottom line in every market, though, is this: “I think the tenant is looking for a responsibly run building with a very predictable and high-quality level of service and a good relationship with management to let them know when there might be any disruptions in services due to other tenant move-ins, needed upgrades and so forth. At the end of the day, the commodity — the product the building owner or manager is providing — is a usable and productive workspace,” Penafiel said.

Craig Meyer, president of the Washington, D.C.-based Society of Industrial and Office Realtors, said the most-successful transactions begin and end with two things: a good attorney to offer legal advice and review the lease, and an experienced, ethical broker.

Rely on a professional with an outstanding track record, said Meyer, whose group represents the nation’s top commercial brokers and has 3,200 members in more than 590 cities.

“They are in the marketplace every day,” he said. “They are, on a regular basis, executing leases, acquiring buildings, selling buildings. They know everything up to the moment. Just like a business owner knows about their particular industry, what their customers need, what they have to obtain from their suppliers, etc., a commercial broker is a professional who is involved in transactions on a daily basis.”

His advice: Before signing on the dotted line, get some information regarding the landlord’s financial stability.

“As we are going through this current financial crisis, many landlords have loans coming due (and/or) buildings are worth less than the mortgage that they have on the property. And that can be problematic for the tenant,” Meyer said.

Just as a landlord might run a credit check on a prospective tenant, tenants should do the same.

“I am instructing our tenants to do the same thing,” Meyer said. “Make certain that building is financially viable, that it isn’t in trouble, that it doesn’t have a foreclosure pending or a loan coming due that may cause a foreclosure.”

The experts also advise asking questions when considering a contract.

Mark Dlott, vice president and principal for the Dayton office of Colliers Turley Martin Tucker, said one of the most important questions to ask is about maintenance.

“Be sure to take a look at the maintenance clauses,” Dlott said. “You need to know whose responsible for what.”

Dlott said a tenant should clearly understand what maintenance work is their responsibility and what falls under the owner’s or manager’s duties.

If the landlord can’t or won’t answer them, do some digging around with help from a broker or lawyer.

“A lot of information is available on public record,” Meyer said.

Brokers and legal counsel are business partners who can help take an operation to the next level.

“You need a team,” Meyer said. “Just like in any other business endeavor, you need to have professionals assist you. An office lease or industrial lease is a sophisticated contract. There are many nuances to it. There are provisions for all different types of circumstances and events.”

About Colliers International

Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 12,700 employees span the world in 294 offices in 61 countries. On a worldwide basis, Colliers manages 1.1 billion square feet, and has revenue of $US 1.6 billion.

Contact Information

Crystal Kirkland
Marketing Manager
3033 Kettering Blvd.
Suite 111
Dayton, OH 45439
937.222.7884

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