Archive for the ‘Case Studies’ Category

Time Is Your Friend

Monday, February 15th, 2010

In last month’s blog, I wrote a case study about a 30,000 square-foot College Boulevard tenant we represented.  In summarizing things that contributed to a successful result, I stated, “time is your friend” referring to having been hired 18 months before the tenant’s lease expiration.  I want to expand on that in this blog.

If you are going to make a mistake, start the process to search for new space (or renew your current lease) too early – not too late.  Subject to what your lease says, my rule of thumb is you need to start at least a year ahead of lease expiration.  The bigger your space, the more time you need to allow, in some cases 2 to 4 years before your lease expires. Here are a few examples…

We just finished a project for JP Morgan Retirement Plan Services for 180,000 square feet.  The duration of this project was 2½ years.  During that time, we discussed renewing the current lease, building a new building and relocating to an existing building.  The result of that process? JP Morgan will occupy an entire building at the Sprint Campus in Overland Park, a solution that suited their needs perfectly.

A few years ago, we represented Lathrop & Gage on an expansion and renewal of its headquarters lease at Crown Center for 170,000 square feet.  We were hired 4 years before the lease expiration date.  Why?  First, we had to work with our client to understand their needs for the next 10 to 15 years.  Then we had to evaluate which existing (or future) buildings could meet those needs.  Finally, we had to negotiate the final deal.  Did it take 4 years to do this?  No, but we had to allow 2+ years time for a new building to get designed, approved and built to avoid holding over after lease expiration.

In the above cases, and lots of others, we had ample time for thoughtful planning, thorough evaluation of alternatives and the leverage of not being backed into a corner.

Now, having said all that, we know that not everyone’s crystal ball allows for all this time. And when we have to, we figure out how to succeed in spite of too little time.  We have numerous examples of being hired much closer to the expiration date than outlined above, and we have made it work.  But remember, in commercial leasing – time is your friend.

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Representation Means Options For Overland Park Tenant

Monday, January 18th, 2010

Eighteen months ago, we were asked to meet with a 30,000 square-foot tenant in a highly desirable College Boulevard building, in the 9th year of a 10-year lease and needed more space.  They had negotiated the original lease on their own.  The lease didn’t have an option to renew or option to expand but the tenant wanted to do both.  The space looked ‘tired’ and needed to be refurbished.

They had received an unsolicited proposal from the landlord to renew at a rent that was $3.00 per square foot higher than they were then paying without any contribution from the landlord toward the refurbishment costs (which were estimated at $450,000) and a 2007 operating stop for a lease that started in 2010.  They were concerned about the $3.00 per square foot increase.  We were concerned that the rent was too high, but we also felt the landlord should contribute a refurbishment allowance and that the lease should have a current operating stop.

Ultimately, we were able to show the landlord that renewing our client at the current rent, including the refurbishment allowance, was better than the deal they would make with a replacement tenant.  We also succeeded in getting a 2010 operating stop and really favorable renewal and expansion options to insure their future at the building.

Several things worked in our favor in this case:

  1. Time – The 18 months before the lease expired gave us time to analyze the market for other choices and get comparative proposals.  Time is your friend.
  2. Experience – We had worked with the existing landlord before and knew what his ‘hot’ buttons were to make him want to keep this tenant – not to take a chance on a replacement tenant.
  3. Comparable Data – We do many leases each year in this community.  And for each lease we do, we probably have 5-10 proposals related to each deal.  So we have lots of comparable data to know, not guess, what a ‘market’ deal is.

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