“My Rent Is Low. That’s Great News – Or Is It?”

Dear El Cardinale’,

I’ve been talking to other executives whose companies lease space in the same building where I do. From what I’m hearing, I’m paying cheap rent compared to others. That’s great news, isn’t it? Or is there something I don’t know that I should be worried about?

– Sitting in the Catbird Seat

Dear Catbird Seater,

Congrats, for now. It might feel like you are in an enviable place, but my friend, I’m here to tell you, that one day things won’t be feeling so pretty.

You see, there is a landlord in the shadows nearby who is waiting for your renewal and he is ready to pounce. That cat with the Cheshire grin has been quietly pushing rents with every new tenant, and every lease renewal proposal he sends out. And the result is a record of rent inflation in all of the top 100 office and industrial markets across the US.

You see, he bought the property recently and paid a lot for it. The only way he will make any profit is to push rent. He and his partners bought the property assuming you will pay “market rents.” I can empathize with him – we are both cat-polist. (Capitalists, get it?)

Okay – enough of the puns.

If you signed a long-term lease five, seven or ten years ago, you may find yourself in a bind when your lease rolls. How so, you may wonder. It’s because when it is time to renew, and with market rates moving up dramatically since the recession, you will need to be prepared for a huge jump in rent.

For example, in 2018, Charlotte had the fastest industrial rent growth in the country – a whopping 8.3%, according to CoStar. Charlotte is not alone, across the nation industrial rents have escalated year after year over the past decade. Office rents have also increased, but not like industrial – with one exception. Class A office rents in the CBD have gone through the roof. If you were the first tenant in a new building five years ago, expect your landlord to provide you a renewal proposal 2%-9% above your current rent.

It’s important to understand the market with a long view. Be sure during renewal time that you are armed with the latest market stats and have a skilled negotiator by your side – it will help you soften the blow of any rent increase.

If you want to know what your others in your building are paying in rent, or if you want a report projecting what your lease renewal lease terms will look like, shoot me an email.

Real estate transactions can be fraught with frustration and pitfalls.

Sometimes the hardest part turns out to be working with your broker, the person who is supposed to help you through the complexities. Veteran commercial real estate broker and client advisor John Culbertson discovered that brokers’ interests aren’t always aligned with those of their clients. He realized there was a better way to advocate for clients and get the deal done.


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