October Commercial Real Estate Update

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Hi All,

As I endeavor in my position as a tenant advocate, I am often reminded of the experience that my father had with his landlord. My father owned a hairstyling business on Long Island. I often remember him complaining about the landlord and how he was being taken advantage of through huge rent increases. Well, that was many years ago, but some things do not change.

The economy remains soft and it would be all too apparent for a landlord to take advantage of a tenant with huge rent increases today. Instead, landlords are much more creative and use “hidden profit centers” as a means to maximize profits. Some of my favorites are large “compounding” escalations, re-measured space, superfluous utility billings and landlord construction profits. See attached “savings” wheel. Note that hidden profit centers may result in tenants paying 20-30% more than they should.

For example, the following is a list of ways that the landlord can take advantage of a tenant through superfluous utility revenue generation: 

1. Purchasing energy at bulk rates and excessively marking up the rates.
2. Billing for overtime air-conditioning and heat without adequate backup.
3. Capturing and allocating common area maintenance costs to the tenant.
4. Subsidizing other tenants operations.
5. Overstating square footage and percentage calculations thereby inflating billing.
6. Capitalizing on tenant loads.

We are currently involved in several lease negotiations in which we are generating large cost savings for our customers. Please feel free to contact me for more details.

Market Update  

The market for commercial office and retail space is slowly improving. The availability rate is dropping, sublet space is coming off the market, rents are slowly increasing and landlord concession packages are getting smaller. See CresaPartners Manhattan TenantReport.

http://www.cresapartners.com/newyork/documents/NewYork_Market_Report-2010-Q3.pdf

CresaPartners Ranked Number Seven Commercial Real Estate Brand

CresaPartners was recently ranked the number seven brand in commercial real estate according to a survey done by Lipsey. Since the top six brands derive their income mostly from landlords, CresaPartners is ranked the number one “tenant only” commercial real estate broker internationally.

http://www.lipseyco.com/pdf/2010.pdf

My team and I are currently involved in several lease negotiations and we are finding that landlords are gaining ground. For example, leases that have recently been drawn and signed in the Midtown market are at fairly higher rent levels than last quarter. Our business is strong and we have recently acquired several new clients over the past couple of months. We also expect to close many deals in the coming months. We believe that our model of serving “tenants only” and our ability to help maximize tenant cost savings is the key to our success. 

My dad is semi-retired and we cannot help him negotiate with his landlord today. However, we welcome the opportunity to serve your business. Please feel to contact me for a lease analysis and evaluation and we would be happy to quantify possible cost savings we can generate for you. Thanks.

All my best,

Joseph

Comments

[Apex Mortgage]

It's terrible your father suffered from rent increases every year, I'm sure that cut into his profit. If you're currently in a tough situation facility wise for your small business, you might be interested in commercial building finance options. This way you could move out of your current location into one that may increase profit and productivity.

[Joseph Armano]

Hi, that was many years ago but that is a good suggestion.

[equity]

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