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Understanding “Microclimates” Can Help You Get the Best Leasing Deal

We’ve all learned from experience that relying on a broad regional weather forecast can be less than useful when microclimate activity comes into play. For example, when scattered thunderclouds are drifting around, that forecast of “mostly sunny” for the region doesn’t mean much when a heavy rain storm drops on your kid’s soccer game.

It can be the same in the commercial leasing market. Regional trends regarding lease rates and occupancy levels provide a useful context but it’s also very important to be aware of the dynamic nature of “leasing microclimates” in order to get the best fit for your needs and to drive the best deal for your budget.

The key to success starts with a clear understanding of your own space requirements and how they relate to the specific market area that you’re targeting. If you’re looking for a large amount of space, it can also be important to play your cards close to your vest in order to avoid influencing the microclimate in the area you’re targeting.

In general, if your space needs are in the 5,000 to 20,000 square foot range and you don’t have any specialized requirements, there are lots of options out there to consider. This is especially true if you have the leverage of location flexibility. A knowledgeable tenant representative can work with you to create a fairly extensive list of possibilities and you can leverage market competition to drive a good fit at an attractive lease rate.

However, when your space requirements are up in the 50,000 to 100,000 square foot range or even larger, the options become much more limited. Since there are relatively few landlords with space in these categories, the microclimate market dynamics are quite different. These landlords generally are on top of all activity in their market; they know the competitors and they watch for potential tenant activity very closely. Therefore, you are at risk of actually influencing these microclimates as you search for space.

In order to drive the best deal, you need to formulate your search strategy much more carefully. Although the market for these larger space categories can be less flexible, there are still some strategies you can use to inject a greater degree of elasticity into the market. If possible, you should expand the search into other areas beyond just your preferred primary location. Remember, saving 5 or 10 cents on the rate for 50,000 to 100,000 square feet over the course of a five year lease can be worth considering locations other than your first choice. Another alternative might be to split your operations into multiple locations. From an operational standpoint, splitting space is generally less desirable but it’s worth looking at and, even if you’re definitely not going to do it, letting this alternative surface can help your negotiating position with potential landlords.

Using these types of “head fakes” can keep the market a little bit off balance regarding your intentions and can spur more competition. The bottom line, is that you need to carefully play the chess game when looking for large space and do everything that you can in order to tilt the microclimate in your favor.

Scot Ginsburg is an executive vice president of Hughes Marino, a global corporate real estate advisory firm that exclusively represents tenants and buyers. Contact Scot at 1-844-662-6635 or scot.ginsburg@hughesmarino.com to learn more.



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