The Pavonis Group

Five Tips for Writing a Killer Lease Analysis


October 29, 2015

Your clients rely on you to determine the best leasing options for their commercial space. They trust that you will put together a lease analysis report that will show them that they are making a good decision when making a long term leasing commitment. To ensure that you are presenting your clients with the best lease terms, here are five tips for writing a killer lease analysis.
 
#1: Owner/Tenant Rep
 
Before committing to renting a property, it’s important to have a tenant broker representing the interest of the client. The tenant broker will help prospective tenants locate properties that fit their needs and wants in commercial space. They will give you objective advice, evaluate your commercial real estate requirements, effectively communicate your desires, and negotiate your commercial lease terms. This is important to include in a lease analysis because it ensures that the needs of the owner and the tenant are met.
 
#2: Tenant Improvement Allowance
 
The Tenant Improvement Allowance defines the fixed amount of money that will be contributed by the landlord toward tenant improvements, which may include new improvements or remodeling that will be paid for by the landlord, tenant or split between the two. The tenant must pay any cost that exceeds the fixed amount in the Tenant Improvement Allowance. For your tenant to be prepared for improvements and extra expenses, the Tenant Improvement Allowance should be included in the lease analysis.
 
#3: Free Rent and Tenant Concessions
 
Depending on the timing in the market cycle, tenants may be able to negotiate concessions or credits in the form of “free” or discounted rent for a period of time. This form of concession can be all up-front or spread over an extended period. In some cases the “Free” rent period may even add months to the lease term. It is critical to understand how these concessions work to determine a comparison of effective rent among several alternatives.
 
#4: Expense Cash Flow
 
The expense cash flow should be included in the lease analysis to ensure that your client understands the complete expense picture. This will help determine the the total cost of occupancy which will be greater than the base rent. Every property has a different level of efficiency and cost structure so is critical to understand the nature and level of additional direct occupancy expenses that will be incurred.
 
#5: Pass-Throughs
 
All of the expenses or an amount above a base level of the pre-defined expenses associated with the lease may be passed-through for payment from the landlord to the tenant, who then pays them. If there is a pass through clause in the lease, the cost of occupancy to the tenant may increase over time. These types of expenses aren’t just direct expenses but also may include the costs to support common areas.. This is important to include in the lease analysis, as these additional costs may be significant and change a decision based on one properties operating efficiency over another.
 
To write a killer lease analysis for your client, you’ll want to include these five things to help them make the best and smartest decision when it comes leasing a commercial property. With the RealNex Financial Analytics Toolset, you will be able to compare and evaluate multiple options and create comprehensive lease presentations to help your clients ensure that they are entering the right lease for their goals and their business.