Are you interested in working harder? Or smarter? 

Finding new rental space and/or negotiating or renewing an office lease is something most businesses do rarely, generally once every 5-10 years. Consequently, it is likely the CEO, CFO or other 'internal' champion will have none, or little experience in this area.  However enthusiastically they dive head first into researching the market, analysing property guides, scheduling site inspections and working the financials, a likely outcome is that they realise the project is 'bigger than Ben Hur' and that achieving a successful outcome involves a lot more insight, energy and expertise than originally anticipated.

However, there is a resource available to you which will supplement your internal capability and will save you and the organisation time and money and provide you with the peace of mind that the matter is in professional hands. 

What Does a Tenant Representative Do? 

An independent tenant representative's role is to champion the tenant's interests in all dealings with real estate agents, landlords and other property professionals.

Their remuneration is solely via the tenant, therefore removing any potential for conflict of interest, a dynamic which is endemic in the commercial property industry.

Based on this definition you would think that every organisation would be jumping on the opportunity to have an independent expert take them through the negotiation process of either renewing their commercial lease or relocating their business. Yet, many tenants are not aware of the benefits derived from the process of creating competitive tension and testing the market. They see it as confusing and time consuming, believing that with the additional costs of legal fees, design, fitout and the disruption of the move, it would be easier, simpler and cheaper to simply stay put.

Based on the experience Joe has at the start of the video we can see why that happens.  But there is a solution.... 

Just like Joe, when a tenant is well informed, they can negotiate a lease to take into account the possible need for more or less floor space and for reduced rents, improved market rent review structures, limited make good liability, increased incentives, reduced parking costs and the landlord committing to accountability for the building's performance and quality.  

To manage your lease expiry successfully you need to: 

1. Know the Players

A major challenge to assessing the market and the best options for your business is an understanding of how to work with the various key players who make up the industry.

"The playing field is only level if you know who is on your side" 

It's important to understand who the various players act for and whether their activities are designed to benefit or in fact conflict with the needs of a tenant.  

When there is a direct conflict between your business and the party assisting with your market search it is impossible for them to provide advice that is in the best interests of your organisation. 

For example, a commercial real estate agency will have one-sided knowledge of the market, leveraged towards properties that they deal with regularly and properties where they represent the landlord. Comparatively, an independent tenant representative will be familiar with all commercial real estate properties throughout the cities and have no attachment to one over the other. 

Should you find a property that ticks the boxes via an agency tenant representative, the negotiation process will be weighed heavily to the advantage of the landlord, whom the agent receives payment from.  Without independent advice, an inexperienced business will not fully realise benefits such as lease incentives for fitout, free rent periods and reduced make good expenses which will cost you more.  

2. Know the Market

As the property market changes on a roughly seven year cycle it's prudent to evaluate leasing options within the context of the cycle.  Dictated by the current economic dynamic and reflective of current commercial real estate vacancy rates you may be facing a:

Tenant Friendly Market: With a contraction in the demand for office space, the tenant has a range of choices in the market at a reasonable price and therefore the upperhand in negotiating contractual terms.  Landlords typically offer leasing incentives in excess of 20% in order to secure tenancies.   

Landlord Friendly Market:  When the economic climate is strong and less commercial real estate available, the market becomes Landlord friendly. With fewer options available to the tenant, suitable options are in high demand and their negotiating power is reduced.    

As of mid 2016 commercial real estate in Sydney is facing a landlord friendly market as several large properties are removed from the market due to compulsory acquisitions via Transport of New South Wales for the new Metro Line.

Comparatively, the collapse of the mining boom has had the opposite effect in Perth and Brisbane. Significant downsizing of mining related business has resulted in an excess of commercial office space is hitting the market creating a field day of opportunities for the savvy tenants.     

Whether your commercial real estate is located in Sydney, Perth, Melbourne or Brisbane, knowing at what stage the market is at will have a significant impact on you tackle the upcoming negotiation. Misunderstanding the market will have your negotiation fall short in terms of the amount of savings that could have been made, or waste time chasing terms of contract that are unrealistic.    

3. Know Your Options

What many organisations don't know is that there are 5 options available when considering your commercial lease expiry from a Stay-Put to Moving to an Existing Building with Fitout. To ensure all required options are available at the time you come to make a decision, it is important you consider your upcoming lease expiry and act to understand your options at least two years prior to the date. This will ensure you have adequate time to test the market and consider all your options without necessary pressure from real estate agents or opportunistic pricing from landlords.    

4. Seek Independent Advice

Why wouldn't you speak with an expert in the field?  

An independent adviser has your interests as their top priority and does not receive commission from the opposing side of the negotiation as real estate agents do. As the majority of tenant representatives work for a percentage of what money you save on the negotiation, they are the one party benefitting when your organisation saves money.  The value of having someone on your side to provide independent advice on contract terms, legalities and commercial terminology?  Priceless!    

Knowing that you explored all options and pursued the right one for your organisation goes a long way to providing peace of mind over what can be an upheaval for any business.    

An initial conversation to find out more about tenant representation services and if they would be a good match for your organisation, is free.