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  • Writer's pictureTom Miller, CCIM

Savvy Tenant Strategies in Landlord-Friendly Markets

Imagine your industrial real estate lease is coming up for renewal, but the current climate favors landlords – as is the case here in northern Nevada. Imagine that your West Coast customers are demanding better shipping times and you need a West Coast location, but the market is asking high rents. Imagine that long haul freight costs are killing your profitability, necessitating a warehouse closer to your distant customer base, but availability is low and rents are high. None of these are favorable scenarios for the tenant, but there is good news.

If you find yourself in one of the situations outlined here, you don’t have to sacrifice solving your logistical problems simply because of landlord friendly real estate market conditions. All you need is a good strategy.

Understanding Vacancy Rates

First, it’s important to understand local vacancy rates. But instead of considering how they apply to the overall market, you want to know what they mean for you. Just because a market has a very low vacancy does not mean the specific size you need isn’t available, or even possibly abundant. Digging deeper into vacancy in your size range an clear up that potential misconception.

Readying Your Appeal

Step two is prepare yourself and your firm for the search and negotiation. Is your company website up to standards to project the best image of your company? Are your company’s financial statements ready to go? Are you prepared for a realistic lease term commitment? If you need specialized tenant improvements, are you able to finance those yourself if need be? Taking time to prepare, organize, and put your best foot forward is an important element that shouldn’t be overlooked.

Gauging Your Landlord

It’s unrealistic to expect a prospective tenant coming into a market to immediately understand which landlords are in the market and what it’s like to work with them, so this is where an experienced real estate agent – one who has been a key player in the market – comes in handy. Landlords are very different in terms of their tenant preferences. Some give higher credit for length of time in business, while others are attracted by length of lease term. Still other landlords value the lack of rent concessions. Each ownership group has a market manager that has further personal hot points. Matching your needs to the right landlord helps streamline the process and adds a higher possibility for a successful transactions.

Avoiding the Easiest Mistake

People like to talk. But it’s the small talk that can often be problematic in business scenarios. A savvy agent understands that a large part of their job is to create maximum leverage in the transaction. In a landlord-friendly market, that is a very challenging matter. Seemingly simple things such as word selection, body language, a few comments dropped here and there, follow up communication with the landlord, etc., can all help or hurt your leverage in negotiating the best deal terms possible. Lease renewals are challenging since landlords know it costs lot to move and it’s disruptive to the operation. Landlords also tend to believe they have almost all the leverage on renewals. Don’t make their job easier by oversharing and tipping your hand.

While this is by no means a complete list of strategies to help level the playing field for the tenant, it’s an important start. The savviest move for any tenant? Teaming up  with a real estate professional, one who focuses precisely in the type of commercial or industrial real estate you need.

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Miller Industrial Properties, Sparks, Reno, Nevada
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