Office lease negotiations are complex, and tenants who lack strong representation are often at a serious disadvantage—they don’t know what they don’t know. One key area where this shows up is the tenant improvement allowance (TIA).
TenantSee Weekly: Subleasing Office Space - What Tenants Need to Know
TenantSee Weekly: The Exclusive Right to Represent
At TenantSee, we only advise clients under a formal working agreement that clearly outlines our role as the exclusive representative, the scope of services, and how we are compensated. It’s a short, straightforward document—but a vital one. It establishes our fiduciary duty and marks the official beginning of our advisory relationship.
TenantSee Weekly: The Long Shadow
When companies select a real estate advisor, one crucial yet often overlooked factor is the advisor’s credibility with landlords. It’s understandable why this isn't top of mind — credibility is difficult to measure. But it can be among the most valuable assets your advisor brings to the table. Let's break down what "credibility with the landlord" means and why it matters.
TenantSee Weekly: Is ChatGPT Better Than You (Me)?
If you’re a business professional—accountant, lawyer, engineer, or even (gulp) an office broker—you’ve probably wondered: Can AI do my job better than me?
As a broker who advises office tenants, I tested ChatGPT in a domain I know well. I asked it for average Class A office rents in downtown San Francisco over the last 30 years, including supply and demand dynamics. In less than a minute, it delivered a surprisingly accurate answer.
TenantSee Weekly: What Tenants See Impacts Tenancy
Most of what tenants need to see in order to make smart leasing decisions is not immediately visible. It must be uncovered through strategic discovery and analysis. That’s the mission of TenantSee: to provide the process and resources that bring hidden factors to light. We don’t make decisions for our clients—we make their decisions better.
TenantSee Weekly: What Really Matters
In the business of advising office tenants on leasing space, services are provided by a wide range of firms—from solo practitioners to global public companies with thousands of employees. As in any competitive industry, each firm tries to differentiate itself by highlighting its strengths while casting doubt on the competition.
TenantSee Weekly: AirOffice
For many companies, office space is among a variety of resources they make available to employees to help facilitate work. Other primary resources include technology. In fact, today, technology arguably contributes more to how work is done than the physical office. The diminished role of the office in facilitating work has resulted in changes in how companies look to use office space. One manifestation of this change is in flexible offices, or coworking spaces. This product segment, having grown considerably over the past decade, is tangible proof of shifting consumer sentiment.
TenantSee Weekly: What's Missing
Negotiating office leases is like any other complex financial decision in that more information leads to better decisions. Yet companies face challenges acquiring the right information at the right time. Why? Because the services typically offered by real estate brokerages are centered on transacting based on site selection and the negotiation of basic rental economics. This is not enough. Sometimes, these services (at least) include a level of multi-building negotiation, exercising a degree of leverage, but too often they lack the proper structure to gather and assess critical data, data that will have a big impact on outcome.
TenantSee Weekly: What Will We Do?
TenantSee Weekly: How a Building Sale Affects Lease Negotiations
The pace of investment sale activity in San Francisco is accelerating. This is the “Great Reset” about which we’ve written. It’s driven by capital partners (equity/lenders) deciding there is no viable pathway to own their way to an exit and choosing to sell (usually at a steep discount to what they paid and/or the value of the debt). Ultimately, these capital stack resets are healthy as they activate the asset, enabling new capital partners to transact at market.
TenantSee Weekly: Do Cities Still Matter?
I grew up in a small town but I always dreamed about big cities. I sensed they were special places where, given the right amount of drive, the right mindset, one simply could not fail. Sure, there would be ups and downs, but cities provided access to a robust network of opportunity. This was in stark contrast to the small New England towns of my childhood, many of which never fully recovered from the demise of the textile mills in the early 1900s.
TenantSee Weekly: Contradictions in Logic
These days, the resetting of capital stacks (the ownership structures for office buildings) is most often facilitated through selling the building. The current market sale dynamic typically involves one set of financial partners (equity, lenders) taking big losses to permit a new set of investors and lenders to “reset” the capital stack on economic terms that provide a pathway to success (e.g., a productive investment).
TenantSee Weekly: Active Listening, the Skilled Negotiator's Secret Weapon
Office lease negotiations are complex, involving numerous parties (the principals and their advisors), and covering a wide range of issues, from economic to legal. The most effective negotiators are those who possess both a deep understanding of the markets, and the ability to actively listen while negotiating.
TenantSee Weekly: Modern Workplace Planning: Solving for Experience Part VII: Design and Construction
One common mistake tenants and their advisors make when negotiating the office lease is failure to properly account for design and construction implications. These are important considerations. Space design plays a vital role in determining the efficacy of the space, how it translates in terms of value to the employees. Construction is expensive, representing a material component of the tenant’s total occupancy cost. Gaining understanding about design and construction at the right time in the transaction process provides useful data in the context of effective negotiations.
TenantSee Weekly: Modern Workplace Planning: Solving for Experience Part VI: Negotiating the Lease
Leases vary by building, by market, and by market circumstances. In most major metros, when dealing with larger buildings, the lease document is sophisticated and complex, addressing a broad range of variables that will have a material impact on the occupier’s experience at the building, as well as its cost of occupancy. If you’ve done a good job negotiating the letter of intent, you should begin the lease negotiation phase from a position of relative strength. However, even when the letter of intent is fully maximized, there’s still a lot to negotiate in the lease.
TenantSee Weekly: Modern Workplace Planning: Solving for Experience Part V: Negotiating the Letter of Intent
The letter of intent (“LOI”) is a non-binding document (although in unique circumstances they can be binding) which captures the terms and conditions upon which the parties have agreed and becomes the basis for a legally binding document (the lease). The best LOIs are highly detailed and cover a wide range of topics from rental economics to flexibility mechanisms (like expansion, contraction, termination, and extension options) to operating expense inclusions and exclusions, and much more. The occupier’s ability to include more items in the letter of intent varies somewhat by the circumstances of the market. In tight markets like San Francisco circa 2019, landlords could get away with limiting the level of detail covered in the LOI. Why would a landlord want to limit the LOI in this manner? Because they gain leverage. Most tenants don’t enter into the lease negotiation until late in their market process, meaning they’ve burned through a lot of the project schedule and will soon need to transition to design and construction in order to get the space ready on time. In short, limiting the terms of the LOI is a way for the landlord to jam the tenant on timing, forcing them to be more conciliatory to preserve schedule. In this current environment, nearly all tenants can enjoy the benefits of expanding the content of the LOI.
TenantSee Weekly: Modern Workplace Planning: Solving for Experience Part IV: Implementing an Effective Market Process
You’ve identified the purpose behind your physical space needs, you’ve created a thorough project budget and schedule, and you’ve developed the right strategy. It’s now time to implement a market process.
What is “…a market process”? In the context of office leasing, market process is how you engage the market. It ties to your strategy, with sensitivity to the objectives you seek to accomplish. The market is where you implement your strategy, where you take it from theory to reality.
TenantSee Weekly: Modern Workplace Planning: Solving for Experience Part III: The Right Strategy
Once you’ve established the purpose of your physical workspace, and given careful thought to budget and schedule, it’s time to develop the right strategy. This is a vital step prior to market engagement. Good strategy is not always obvious. At a minimum, any effective real estate strategy will include simultaneous assessment of multiple deal scenarios. Why would this matter? For starters, negotiation outcomes are not known. At the beginning of the process, the favored outcome may be to stay in the existing space. However, as the process evolves over multiple rounds of negotiation, we often find that things change in ways that may cause the desired outcome to shift. For example, when the existing landlord offers terms that are materially less favorable than those achievable through relocation.
TenantSee Weekly: Modern Workplace Planning: Solving for Experience Part I: The Purpose
In the years leading up to the pandemic, most medium and small companies defined their office space need based on headcount (current and projected), space programming, and industry/sector norms. The exercise was mostly formulaic. The primary differences in the offices of a small, regional law firm compared to those of an AM Law 100 firm would be scale, the cost of finishes, and the quality of the building and views. It was planning for the same outcome, just at different levels on the cost spectrum. Companies having a larger portfolio of offices would typically create a “workplace strategy” that included guidelines around programming (e.g., space layout, office size, critical adjacencies, growth factor, finishes, FF&E, etc.). These guidelines could then be used to inform the real estate process across geography.