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LEASE AGREEMENT REFERENCE GUIDE 1410: NAILING DOWN SPACE FOR MAJOR OFFICE USERS IN TIGHTENING MARKETS $24.95


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Lease Strategies
1410

Product Overview

This LARG contains the following items:

Tighter Markets, Big Blocks, and Tenant Strategies, Controlling the Premises Before the Lease Is Signed, and the Lease Clause Critique: Three Devices That Nail Down Space for the Major Tenant Before the Lease Is Signed.

Number of Single Spaced Pages: 12

 

Excerpt

Nailing Down Space for Major Office Users in Tightening Markets

 

This LARG looks at what happens when the market for suburban and downtown office space tightens up, and how it changes the leasing landscape. It analyses three traditional devices the major tenant can use to control large blocks of space during negotiations to minimize its chances of losing the deal to another tenant. The Lease Clause Critique contains extended excerpts from those pro-tenant pre-execution devices—an Option to Lease, a Letter of Intent, and an Exclusive Negotiating Agreement.

TENANT STRATEGIES FOR TIGHTER MARKETS AND BIG BLOCKS OF SPACE

When real estate leasing markets tighten up, it gets harder for tenants to find and nail down big blocks of space, especially in premier buildings. Flash back to what happened in Houston in the late 1990’s, and what C&W was saying about it. “Large blocks of contiguous class A office space 50,000 feet or larger are becoming scarce, and Landlords who have them may have several prospects looking at the same block,” said a leasing broker from Cushman and Wakefield of Texas. “Tenants who don’t develop a thorough real estate strategy in the beginning that includes back-ups and alternatives could lose significant time and upfront costs when they don’t get the space.”

According to C&W’s tenant representation specialists, the tightening market in Houston changed the way landlords with desirable large blocks of office space did business. In tight markets, the following techniques become common:

  • when several tenants compete for the same space, it’s usually the tenant with the best financials who ultimately gets the deal;
  • since building ownership and asset managers are constantly changing, tenants need to verify whether the funds are available to complete tenant improvements, and whether the equity partners, the lender, the legal counsel and any potential new owners have approved the lease;
  • landlords sometimes delay approval of a tenant’s financials after the lease is fully negotiated to continue negotiations with other competing tenants in an effort to get the best deal possible for the space; and
  • landlord leasing agents sometimes include space they don’t control in their leasing proposals to assemble a block of space large enough to meet the needs of a major user. If the big user is interested, the leasing agent scrambles to try to put together a deal to gain control of the space occupied by a third party tenant to make the larger deal happen.


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