A commercial lease transaction is a complicated and important transaction between the landlord and the tenant. Lease negotiations require both parties to engage in extensive analyses, discussions, negotiations, and compromises. The best outcome is a win-win situation in which both parties are confident that their objectives have been met. A completed lease transaction is the rewarding result of several real estate professionals using their expertise, knowledge, and experience. They all work together to achieve their client’s leasing goals and objectives. The leasing process these professionals go through takes several months and either culminates in a completed lease or ends with the landlord and/or the tenant being disappointed that they were unable to complete the transaction. The lease
transaction is also important to many individuals who provide information to help the landlord and tenant make their best decisions during lease negotiations. Though these professionals do not control the decisions made by the landlord and the tenant, they must fulfill their responsibilities in a timely manner. Their goal is to bring the leasing process to fruition through a fully executed lease. There are many beneficiaries of a completed lease. The community benefits every time a new business enters the area. Jobs are created, services are provided, the tenant mix of shopping centers is enhanced, and other businesses in the area benefit when a new business brings employees and attracts customers to the area. The new business and its employees often become customers of other businesses in the area. And each business contributes to the tax base of the community. Yet lease negotiations do not just
effortlessly transition through the many steps needed to arrive at an executed lease. The landlord and tenant must be prepared for the important process of negotiations, and all the players involved must use their skills diligently to achieve the successful completion of a lease transaction.
Leasing space requires the expertise of several professionals from different disciplines in the real estate industry working together to achieve their client’s leasing goals and objectives. Landlords assemble leasing teams to find tenants for their buildings, while tenants assemble leasing teams to find space to operate their businesses. The landlord’s team will include leasing agents, administrative support, attorneys, space planners, tenant improvement contractors, the building’s property manager, and possibly the building’s lender. When the landlord is a developer, the team developing and building the project will expand to include the developer’s employees, designers, construction contractors, finance professionals, leasing agents, and property managers. The number of players on the tenant’s team will vary depending on whether the tenant is a local business or a national company. A local business will hire a leasing agent and may require the services of a space planner and designer. Regional and
national companies have real estate representatives, site selection committees, construction coordinators, and lease administrative personnel, and they often contract with a local leasing agent to find alternative locations to consider.
Muhlebach, Richard; Alexander, Alan (2010-06-14). The Leasing Process (Kindle Locations 545-817).
Institute for Real Estate Management. Kindle Edition.
Lesson Learning Objectives
By the conclusion of this Lesson you should be able to:
- Comprehend the complete leasing process
- Understand the roles of the various professionals in the leasing process
- Understand the Landlord’s and the Tenant’s view of the lease investment
- Recognize the reasons leasing deals fail
- Understand professional standards and determine the boundaries of ethical behavior
- Study Chapters 1 and 2 of the text.
The following Assignments should be completed and submitted to the course faculty via the learning platform for evaluation and grading. Submit your responses to these questions in one WORD document. List the question first, and then your response.
Be sure to properly site your sources, both in-text and with a reference list at the conclusion. If you use an online source to support your answers, you must provide a properly formatted link to the source. You should use APA citation format and make sure your sources are credible. In most cases, your responses should be no more than 500 words.
1. Commercial real estate brokers can provide a valuable service to landlords and prospective tenants. Describe the advantages and disadvantages of retaining a commercial real estate broker from the perspective of the prospective tenant.
2. Discuss the key questions to ask yourself when you are looking for space for a business.
3. Reflect on the pitfalls that prevent leasing deals from happening.
4. Compare and contrast the importance of a lease as an investment, from the Landlord’s view and
from the Tenant’s view.
5. Describe the three constituencies that benefit from ethical behavior in the commercial real estate market and discuss the three primary players in a real estate lease transaction.