Let’s talk numbers!
In 2017, we discussed the importance of knowing your company’s right size and building the tenant-landlord relationship. There is one more piece to the puzzle that we should discuss. The one thing that even tenant reps have a tough time getting out of their clients. That piece is the budget.
Reading this, you are probably thinking that would be a no-brainer first question. But you would be surprised at how many tenants choose not to reveal their budgets until the final stages of the leasing process. Most real estate agents will ask this question right from the start. It’s usually in the top five questions following, “What does your company do?” and “How much space do you need?” The typical response from a tenant is, “I’m not sure. Let’s see the spaces first, and then we can discuss budget”. Sounds innocent, right? Wrong? It is very important for tenants to give the agent with whom they’re work, at a minimum, a budget range in the beginning of their search.
Imagine you are going to buy a house. The buyer just gives their agent what they’re house size, requirements, and other dream parameters. The agent takes the buyers out and shows them their dream house without knowing what they can actually afford. Once they learn this information, the house type would usually drastically change. The problem…the buyers have fallen in love with a house they can’t afford. When they do look at other houses within their budget, none measure up. Then you end up with a buyer that is not completely satisfied and a very frustrated agent who only wants to help. While we all want the “perfect” dream house, we all need to remember that there’s usually one thing standing in our way, our budget. The budget is our reality. A very similar thing can happen in commercial real estate. Falling in love with a space only to realize that cost is just not a reality.
How to avoid the “fantasy” and face the reality
When an agent knows the tenant’s budget on the front end, it is a significant help to them in finding the tenant their perfect space in efficient time. The agent can easily weed out the spaces that would push the tenant to their budget breaking point. This is especially helpful if a build out is required. Recently, we worked with a group that was very upfront with us about their budget numbers. We were able to quickly narrow down a space and negotiate an exceptional deal on their behalf. The tenant was happy. The landlord was happy. In another case, where the budget was not presented up front, when the client received the Letter of Intent, they asked us to counter back at their budgeted number. A number that ended up being 65% less than the landlord’s asking price. As you can imagine, we had to go back to the drawing board and start the search over.
Trust your agent with your commercial budget like you would a residential budget. Your agent’s goal is your goal: finding a perfect space at a perfect price!
Ashleigh Kiggans, Vice President, joined the MacRo team in 2015. She plays a key role within the organization, assisting the leadership team across a wide range of initiatives, including market research, data analysis, client communications, and marketing while assisting with the sales and leasing transactional process.