New York City's commercial real estate market is one of the most complicated in the world.
During the course of a conversation with a tenant, they asked why anyone would want to use an exclusive broker to represent them in finding and negotiating a lease.
In an ideal world, commercial tenants would work with both internal and external stakeholders to determine how much space they need before looking at properties. Management would go through a strategic planning process to figure out where the company is going, how it’s going to get there, and who's going to take it there. The company would consult with an architect to determine its exact space needs, and necessary board or upper management approvals would be obtained beforehand.
Recently I was contacted by a non-profit organization whose lease will be expiring soon.
Throughout my career, I have seen many situations in which doing business is made difficult by a dysfunctional power structure, but there are two that are particularly vexing:
1. A person has all of the authority, but none of the responsibility; or
2. A person has all of the responsibility, but none of the authority.
Responsibility: Project Manager
If a new building department regulation goes into effect subsequent to the signing of a lease, either the tenant or the landlord has to comply with that regulation. In most cases, the landlord stipulates that the tenant is fully responsible for complying with all laws and regulations. However, it is usually possible to prevent the tenant from being fully responsible for capital improvements. An excellent example of this is retrofitting a space for a sprinkler-based fire prevention system.
Last year I had the pleasure of representing a foreign client who wanted to find a retail space. One of the storefronts we were considering was adjacent to a large corner unit that was leased to an accessory unit of a world famous brand. Recently, I found out that the tenant, who had only been in the space for less than a year, decided to close the store and sublet the unit for the remainder of the lease—even though the tenant had invested millions of dollars into the construction and design of the space.
After Winter Storm Jonas (more popularly known as Snowmageddon 2016), New York City had 2.5 to 3 feet of snow in places. It was hard not to notice that some patches of sidewalk were shoveled while others weren’t, requiring pedestrians to navigate alternative routes. Sometimes, this means walking out in the street, which can be dangerous. I experienced this first-hand in front of a local H&R Block store.
The best time to leave a property is upon expiration of the lease term, but there is always room for negotiation.
Several months ago, a client (the tenant) had a lease that was close to expiration. The tenant was about to sign a lease for a different space, but something happened: Another property came on the market, they looked at it and decided it was much better suited for their business. However, starting all over in the negotiation process would have put the tenant over their current lease expiration date. In order to acquire the new space, the tenant would have to extend their current lease, or pay a penalty.