5 Myths About Commercial Real Estate Debunked

Everyone has different opinions about real estate, but when it comes to commercial real estate, the general public seems to have less knowledge on the subject.  Below are a few tips:

1)      50,000 SF available for Lease means you have to take all 50,000 SF:  This is not the case.  When you are looking for a home, if you see a 3,000 SF house for sale, you are buying all 3,000 SF.  In commercial real estate, spaces for lease can be flexible.  It is up to the Landlord, or owner of the building to decide how he wants to divide a space.  If you only need 10,000, the Landlord may be willing to divide the 50,000 SF space into smaller suites.  There is a cost associated with putting up or tearing down walls, but collecting no rent vs collecting a portion of rent is often better than nothing.

2)      If you downsize, you’re stuck in your large space: During tough economic times, sometimes you are forced to lesson headcount.  This doesn’t mean you have to have 5 empty cubes taking up 1/3 of your space.  In commercial real estate, there is something called ‘sub-lease’, where a portion of your space is lease to another tenant.  Sometimes it is a win-win; that other business only needed 3,500 SF space and couldn’t find a great location such as yours; while you are not paying for unused space and save money.  However, have your commercial real estate agent thoroughly vet out that subtenant to ensure they are a good fit.

3)      The guy with the most signs is the best: You may not have representation for your commercial real estate needs.  While doing your daily driving in your town, you notice that broker X has 10 signs up, more than any other agent, so you think, “he must be the best, so I should go with him.”  This isn’t always the case.  Ask these questions: How long have his signs been up?  Some agents take listings just so they can get a sign up.  That listing probably will never sell because it is overpriced or not worth the effort, but that agent keeps the sign up.  Also, some agents are great at ‘getting the listing’, but don’t have the necessary skills or partner to close the transaction.  Do a little homework before deciding.

4)      The #1 agent/company is always the best:  You may know who the #1 agent or even who the #1 company is in your market.  However, you may not get the attention that you need when you go with the #1 company.  Since they are #1, they may be dealing with several transactions at one time, thus not able to focus on your needs.  They may have a system or process in place that just doesn’t fit with your needs.  Don’t go with the #1, strive for the agent that will understand and meet your needs.

5)      My rent is fixed for the term of my contract:  This isn’t always true.  While it is true that commercial real estate leases typically are longer, it doesn’t mean you are stuck.  There is a concept called ‘blend-and-extend’, which is, opting for an early renewal while injecting new terms such as lower rents and additional capital improvements.  This is typically a win for both parties: you, as the tenant, can achieve a more favorable rental rate or other improvements.  The landlords keeps you in their space for X amount of additional years.  A qualified Coldwell Banker Commercial professional can assist with negotiating blend and extend terms.

By: John Boyer, Director of Marketing, Coldwell Banker Commercial Affiliates