Think back to high school math. It probably started with algebra and ended with calculus. Up until calculus, your math homework may have been easy. If you were so inclined, you could look up the answer in the back of the book and be done with it. This easy road came to a dead end, however, when you got to calculus. In calculus, you actually have to prove the answer.
In a lease negotiation, it’s not enough to tell the landlord that x=30 (dollars per sq. ft., that is); you actually have to prove through the right process that you deserve the terms you seek and the terms that you should be seeking.
In nine out of every 10 in-place leases we review, it’s clear that the tenant either was not properly represented or was merely looking to the back of the book (in this case, an article or a neighbor’s lease) for the answer.
In some cases, the tenant focused on what it thought was a market rent, but clearly did not understand how the design and construction process, or expense pass-throughs, could negate ostensible rent concessions.
In others, the tenant was clearly focused on what it understood to be the cost implications of the lease, but neglected the lease protections necessary to avoid unforeseen facility costs and liabilities.
Tenants make mistakes like the ones above, not because they are unaware of market rental rates, but because they don’t prove to the landlord that they are following the right evaluation and negotiation process to achieve the correct result.
Landlords know that it’s seemingly easier for a tenant to use the back-of-the-book approach and, therefore, market their buildings accordingly.
Conversely, tenants that have their leases, facilities and landlords professionally evaluated are able to prove that they are taking the negotiation process seriously and, as a result, end up surpassing their peers.
Mike Norris, LEED AP, heads the healthcare tenant-representation group as a vice president with The Washington, D.C.-based Ezra Co.