Hi all, I am about to lease a commercial space in a busy section of our city in Kentucky. The square footage is 4,200. The landlord is asking for $5250 a month triple net. I wanted to negotiate the price down to $4300 is that feasible?
Hi all, I am about to lease a commercial space in a busy section of our city in Kentucky. The square footage is 4,200. The landlord is asking for $5250 a month triple net. I wanted to negotiate the price down to $4300 is that feasible? This place has been empty for 7 years and he would be replacing all utilities (plumbing, HVAC, take down some walls) and we would also ask for 5 months of free rent on a 5 year lease.any tips would be greatly appreciated!
[{"id": "iwnnjs7", "text": "In markets like this, anything is possible. There is a point in which it doesn't make sense for the LL to do the deal based on capital expense...You want to be right above that point :)\n\nFWIW, without knowing specifics about the market there really no way of knowing what is a \"good deal\". The fact that it's been empty for 7 years is a pretty solid reason to really push on negotiations. Worst case, they say no and you try again.", "replies": [], "depth": 1}, {"id": "iwnnvxh", "text": "It's all a negotiation, ask for what you want and see what happens!", "replies": [], "depth": 1}, {"id": "iwnof0g", "text": "find the comps.", "replies": [], "depth": 1}, {"id": "iwnud4i", "text": "Can we get a bot that just pins \"Hire a broker\" to the top of each thread?", "replies": [], "depth": 1}, {"id": "iwnzonh", "text": "I would ask about the CAM charges, especially if the LL will upgrade the unit. Some of this cost may be passed on to you thru operating expenses.", "replies": [], "depth": 1}, {"id": "iwo3651", "text": "Hire a broker.", "replies": [{"id": "iwo6utz", "text": "And good lawyer once you get to lease", "replies": [{"id": "iwodjxp", "text": "This is the way.", "replies": [], "depth": 3}], "depth": 2}, {"id": "iwqoo7u", "text": "I don't know what city they live in but knowing it's Kentucky, without any real major market, I would bet it's not easy to find an experienced leasing broker. \n\nHiring a residential agent to negotiate a lease is going to be hit or miss at best.", "replies": [{"id": "iwrfmy2", "text": "Several large shops have a presence in Kentucky. I\u2019ve done several deals in Louisville, partnered with local brokers from large shops in that market. OP what city are you in?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iwoc93l", "text": "1st question - is this location your top pick, or is it the 2nd or 3rd on your list? If its your top pick and you won\u2019t find as good of a place again, be careful about what you offer - if the LL thinks $4,300 is a lowball offer (20% discount), they may write you off as a tire kicker. If its 2nd or 3rd on your list and you don\u2019t mind loosing this prospect, go for it.\n\nOther considerations:\n- if your really want to start off at 4,300 bc you want your initial expenses low, then maybe put in your LOI (letter of intent) relatively aggressive rent increases matching close to market in years 3 - 5\n- Also, I understand the place has been empty for 7 years, but how long has it been actively on the market for?  If it hasn\u2019t actively been on the market, the LL doesn\u2019t really want to lease it out.\n\nHope this helps. Feel free to reach out if you want to bounce ideas off. (P.S. I am a residential / commercial LL in TX)", "replies": [{"id": "iwod2xb", "text": "It\u2019s been on the market since 2011 from what we can tell and yes it\u2019s our first pick.", "replies": [{"id": "iwpyxyq", "text": "Lol, no way it's been on the market for 12 years...", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iwof6bi", "text": "Louisville based commercial investor and broker, shoot me a chat and we can talk. Not a sales pitch I only work on my own stuff but would love to be helpful if I can be.", "replies": [{"id": "iwqp3m9", "text": "OP, this is a huge offer. Take them up.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iwoj9gd", "text": "Unlikely.", "replies": [], "depth": 1}, {"id": "iwosprh", "text": "Tons of capital work, tenant improvements, a 5 month abatement period, AND a massive rent reduction?  Pound sand.", "replies": [{"id": "iwqoz1a", "text": "Lol. Keep the building vacant then and keep paying your expenses OOP, LL.", "replies": [], "depth": 2}], "depth": 1}, {"id": "iwp2715", "text": "LL is asking $15 per square foot per year net, you are suggesting $12.28 psf. The free rent (net? gross?) also lowers the net rent by $1.25 psf a year assuming net. \n\nI don\u2019t really like the deal from the LL\u2019s perspective. Landlords like to keep the face rate (i.e. net rent) up for financing purposes. So maybe push for a lower rate or the free rent, but doubtful you would get both.\n\nYou need comps from a commercial appraiser or broker in the area to justify your case.", "replies": [], "depth": 1}, {"id": "iwpqkau", "text": "Check the tax assessment and make sure you factor in any potential increase from the Reno etc", "replies": [], "depth": 1}, {"id": "iwq01iq", "text": "Triple net. Basically you pay 3 of the landlords expenses. This will be base rent/their mortgage, also the landlords insurance, and probably property taxes, etc.\n\nAsk if $5250 is the actual cost of rent and not just the \u201cbase\u201d part of the triple net.\n\nBesides the cost there may be other reasons why it\u2019s been empty for 7 years. Ask the neighboring tenants/business owners about that space. \n\nIt\u2019s the landlords space. Don\u2019t pay anything for the updates. They get to keep those and those increase the value of their property. They should pay for all of that. Also, negotiate for \u201ctenant improvements\u201d (their money for cosmetic upgrades).\n\nBe mindful about how many transactions you must do to pay that amount of rent. Is that doable? It sounds like you have plenty of room to negotiate. \n\nI have a ton of experience in lease negotiations, but I can\u2019t be your advisor for free and I don\u2019t have time for more clients. So unfortunately I cannot answer anymore questions. Hopefully, what I provided helps.\n\nHire a professional to help you understand the lease. Best of luck on your endeavor.", "replies": [{"id": "iwq7miy", "text": "That is not what a triple net is.", "replies": [{"id": "iwr48wv", "text": "Triple net; a commercial lease where the lessee pays rent and utilities as well as 3 other expenses. Those could be insurance, maintenance, taxes. \n\nHire a CPA or an attorney. (Suggested for the original post) They\u2019ll explain it that same way. If my first response was unclear, what I wrote in this post is the exact contract law. \n\nUnfortunately, I can\u2019t waste anymore time debating known facts. I hope the OP gets that all sorted out. I\u2019ll be avoiding this toxic sub.", "replies": [{"id": "iwrg5o6", "text": "It's not a debate you are just wrong. It's not some random \"three other expenses\"\n\nA triple net lease is a type of lease used in commercial real estate that provides tenants with a low base rent but requires them to pay their share of the property\u2019s operating expenses, insurance &amp; taxes, and improvements and repairs in addition.\n\nI don't need a CPA I do this all the time. I hope to God no one is actually paying for your advice.", "replies": [{"id": "iwrn7zr", "text": "So toxic in here. Your hilarious!", "replies": [{"id": "iwss98f", "text": "If by toxic you me correct then yes. I'm confused at why you are picking this hill to die on when it's literally the definition of a triple net. We aren't talking opinions or anything like that. You are just flat out misunderstanding what a triple net is.", "replies": [{"id": "iwtfka6", "text": "\u201cHill to die on.\u201d This really isn\u2019t that serious. You are so hilarious. Toxic..yes. Apparently, that would also define you as well. \n\nWhen I write legal contracts. (Yes I do get paid for that. Nothing you can respond with will change that.) I use Double net = 2 expenses. Triple net = 3 expenses as a framework.\n\nI don\u2019t use templates from the Internet. I create customized contracts. Writing a book report for you to prove my ability isn\u2019t the best use of my time. I don\u2019t need lessons from you because I have degrees. \n\nThe only misunderstanding here is the OP. Whom I was trying to help. Obviously, I was in a hurry when I posted and didn\u2019t explain things as well as I should have. My \u201cReddit time\u201d is limited. Clearly, that\u2019s not something you can decipher. \n\nFor you to insult someone for your own pleasure shows you have zero class and provides no benefit to anyone. So, I shouldn\u2019t interact with you anymore. My time is better spent elsewhere. Please quit bothering me with that petty nonsense. \n\n\u201cHill to die on.\u201d Hilarious!\n\nAgain, I hope the OP got everything sorted out and their endeavor goes well.", "replies": [{"id": "iwwzz79", "text": "So in otherwords you still dont understand what you are talking about.\n\nI'm not insulting you I am protecting anyone reading this forum from bad advice \n\nCommercial leases are offered as a fixed amount per square foot that is \u2018net\u2019 of certain expenses that the tenant must also pay.\n\nSingle net lease:\u00a0the tenant pays rent for their space plus specified direct operating expenses (such as their own electrical use).\n\nDouble net lease:\u00a0the tenant pays rent plus direct operating expenses and is also charged a proportion of non-operating expenses (such as insurance and taxes) that are \u201cpassed through\u201d as well\n\nTriple net lease:\u00a0the tenant pays rent plus direct operating and proportional non-operating expenses. In addition, the tenant is charged for certain recurring expenses associated with maintaining the interior of the space (such as repairs or space reconfiguration).", "replies": [{"id": "iwx4jbt", "text": "Nice copy and paste from Wikipedia.", "replies": [{"id": "iwx6qop", "text": "That's the point dude. It's the dictionary definition. Just admit you didn't understand what a NNN lease was. It's cool we all had to learn at some point.", "replies": [{"id": "iwxhnsr", "text": "From the person who copy and pasted their knowledge from Wikipedia. I feel sorry for you.", "replies": [{"id": "ix13w3x", "text": "It's like you are determined to prove you don't know anything about CRE.", "replies": [{"id": "ix14hxz", "text": "Wow. This is so fun.", "replies": [], "depth": 13}], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}, {"id": "iwrlf6e", "text": "NNN is not just three other landlord expenses - it IS payment of rent/utilities along with insurance, maintenance, and taxes. \n\nMany so-called \"NNN\" leases obligated LL for roof and structure maintenance/repair (which really makes them NN leases), but that's besides the point.", "replies": [{"id": "iwtfv1d", "text": "Exactly..\n\n\u201cTriple net; a commercial lease where the lessee pays rent and utilities as well as 3 other expenses. Those could be insurance, maintenance, taxes\u201d\n\nThanks for the added clarification. I was on a hurry when I posted.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "iwrscq7", "text": "Hire a Broker", "replies": [], "depth": 1}]