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The Benefits of Leasing From Large Landlords

While it may cost you a few extra cents per square foot, the perks that come with leasing from a major landlord can be invaluable.

Within just six months of having signed a long-term lease for Hughes Marino’s Orange County office space, we had already outgrown it. So we made the decision to upgrade from a 1,500 square foot office into a 5,000 square foot space to accommodate our growing team. The new space (which we will tell you about soon, but here’s a hint: it’s awesome) required a lengthy build-out and, while we waited for the project to be completed, we were suffocating in our small office. Luckily, our landlord allowed us to move into a larger, temporary space to hold us over until our new office was finished.

Situations like these prove that the perks that come with leasing from large landlords can be invaluable. Here’s a look at why:

1. Large landlords offer tremendous flexibility in more ways than one.

When you choose to lease from a landlord who has multiple properties in their portfolio, you’re typically granted the opportunity to expand into larger spaces with very little resistance. Normal space churn leaves most multi-tenant buildings with just under 5% of space available at any time. Therefore you are likely to find that when you need to expand, not only will they have the space you need, but there may also be a space to move into during the interim.

But that’s not all large landlords offer in the way of flexibility. They allow business owners to lock in long-term leases at low rates, and are more than happy to accommodate you in moving up, or moving around within their portfolio during the term of your lease. Even if you sign a five-year lease, for example, but need to upgrade after just two years, they will relieve you of your existing obligation in light of a new contract elsewhere in their portfolio. Rather than forcing you to sublease your existing space – or worse, forcing you to buyout the rest of your lease – they often are helpful in keeping your rent reasonable during your transition.

Finally, large landlords offer flexibility perks that smaller landlords just can’t compete with. For example, consider there might be a conference room in your building that you would like to book for a company event. As it happens, the room is already booked for that day. In most cases, you will have the opportunity to utilize amenities located in other properties within the landlord’s portfolio. This also helps some businesses with confidentiality issues, as they can move sensitive meetings to an off-site location away from their office.

2. Large landlords afford the opportunity for greater tenant improvements.

With big companies, come big pockets, and in this regard leasing from large landlords is to the benefit of tenants. You are far more likely to get a larger tenant improvement allowance from an institutional landlord than you are with a non-institutional landlord. The reason is simple. They have more tenants, they collect more rent, they have great access to capital and therefore more money is available in order to help you to customize your space to your particular needs.

3. Large landlords have sophisticated property managers.

Landlords with large portfolios of properties bring their A-game when it comes to the management of those properties. Indeed, when you lease from a large landlord, you can almost assuredly count on the fact that they will have an entire team devoted to meeting tenant needs. This will often include engineers, IT specialists, maintenance workers and a cleaning staff. That means that you are not at the mercy of one handyman to handle every issue that arises.

By way of example, one of my clients recently needed very specific technological requirements for one of the conference rooms in the space they were going to be leasing. The system absolutely had to be compatible with a system used in their New York office. This particular institutional landlord had an IT guru as part of its property management team, and my clients’ needs were met seamlessly.

It may sound like I’m telling you that leasing from large landlords is going to make all of your dreams come true. In many regards, it may appear that way (as long as your dreams only involve leasing commercial office space). But the truth is, you likely will pay a bit of a premium for Class A space. Each case will be unique and will depend on a myriad of factors. However, at the end of the day, for most users, the flexibility, the management, and the opportunities afforded by leasing from large companies will far outweigh the price of a few extra cents per square foot.

Tucker Hughes is managing director at Hughes Marino, a global corporate real estate advisory firm that exclusively represents tenants and buyers. As head of Hughes Marino’s Orange County and Los Angeles offices, Tucker specializes in tenant representation and building purchases throughout Southern California. Tucker makes frequent media appearances to speak on the future of commercial real estate, and is also a regular columnist for Entrepreneur.com. Contact Tucker at 1-844-662-6635 or tucker@hughesmarino.com.

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