Finding a suitable commercial space to lease can be a real challenge for some companies and their tenant reps. So much is involved in actually finding the perfect space: negotiating with landlords; going through a credit check; building improvements; and the cost of business relocation. It is no wonder this process can take months or even years.
Yet there is another concern many companies must deal with that is somewhat unexpected - financially unstable landlords. Adding yet one more factor to the process of finding the right space, tenants now need to screen landlords. This further highlights the importance of working with an experienced tenant representation company.
The Problem of Financially Unstable Landlords
When companies lease office space and take the time and expense to relocate their business, it is normally done with the intent of staying for the duration of their lease or even renewing the lease indefinitely. To make this investment, then forced to vacate because the landlord has lost ownership of the building, is nothing any tenant wants to hear.
Unfortunately, this situation has recently become more prevalent, creating yet another concern for tenants who are looking for the perfect space to lease. Will tenants even get their money’s worth after signing a lease? This is a serious concern that has more companies seeking guidance from tenant reps who can effectively screen their landlords, even to the point of examining financial statements.
Why Is This Happening?
Although it is not impossible for a landlord to lose a building, it is not a common situation either. The commercial real estate market is seeing a marked increase in these occurrences and financial analysts blame the recent real estate boom. It is thought that many landlords may "over-purchase" due to the availability of cheap money that was easy to obtain a number of years ago. In spite of the ease with which real estate could be purchased, many did not see the necessary returns to stay afloat due to a poor estimation of income and cash flow. Many of the buildings affected by this happening have been foreclosed on for these and similar reasons.
Tenants Must Carefully Screen Landlords
Every commercial tenant wants to lease from a landlord with whom they can have a workable landlord-tenant relationship. A tenant representation company helps businesses find the best buildings and landlords who are most likely to favorably negotiate; however, now there is yet an additional factor to consider. When contemplating this increase in financial instability among landlords, especially among those who purchased buildings during the recent real estate boom, tenant companies must be even more careful with their research.
Landlords always check financial references before signing a lease with any tenant; now tenants must take these same measures for their own security. Looking at financial statements to ensure that landlords are current on their payments and can continue to make such payments is now yet another top concern for tenants. This even affects companies subletting space who are facing the same risks.
To avoid the problems that could arise from these circumstances, tenant reps must look at finances on both sides of the deal to protect a tenant’s investment. Even in what seems like the most favorable leasing conditions with an agreeable landlord, financial problems faced by the landlord can put a tenant at great risk. When working with an experienced tenant representation company that can carefully analyze a landlord’s financial condition, businesses fare much better long term. A landlord’s loss does not have to affect tenants who do the right research and make wise leasing decisions!
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