Less is More Corporate Real Estate Tenant Representation

A Primer on Assignment Clauses

Walt Batansky — Wed, 18 Apr 2012 12:32:09 +0000

Assignment clauses are no-doubt a big reason for the inherently tough nature of commercial lease negotiations.

An assignment clause provides tenants with protection from long-term negative impacts of having to move before the lease's termination date or in the event of a change of ownership.

When activated, a tenant can "assign" a new tenant to the lease. The new tenant then falls under the same terms in the same space. The original tenant is then absolved of future lease obligations.

The Evolution of the Corporate Campus

Walt Batansky — Mon, 13 Feb 2012 21:53:27 +0000

Zappo's is turning the idea of a corporate office campus on it's head. While they could have followed the majority of other California internet firms and built or bought property in a Silicon Valley suburb. Instead they packed up and moved - to Vegas.

Not the high glitz strip in a Class A building, either. They're taking over the City Hall building in the old Las Vegas downtown. The building and 12 acres of surrounding land and buildings will have apartments for staff and retail to support company amenities and concessionaires, with an option for them to purchase another 10 acres for expansion. They're moving into town, and turning it into one giant Zappo's workplace experience.

Objectives, Strategy, and Goals - What's the Difference?

Walt Batansky — Mon, 13 Feb 2012 21:39:42 +0000

Many people use the above terms interchangeably. Well, they're certainly all related although used - at least in my firm as related to corporate real estate - as different parts of an overall operational plan.

Here's our breakdown:

Is Less Actually More?

Walt Batansky — Wed, 18 Jan 2012 18:21:43 +0000

Less is More? I frequently have people ask me, "Why the name "Less is More" and what does it represent?"

Less is More is one of the basic concepts that we teach corporations to embrace regarding their operational real estate. The ability to minimize facility obligations and cost in relation to your competition creates a key competitive advantage for your firm.

In service businesses, this means reducing the real estate cost/employee or cost/seat. For distribution, it is cost/pallet position or cost/pallet occupancy term. In manufacturing, it is cost/widget produced or cost/revenue dollar. These metrics are Key Performance Indicators (KPI) and you’ll typically track more than one to get an accurate measure of success.

The Eight P&L Impacts of a Corporate Lease

Walt Batansky — Sat, 19 Nov 2011 18:06:27 +0000

On many CFO and financial executive’s Urgent Issues or Focus List, real estate often doesn’t make the top ten. Why? I think in part it is because the impact of a real estate decision is spread over many categories of the Profit & Loss Statement. In addition, often financial analysis of a lease decision is based on the rent and operating expense being paid now vs. the rent and operating expense on the new lease. If the impact is acceptable, the company moves forward. Simple enough, right? Perhaps too simple.

Up in Flames. What happens if your commercial space burns to the ground?

Walt Batansky — Fri, 29 Jul 2011 17:59:00 +0000

In the last 25+ years, our tenant representation clients have experienced fire and smoke damage to their facilities, and we've heard stories from people who's buildings have burned to the ground, although just recently experienced first hand a total destruction. Not just a fire, but a complete nothing-but-cinders-remain inferno that devastated the building including one of our client's delivery vehicles.

The facility was a distribution warehouse in a multi-tenant building and industrial park.

So that brings up something to perhaps consider with a bit more concern in future lease documents: The Destruction Clause.

Going Green

Walt Batansky — Wed, 08 Jun 2011 13:08:00 +0000

Many corporate tenants mistakenly believe that incorporating sustainability into their buildings is the landlord's responsibility. In fact, the tenant controls a significant amount of options to improve the LEED rating of their space through interior space design and specifications.

Most just don't bother, often because the tenant finish is completed by the landlord on a turn-key basis. When was the last time that your specifications stated that the installed lighting would provide the most favorable ROI based on both initial cost AND operating costs over the term of the lease?

I'll answer that for you: Never.

So, why?

Commercial Lease Commencement Dates

Walt Batansky — Sat, 16 Apr 2011 19:00:58 +0000

A typical commercial office or industrial lease states something to the effect that the “The Commencement Date of the Lease shall be the later of X date or the date that the Landlord delivers the Premises to the Tenant.” (Note: If it says the “earlier of X date ….”, your landlord is really giving you a raw deal.)

This Commencement Date language protects you in case the Landlord is late in completing construction and you don’t get possession when planned. Right? Wrong. Here’s why:

The Operating Expense Trap

Walt Batansky — Sun, 13 Mar 2011 15:26:18 +0000

Imagine that you purchased $10,000 worth of product from one of your suppliers. When the invoice came, however, they incorrectly billed you $20,000 and your accounts payable department unknowing paid the full invoice. When you discovered the error 45 days later, you approached the vendor and they said, “Sorry, read the fine print. If you don't object to the billing within 30 days, we get to keep your money.”

Would you ever do business on these terms? Would you ever accept such an attitude from your vendor?

Guess what? You're doing it now, and the vendor is your landlord.

It Pays to Explore Sub-Markets (and Beyond)

Walt Batansky — Wed, 02 Mar 2011 22:40:00 +0000

From a national perspective, you may look at a list of rental rates, peg where your current or prospective lease falls and, if within a range of 5-10% or so, figure you are doing well. Are you? Maybe, maybe not. Here's why: Typically, market rents are quoted as average rates. Forget that they ignore your particular improvements and other critical requirements. There can be big – really large – huge swings in price from one sub-market to another.