Would you classify industrial real estate transactions as win/lose scenarios? It seems like an obvious call. After all, either the tenant or the landlord will leave the negotiating table feeling like they had the upper hand. Actually, it’s that scenario that can set up the biggest risk an industrial real estate tenant can take. The riskiest proposition for any tenant is always the same – entering any phase of the lease transaction without sufficient representation.
Tenant Goals vs. Landlord Goals
In the typical industrial real estate transaction, there are usually multiple players. These may or may not include:
The owners/investors, or those are looking for specific returns on their investment
The developers, or those who must provide economic returns to their investment partners while still remaining competitive in the market
The property managers, or those who ensure property maintenance for tenants, developers and landlords
The tenants, or those looking for the most appropriate location for their business while managing operation and budget considerations
Laid out like that, it becomes clear why the goals of tenants are often directly in competition with the goals of the property owner or developer. It’s this competition that may prompt tenants into taking unnecessary risk.
What You Don’t Know Can Hurt You
Tenants often ask for advice. After listening to the issue, and reviewing both lease documents and the options at our disposal, I usually end up asking the tenant why they had agreed to a specific point in their transaction. Usually, the answer is a version of:
I didn’t realizing I was agreeing to it.
I didn’t understand that element of the agreement.
I didn’t expect this to happen when I signed the agreement.
I didn’t actually read the lease word for word.
Unfortunately, this puts us at a major disadvantage. If you sign something without understanding what it means and what consequences it may have – if you sign something without reading it – the contract is binding nonetheless.
Avoid this Risk
Fortunately, all of this can be avoided when a tenant remembers just one thing. The landlord is the advocate for not only him or herself, but also the investment partners – they are not on your team. You can even the field by partnering with a qualified industrial real estate agent, someone who handles lease negotiations as a matter of course and has a successful track record with transactions similar to yours. Avoid the risk, and partner with someone who knows what he’s doing. If you’re considering industrial real estate in northern Nevada, Miller Industrial Properties can help.
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