Real Estate Information ? Blog Archive ? Reminders About Leasing ...

When it comes to leasing commercial or retail property, it is the total lease package that is more important than the starting rental. The total lease package is the value of the cash flow and the stability of the tenant over the entire lease term. Too many landlords focus on the starting rent with little regard for the long term. Experienced real estate agents can help the client through that dilema.

As a commercial real estate agent of many years industry experience, I have successfully shown quite a few landlords that the starting rental is only a small part of the property leasing equation.

Landlords should stop focusing on the asking rent and start to look at the value of the complete lease package. The starting rent is a only of significant concern when the landlord is about to sell the property, or refinance the property.

It is very easy to prove to a landlord the long term value of the lease. You simply use a net present value approach to the lease cash flow.

Things to consider in the cash flow analysis and calculation will be:

1. The initial starting rent and the type of rental to be used. This will normally be gross or net rent.
2. The incentive to be provided to attract the tenant. This can be discounted rent, rent free period, landlord funded fit out, or cash payment.
3. The duration of the lease term excluding lease options
4. The rent review profile and timing over the lease term
5. Current market rental benchmarks from the local area on comparable property
6. The stability and experience of the tenant in their current business operation
7. The fit between the tenant and the existing tenant mix
8. The lease term and the expiry date for the individual lease and its comparison into the existing tenant mix expiry profile.
9. The expected landlord costs to be incurred in preparing the premises for new occupation
10. The secondary costs associated with the leasing process such as leasing fees and commissions
11. The downtime associated with an extended vacancy factor
12. The loss of outgoings recovery associated with vacant tenancy space

This simple list presents many ideas and concepts that can be used with the landlord in the negotiation of the new lease. Leasing a property or a tenancy is all about where you finish and not where you start. You can easily use a cash flow analysis model to prove that.

John Highman is an expert real estate author, conference speaker, and coach. He helps Real Estate Agents to improve their market share, listings, and commissions. You can get a free ebook of real estate tips and tools right here at http://www.commercial-realestate-training.com

This entry was posted by Alex Bhaswara on October 10, 2011 at 4:02 am under Commercial Property. Tagged Leasing Commercial, Retail Property. Both comments and pings are currently closed.

Source: http://neurai.net/reminders-about-leasing-commercial-and-retail-property-the-right-way/

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