Finding Space

FINDING SPACE

In real estate, as insurance, there are independent brokers and affiliated agencies. In New York City, most commercial brokers represent owners or lessors of real property, and are referred to as either “managing” or “listing” agents (agency brokerages). Their primary goal is to market and lease their clients’ properties. If you (as a commercial tenant) deal directly with a managing/listing agent to locate space, you will likely not be shown all the space that’s available (because their commission is half with properties they don’t manage or have listing agreements with). Or if you decide to lease space in one of the buildings marketed by an agency broker, when it comes time to negotiate the terms of the lease, who will represent the interests of your organization? The managing/ agent owes a fiduciary duty to the landlord to obtain the HIGHEST rent, not the lowest rent and concessions for you!

MANHATTAN OFFICE SPACE ® only represents commercial tenants, not owners or landlords. It or a designated broker will provide your organization with a complete listing of all available space, a summary of the costs (including rent, electric and escalations), and comparisons with surrounding submarkets. MANHATTAN OFFICE SPACE ® has access to an independent research firm that provides data on all commercial office space with updates daily, and our affiliates regularly visits locations throughout Manhattan to identify space before it’s even listed.

Finding commercial office space that meets your use requirements and budget involves a series of steps. First, it’s important to decide upon using one broker, but only after you’ve had a chance to evaluate several. Ask for a listing of available space and have the broker tell you which you’ll be shown (that way you will avoid being shown the same space by different brokers). And you don’t need to sign any exclusive agreement, binding you to one brokerage.  But it is in your best interest to use one, excellent broker to find space, instead of calling/emailing a dozen agents who will be chasing the same space.  That will lessen the landlord’s commitment to show you space and leave the impression that his/her time is being wasted (since multiple agents are chasing other spaces as well). That’s why we designate the most appropriate broker for you to work with.

Second, in the current real estate market, it’s oftentimes best to consider at least two or more spaces upon which to make offers. If you focus on only one, the chances of your offer being accepted may be problematic (due to other prospective tenants).  When the vacancy rates were lower, it was often useful to advise landlords that multiple offers were being made.  Now that the vacancy rates are higher, all the more reason to use this tactic.  But, if you use a landlord’s rep or broker who often represents landlords (listing their property), they’re more likely to share that (confidential) information with the landlord.

Third, be prepared to submit up-to-date financial statements and a brief description of your organization. This is a tenants’ market, but quality, smaller space can often be the subject of several offers. What will make your offer stand out and motivate the landlord to rent the space to your organization? How will your business impact the neighborhood, complement the building, or add value to the leasehold? These are questions you and your broker should consider, and the answers incorporated into the offer.  So let us help you use a broker who’s knowledgeable and who will save you money.

SUMMARY OF FACTORS TO CONSIDER IN LEASING OFFICE SPACE

1. Why use a Tenant Broker?  The simple answer is you’ll save money.  Office space advertised online, in a newspaper, or on a building sign directs you to landlords’ agents who do not represent your interests (they represent the landlord).  As a result, the asking rent will be inflated and the agent may not show you all available space.  And unlike most who call themselves “tenant brokers,” MANHATTAN OFFICE SPACE ® only represents tenants, not landlords.  We know the historic rents in the building, vacancy rate, and other key data which affect market price, and can obtain much better business terms for your organization.

2. Select your broker carefully.  To be effective, a broker must match your needs with the right space, draft a competitive and detailed offer that protects your rights, and structure the transaction to close in a timely manner.  He should be a licensed real estate broker, not an agent-in-training.  Also, inquire if his employer represents landlords or is acting as an exclusive leasing agent.  If so, ask for a written Tenant Agency Agreement that specifies he’s working for you and will not share confidential information with the landlord.

3. Make offers on a variety of spaces. This can significantly improve your bargaining position and provides a backup in the event your first choice is leased to someone else.  Even after an offer is accepted, most landlords continue to show the space, and some will actually lease it to another party who they feel is a better credit risk.  With a sublease, the landlord typically has the right to cancel the prime lease and recapture the space (which can result in the loss of 3-6 weeks).

4. Be proactive and market your company.  Financial statements and a company brochure or written summary should be submitted with the offer.  Landlords will not consider an offer without basic financial information, and a written overview can showcase your company.

5. Include other professionals.  If Tenant Improvements (TI) are anticipated, an architect or experienced office space planner should be consulted and any recommendations incorporated into the offer.  Your insurance broker should also review those portions of the lease that deal with property damage, personal injury, and condemnation rights.  Your attorney, architect, and other professionals should be included at an early stage of any potential transaction.  We also recommend that TI be approved as part of the lease negotiations instead of after the lease is signed (a)  to avoid wasting free rent while the landlord reviews plans and (b) because there’s greater bargaining power before the lease is signed (than afterwards).

6. Don’t stop looking for space.  Just because your offer has been accepted by the landlord doesn’t necessarily mean a lease will ultimately be consummated.  Until the lease is signed by both parties, there’s no legally enforceable contract.  We therefore recommend that you continue to look for space and check new listings until the lease is fully executed and delivered.