Lack of Adequate Representation
Unless you are an expert in commercial real estate, then it's hard to understand the complexities of the industry. Lack of knowledge combined with time pressures can expose Tenants to downside financial risks.
An experienced Tenant Rep can counterbalance the Landlord's professionals that prevent the Tenant receiving the best possible rates, terms, incentives and lease clause protections.
Allowing the Landlord broker to present only their side may lead to incomplete information, or conflicting loyalties.
Lack of Understanding the True Space Costs
Lack of experience with commercial real estate can cause confusion and the inability to perform true apples to apples comparison analysis of different facility features. It can be complicated to compare the different lease types such as: Full Service, Gross, Semi-Gross, Net, Triple Net, CAM, etc.
Other items such as billable square feet and interior finish levels offered by Landlord can contribute to comparison difficulty.
This confusion can lead many Tenants to make less than optimum decisions.
Lack of Enough Landlord Incentives
Tenants may not obtain as many incentives as they could get without effective negotiating. Typical incentive items may include:
- *Free rent periods before and after lease commencement
- *Reduced rent escalation rates
- *Discounted rent for various time periods
- *Landlord contributions to tenant's build-out costs
- *Landlord improvements and/or maintenance to the space etc.
Lack of Consideration to Outside Incentives
These incentives include tax rebates, relocation assistance, payroll subsidies during employee training, infrastructure improvements and others.
Many times the statutory incentives can be negotiated before the lease and allowed for during the lease period. Inexperience may leave many key dollars on the table.
When a company relocates it may be possible to obtain substantial economic incentives from local government.