Top 5 Mistakes Corporate Tenants Make When Leasing Commercial Real Estate

By Fadekemi Ajakaiye

A high-profile realtor, Fine and Country, has listed five
mistakes corporate tenants make when leasing commercial real
estate. The research finding is titled ‘Commercial Properties; The
devil is in the detail’.

Fine and Country International (W.A) is a multi-award winning
international real estate network reputed locally and worldwide for
its’ unique blend of intelligent and creative marketing and
branding services, a solid market research and property investment
advisory service coupled with a professional approach to corporate
sales and leasing of premium commercial and luxurious residential
properties.

With operations spanning over 300 offices worldwide; in the UAE,
South Africa, Mauritius, Fine and Country International Realty has
its head office located on Park Lane, Mayfair in the United
Kingdom.

According to Fine and Country, the commercial real estate space
is quite dynamic and requires expertise of the processes involved,
as it is clearly more complex than leasing a residential apartment.
However, too many corporate tenants take it for granted and end up
making huge mistakes as a result of not following and understanding
due process. To help minimise potential risks and other costly
errors associated with this, we have compiled a list of top five
mistakes corporate tenants make when leasing commercial real
estate.

1. Beginning the negotiation of a renewal or new lease
too late.

Delayed negotiation of a renewal or new lease is one of the
biggest mistakes we see corporates tenant make. In simplest terms,
if you wait until your lease expires before you start speaking to
your landlord about renewing your lease or before you start looking
for a new space, you may have a hard time finding exactly what you
need especially in a competitive market.

2. Competence and Expertise

Many corporate tenants go into lease agreement process without
properly having adequate and required knowledge and as such, they
have made lots of mistakes that have impacted their business
negatively. Lack of knowledge combined with time pressure usually
causes corporate tenants to make wrong location decisions without
being aware of all the choices. This will sometime result in errors
that cut into their profits and/or increase financial exposure. To
guide yourself, consider getting the services of a commercial real
estate advisor to walk you through the process and confirm that a
space will meet your current and future needs.

3. Commercial Lease Clauses- the devil in the
detail

There is usually a lot of documentation as well as clauses in a
commercial lease contract that are mostly in favour of the
landlord. It’s therefore important to understand what those clauses
mean and how they can they positively or negatively impact your
business. Most times your real estate advisor/legal team can help
you understand these and negotiate clauses that will be more in
your favour.

4. Focus On Strategy, Not the Transaction

Whenever there’s a need for a company to move to a new
development or to renew their lease, in the excitement of ensuring
the transaction goes on smoothly, corporate strategy is often
neglected. All negotiations tend to focus only on the major
financial terms of the lease agreement and as a result, the impact
of the transaction on the portfolio strategy is easily forgotten,
important terms like rent review, expansion and contraction rights
seem to have low priority in the leasing process.

5. Do not underestimate the time the process will
require

The inability of corporate tenants to understand the time
process required often results in companies having to stay longer
in their existing premises and may negotiate a soft lease renewal
with the landlord. A successful relocation transaction time process
should include time for a site analysis and property selection,
negotiation, executive approval, legal documentation, fit-out,
relocation, etc. All these processes need to be completed within
the remaining period of the lease and if not the landlord will
demand compensation as entitled as per the terms of lease.

By Fadekemi Ajakaiye

A high-profile realtor, Fine and Country, has listed five
mistakes corporate tenants make when leasing commercial real
estate. The research finding is titled ‘Commercial Properties; The
devil is in the detail’.

Fine and Country International (W.A) is a multi-award winning
international real estate network reputed locally and worldwide for
its’ unique blend of intelligent and creative marketing and
branding services, a solid market research and property investment
advisory service coupled with a professional approach to corporate
sales and leasing of premium commercial and luxurious residential
properties.

With operations spanning over 300 offices worldwide; in the UAE,
South Africa, Mauritius, Fine and Country International Realty has
its head office located on Park Lane, Mayfair in the United
Kingdom.

According to Fine and Country, the commercial real estate space
is quite dynamic and requires expertise of the processes involved,
as it is clearly more complex than leasing a residential apartment.
However, too many corporate tenants take it for granted and end up
making huge mistakes as a result of not following and understanding
due process. To help minimise potential risks and other costly
errors associated with this, we have compiled a list of top five
mistakes corporate tenants make when leasing commercial real
estate.

1. Beginning the negotiation of a renewal or new lease
too late.

Delayed negotiation of a renewal or new lease is one of the
biggest mistakes we see corporates tenant make. In simplest terms,
if you wait until your lease expires before you start speaking to
your landlord about renewing your lease or before you start looking
for a new space, you may have a hard time finding exactly what you
need especially in a competitive market.

2. Competence and Expertise

Many corporate tenants go into lease agreement process without
properly having adequate and required knowledge and as such, they
have made lots of mistakes that have impacted their business
negatively. Lack of knowledge combined with time pressure usually
causes corporate tenants to make wrong location decisions without
being aware of all the choices. This will sometime result in errors
that cut into their profits and/or increase financial exposure. To
guide yourself, consider getting the services of a commercial real
estate advisor to walk you through the process and confirm that a
space will meet your current and future needs.

3. Commercial Lease Clauses- the devil in the
detail

There is usually a lot of documentation as well as clauses in a
commercial lease contract that are mostly in favour of the
landlord. It’s therefore important to understand what those clauses
mean and how they can they positively or negatively impact your
business. Most times your real estate advisor/legal team can help
you understand these and negotiate clauses that will be more in
your favour.

4. Focus On Strategy, Not the Transaction

Whenever there’s a need for a company to move to a new
development or to renew their lease, in the excitement of ensuring
the transaction goes on smoothly, corporate strategy is often
neglected. All negotiations tend to focus only on the major
financial terms of the lease agreement and as a result, the impact
of the transaction on the portfolio strategy is easily forgotten,
important terms like rent review, expansion and contraction rights
seem to have low priority in the leasing process.

5. Do not underestimate the time the process will
require

The inability of corporate tenants to understand the time
process required often results in companies having to stay longer
in their existing premises and may negotiate a soft lease renewal
with the landlord. A successful relocation transaction time process
should include time for a site analysis and property selection,
negotiation, executive approval, legal documentation, fit-out,
relocation, etc. All these processes need to be completed within
the remaining period of the lease and if not the landlord will
demand compensation as entitled as per the terms of lease.