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Q: The final draft of a lease I've just negotiated has all of the changes from my standard lease form highlighted by redlines. Rather than printing a “clean copy” of the lease, I'd like the tenant and me to sign the redlined copy so it becomes the official version of the lease. This way, I'll be able to easily spot the changes whenever I need to refer to the lease. Is there any risk involved with signing a redlined copy?
A new U.S. real estate forecast based on a survey of 39 of the industry’s leading economists and analysts shows that commercial property transactions are expected to rise over the next two years to levels not seen since before the recession—exceeding the volumes hit in 2006. The annual study, conducted by the Urban Land Institute and financial and accounting services firm Ernst & Young, predicts that commercial property transaction volume will reach $430 billion by 2016.
A tenant that has been renting space from you for many years might be paying less in rent than you think the space would be worth to a new tenant. If the tenant approaches you about exercising some type of option or right under its lease, don’t be tempted to try to use your consent as leverage to raise its rent. A recent Alabama case dealt with this issue and the owner ended up losing its argument.
When describing management fees that you’ll pass through as a CAM cost or an operating expense, don’t depend on synonyms for “manage” or “management” to convey your meaning. If you use only the words “supervise and administer” or “supervision and administration” a tenant may argue that the lease doesn’t authorize you to pass through “management” fees. So you may get stuck footing the bill for them.
Technology and media are benefitting Broadway in a big way, as Facebook expands its office space in Manhattan’s Midtown South neighborhood—exercising a lease option that will give it 60 percent more room to spread out.
The social networking firm initially leased 100,000 square feet of space at 770 Broadway for its offices and will add 60,000 square feet after exercising an expansion option in its lease that it wasn’t expected to for two years. CRE experts have speculated that the tech and media boom in the Midtown South submarket pushed the company to act sooner.
If you’re not careful, under certain circumstances, you could get stuck with a big bill for a brokerage commission or transfer taxes if your tenant assigns its lease or sublets its space. For example, you may have a listing agreement with a broker that entitles it to a commission for any transaction involving your building or center. Or a tenant may fail to pay real estate transfer taxes due on an assignment and leaves you with the problem of getting rid of the resulting lien on your building or center.
Q:I’m considering renting space to a labor union tenant. Are there specific aspects of such a lease that I should prepare for ahead of time?
A:Before you rent space to a labor union tenant, make sure that you’re willing to agree to lease requirements that are unique to that type of tenant. There are three common things that you should expect during lease negotiations.
Your leases with tenants that started renting space at your shopping center a long time ago might not mention online sales in the gross sales exclusion provisions in the lease. But since online sales are here to stay, you should address those sales—and any other nontraditional types of sales that you foresee—in the leases you’re currently signing. That’s because every gross sales exclusion takes percentage rent out of your pocket. So you’ll want to stop the tenant from taking exclusions that you didn’t expect it to take.
The Real Estate Roundtable’s latest quarterly Sentiment Survey has some good news for CRE owners and investors: U.S. commercial real estate markets continue their gradual recovery from recession—as reflected by improving fundamentals, transaction volumes, and capital flows—and will probably remain on a modestly upward trajectory over the coming year.
When you need to find a contractor for a major project at your center, such as an ongoing job like landscaping, or a one-time job like replacing roofs, don’t simply hire the first available contractor you can find. Instead, prepare a request-for-proposal (RFP) to solicit bids from multiple contractors.
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