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How to Negotiate a Favorable Office Lease in Today's Frenzied Market
New York City is booming. And as a result NYC office rents are headed into the
stratosphere. What is a growing tenant to do? Your business is expanding, but you are
worried whether you can afford the rents for the space which you desperately need. Below
are a few pointers for how you can obtain reasonably priced space in an oveheated market.
Beware of Build-Outs
When searching for spaces, focus on those which are already built out. While raw space might seem a bargain, by the time you are done you will see it is not. Costs of construction and other extras will add on a substantial percentage to your upfront costs. Know what you are getting into! Construction costs are inherently unpredictable and subject to increase. Be mindful!
Sublets - The Bargain Hunter's Delight
Focus on sublets and pre-built spaces, especially where furniture has been left in place.
Sublets often present special situations where tenants need to dispose of space quickly, thus
lowering the rents per square foot. While your rights are different as a subtenant, they can be
a great bargain. The lower rent may well be worth any credit risk. Depending on the
situation there may be some creative ways to protect against the default of a sublandlord.
Don't Sweat Your Remaining Lease Obligation
You may be worried about what to do with your current lease if you have a longer term and
have to grow to larger quarters. However, in this market the landlord may be happy to take
your space back and release you from your liability. A knowledgeable agent can help
negotiate such a deal.
It's All in the Timing
It is important to carefully coordinate your exit from the old space and entry into the new
space in order to minimize any unnecessary expense. Obviously, you do not want to be on
the hook for several months rent for the space you have already left. Your trusty real estate
agent can arrange this so that you do not waste time and money unnecessarily.
Watch the Escalations
Every lease contains escalation clauses for items such as building operating expenses,
electric and real estate taxes. Best bet is to use a fixed annual increase of 2.5% to 3%, as
opposed to an escalation tied to the Porter's Wage (an arcane measure of inflationary
expenses often used in NYC leases) or direct operating expense escalations.
Know Your Landlord
Some landlords are better than others. Know your landlord's reputation. Some landlords
have a reputation for treating their tenants fairly and providing services while others do not.
An experienced agent will have wide knowledge of both landlords and the market, which
will help you avoid unpleasant surprises after you take occupancy.
Caveat Emptor
Many real estate agents have a reputation for pressing clients to get a deal regardless of the
ultimate result for their clients. For 18 years Wharton Property Advisors, Inc. has helped
NYC office tenants find and dispose of office space. We provide the full range of
commercial real estate services, and finding and negotiating great deals for our clients is our
specialty. Moreover, we represent our clients with intelligence, honesty and diligence!!
Need office space with a favorable lease or sublet?
Contact an Agent at Wharton Property Advisors, Inc.
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