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Short Term Commercial Real Estate Leases Main Boise Valley Commercial Real Estate
People often ask if an owner / landlord would want / be willing to lease a space to them on a short term basis at a low rate. We can always ask an owner / landlord if they are interested in that type of offer, but before you do make that kind of offer, there are some things you should consider.

Tenants often want to use a space either on an interim basis or for a short-term while they determine if their busines model is valid or for their own purposes.

First, let me say that all owners / landlords are different. They're just like you and me with different objectives and needs.  That means there is no single answer to this question.  However, to be credible to the owner / landlord, there are some general considerations.
 
One thing most people don't know is that owners / landlords have their properties valued based on the leases in that property. The lease rate, term of the lease, and tenant credit-worthiness (among other things) establishes building value with their lenders. So, even though it may not seem that having a space sit vacant makes sense, leasing a space at a discount may, even though they can derive some income (the "some income is better than no income" thought), devalue their property in the eyes of their banker. That, in turn, can create issues for them.
 
Another issues landlord / owners have to consider, like all of us in our own business, are the other issues that might come up with their other clients (tenants). If they were to give favorable pricing to short term tenants, then how would their other longer-term tenants (who might also be more credit-worthy) feel if that were to become known. Generally, favorable rates are given to a) "national credit" tenants and b) credit tenants making long-term commitments.
 
However, there are several things a short-term tenant can do to possibly overcome those objections. Those "things" a short-term tenant can do, either individually or in combination are:
 
1)    Offer to pay an above market rate (a premium to make it worth the owner / landlord's time & effort);
 
2)    Offer to vacate in 30 days upon notice (although I would suggest requesting a first right of refusal in case it did look like a good fit);
 
3)    Offer to lease for 3 or more years and ask for certain rights of termination after stipulated periods (e.g.; every 3 months during the first year, every 6 months during the second year, etc...) - those rights may come with a termination fee of one or two month's rent; and / or
 
4)    Offer to pay several months in advance at lease signing.
 
There may be other things that might entice a owner / landlord to consider a short-term deal that your commercial real estate agent can determine once you both have a game plan for making an offer on a specific location and after your agent is armed with your thoughts and needs, they can meet with the owner's leasing agent to discuss in broad terms, a possible deal structure.
 
Tenants need to consider the owner / landlord's position to be effectinve in negotiating a win-win deal.  What I mean by that is to ask yourself how you would react if a new customer came to you with a similar request in your line of work. If a one-time or very small customer came to you and asked for your best pricing, how would you feel / respond? Knowing how you would feel / respond, now think how you would feel if that customer came in and said something like "I know I am only a small possible client, but here's what I'm trying to accomplish and here's my vision. Now, how can we work together and under what circumstances to make this a win-win?"
 
See the difference? That approach, is generally where you find owners / landlords more open to creative approaches.
 
Please understand is that what we (commercial real estate agents) serve several purposes. The first is to bring value to our clients in the way of knowing what market rates are, what normal leasing terms (lease issues) are and second, by acting as facilitators to make things happen by understanding & anticipating both parties concerns and objectives.
 
So, in summary, the short answer to the question of leasing a space on a short term basis is "maybe."  I suggest you discuss a game plan with your commercial real estate agent for approaching the owner / landlord's leasing agent to explain to them what your objectives are and terms under which both parties might be able to work with.  We don't give away the highest level you'd be willing to pay, that's not how we do it, but if we understand what we have to work with, then we can sit down with the owner's leasing agent and get into a focused discussion in a give & take setting to see if we can outline a suitable deal structure for both parties.
 
Hope this helps.
 
Best,
 
Scott Nicholson
BOISE VALLEY COMMERCIAL REAL ESTATE, LLC
 (208) 890-3939
 e-fax: (208) 248-2250
 
Posted by Scott Nicholson at 7/21/2008 5:45:00 PM
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