This guide identifies 15 of the most consequential commercial lease red flags that Hughes Marino’s tenant representation team encounters most frequently in commercial lease negotiations. Each represents a clause that is routinely included in landlord-drafted leases, routinely accepted by tenants without scrutiny, and routinely correctable, if you know what you’re looking for and have the right advisor in your corner. We’ve also included specific lease negotiation counter-terms for the five highest-risk clauses, so you walk into every negotiation with a clear target, not just a list of problems. Whether you’re reviewing an office lease, laboratory space, an industrial facility or any other commercial property, these are the provisions that deserve your closest attention.

Hughes Marino’s Commitment to Transparent Tenant Representation

Hughes Marino represents tenants and occupiers, not landlords. That singular focus matters most at the lease negotiation stage, because the advisor who reviews your commercial lease brings either a tenant’s perspective or a landlord’s perspective to every clause. A large brokerage firm that also manages properties, handles landlord leasing and sells investment real estate has structural reasons to preserve landlord-friendly language that a pure tenant representative does not.

Our team has reviewed tens of thousands of commercial leases for our clients around the globe. The 15 most common red flags to watch out for below are not theoretical; they are the clauses we renegotiate most often, the provisions that cost our clients the most when they go unchallenged, and the language that landlords’ attorneys count on tenants to accept without question. While the below topics are most common, there are often 100+ idiosyncratic issues to negotiate in order to properly protect tenants. If you have an existing lease and are not certain what it actually says on any of these points, a lease audit is the most efficient first step. If you are approaching a renewal or a new lease, the time to identify and address these provisions is now, before any terms are agreed to verbally and before you’re negotiating from a position of reduced leverage.

1. Financial Red Flags: Personal Liability, Rent Structures and Escalations

The financial provisions of a commercial lease determine not just what you pay, but who bears the risk when business conditions change. These are the clauses most likely to produce catastrophic outcomes for business owners who didn’t fully read what they signed.

Red Flag #1: The Unlimited Personal Guarantee

A personal guarantee requires an owner or officer to back the company’s lease obligations with their personal assets. In a landlord-drafted lease, the guarantee is typically unlimited, covering the full financial exposure of the entire lease term, with no sunset or mitigation provision. That means if your business closes in year three of a ten-year lease, you remain personally liable for seven more years of rent obligations. The negotiated alternative is a burn-off guarantee: personal liability that reduces or expires after a defined period of consistent on-time rent payment (typically 12 to 24 months), and is capped at a fixed dollar amount (typically 6 to 12 months of base rent) rather than the full remaining term. Landlords who want creditworthy tenants will accept this. The ones who refuse to negotiate personal guarantee terms are showing you something about how they expect the tenancy to go. Your advisor plays a substantial role in how this provision gets negotiated.

Red Flag #2: A Fixed Rent Schedule with No Renewal Market Reset Mechanism

Commercial leases, especially long ones, should include a mechanism for resetting rent to market if conditions shift significantly. A lease that locks in today’s rent on a fixed escalation schedule for 10 or 15 years means you could be paying substantially above-market rates by year eight with no contractual remedy. Push for a fair market value rent reset option at renewal, defined by a third-party appraisal process with binding “baseball” arbitration if the parties disagree. This is standard in well-negotiated leases and something most landlords will accept when pressed.

Red Flag #3: Uncapped Annual Rent Escalations

Most commercial leases include annual rent increases tied to either a fixed percentage (typically 3%) or the Consumer Price Index. The CPI-linked version is the more dangerous of the two, because CPI has no ceiling. In a high-inflation environment, a CPI-based escalation clause can push rent increases above 8 to 10% in a single year with no protection for the tenant. Negotiate a cap on annual escalations, typically 3 to 4% per year regardless of CPI movement, as a hard ceiling on your year-over-year rent exposure.

2. Expense Exposure Red Flags: CAM, Gross-Ups and Capital Pass-Throughs

For tenants in NNN (triple-net) or modified-gross lease structures, operating expense provisions are where the financial exposure often hides. The base rent may be competitive, but the total occupancy cost can be dramatically higher once operating expense pass-throughs are factored in, especially in aging buildings with deferred maintenance or in markets where landlords routinely push the boundaries of what expenses can legitimately be passed through.

Red Flag #4: Uncapped CAM and Operating Expense Pass-Throughs

Common Area Maintenance (CAM) and operating expense clauses in NNN leases can pass through virtually every building operating cost to tenants: property taxes, insurance, maintenance, management fees, utilities and more. Without a cap, your occupancy cost is unpredictable from year to year. Caps aren’t standard for most tenants, but they are negotiable: push for a year-over-year CAM increase cap of 3 to 5% on controllable expenses (those within the landlord’s ability to manage). This doesn’t limit total operating costs; it limits how fast they can grow in any given year, which is what matters for your budget certainty.

Red Flag #5: Gross-Up Provisions

When a building is partially occupied, the landlord’s actual operating expenses are lower than they would be at full occupancy. A gross-up provision allows the landlord to calculate what expenses would have been at 95% or 100% occupancy, and charge tenants their pro-rata share of what could be an inflated number – rather than the actual number. In a soft market with significant vacancies, this can result in tenants paying thousands of dollars per year in phantom expenses the landlord never actually incurred. It is important to understand whether a gross-up provision can save or cost you money, as it depends on many factors.

Red Flag #6: Capital Expenditure Pass-Throughs

Routine maintenance is a legitimate operating expense that tenants in NNN leases should expect to share. Major capital expenditures shouldn’t be a tenant’s responsibility, but often are. A landlord-drafted lease will often attempt to pass through the cost of HVAC system replacement, roof replacement, parking lot resurfacing, mold mitigation or elevator modernization as operating expenses, amortized over time, but still billed to current tenants who will never occupy the building long enough to benefit from the improvement. Negotiate explicit exclusions for capital expenditures exceeding a defined dollar threshold (typically $10,000 to $25,000 per occurrence) from the operating expenses you are responsible for as a tenant.

3. Control and Flexibility Red Flags: Relocation, Exclusivity and SNDA

Some of the most consequential lease provisions are not about what you pay; they’re about the security of your right to occupy the space you’ve invested in, and whether you have the operational flexibility your business actually needs. These clauses are frequently buried in the middle of long leases and passed over without full consideration.

Red Flag #7: Landlord’s Right to Relocate Your Business

A relocation clause gives the landlord the right to move your business to a different suite or floor within the building, typically with 30 to 90 days’ notice. This provision exists primarily to give the landlord flexibility to accommodate larger tenants or reconfigure floors. For the tenant, it can mean an unplanned move mid-lease with real cost implications: new signage, new office materials, client notification, IT reconfiguration and potential damage to carefully cultivated adjacency relationships. The solution is to negotiate for the relocation clause to be removed entirely, or conditioned on your written consent plus full reimbursement of all documented relocation costs.

Red Flag #8: Exclusivity Clauses with Too Many Carve-Outs

If your business depends on being the only provider of your product or service category in a building or shopping center, an exclusivity clause is essential. The problem is that most landlord-drafted exclusivity provisions are riddled with exceptions: existing tenants and their renewals are excluded, franchises are excluded, incidental sales are excluded and online or delivery operations may be excluded entirely. Read the exclusivity clause carefully and test every carve-out against real scenarios. A competitor who secures space in your building under the “existing tenant renewal” exception is just as damaging as one who signs a new lease.

Red Flag #9: No Non-Disturbance Agreement (SNDA)

A Subordination, Non-Disturbance and Attornment (SNDA) agreement does three things: it confirms your lease is subordinate to the landlord’s mortgage, it protects your right to remain in occupancy if the lender forecloses, and it commits you to recognize a new owner as your landlord. The critical piece for tenants is the non-disturbance commitment: the lender’s agreement that if they take title to the building, your lease will remain in force. Without it, a lender who forecloses can potentially terminate your tenancy even if you are current on rent. Require an executed SNDA from the existing lender before you take possession, and require that future financing be similarly conditioned on non-disturbance protection for your tenancy.

4. Exit and Transfer Red Flags: Subleases, Demolition and Holdover

Business conditions change. Companies grow, contract, restructure, merge and occasionally fail. A commercial lease that was appropriate for your business on day one may become a significant liability if it doesn’t allow you the flexibility to adapt your space commitment when circumstances shift. The clauses in this category determine whether your lease is a manageable obligation or a trap.

Red Flag #10: Restrictive Sublease and Assignment Provisions

Most commercial leases require landlord consent before you can sublease your space to another party or assign your lease in connection with a business sale or merger. That consent provision is standard, but the conditions under which it can be withheld, and the economic terms attached to it, vary enormously. Landlord-drafted leases typically allow the landlord to recapture the space if you want to sublease (taking the space back and re-leasing it at market), share in any sublease profit above your base rent, or withhold consent with minimal justification. Push for consent that cannot be unreasonably withheld, no recapture right and no profit sharing on sublease premium, especially for subleases covering less than your full footprint.

Red Flag #11: The Demolition or Recapture Clause

A demolition clause (sometimes called a redevelopment or recapture clause) gives the landlord the right to terminate your lease early if they decide to demolish, substantially renovate or redevelop the building. The notice period is typically 6 to 12 months, enough time to create serious disruption but rarely enough to find, negotiate, build out and occupy a comparable space without gaps. This clause is particularly dangerous for tenants with significant build-out investments, because all of that investment is lost when the landlord exercises the right. If you cannot get the clause removed, insist on a minimum notice period of 18 to 24 months, full reimbursement of unamortized tenant improvement allowances and moving costs, and a right of first refusal on any comparable space in the redeveloped property.

Red Flag #12: Extreme Holdover Rent Penalties

A holdover clause governs what happens if you remain in your space beyond the lease expiration date without executing a renewal or new lease. Landlord-drafted holdover provisions often set the holdover rent at 150 to 200% of the then-current base rent, payable month-to-month, plus the landlord’s right to recover consequential damages, meaning if another tenant wanted the space and couldn’t get it because you held over, the landlord can sue you for that lost deal. The more reasonable standard, which experienced tenant advisors negotiate routinely, is 100 to 125% of base rent for a defined short period (60 to 90 days), with consequential damages limited to situations where the landlord has an executed lease with an incoming tenant.

5. Structural Protection Red Flags: Delivery Condition, Repairs and Renewal Options

The final category of commercial lease red flags relates to the physical condition of the space you’re taking, the obligations you’re assuming for its maintenance, and the mechanism by which your lease continues or ends. These provisions are often dismissed as “boilerplate,” which is precisely why landlords’ attorneys leave them in the most landlord-favorable form possible.

Red Flag #13: “As-Is” Delivery with No Defined Condition Standard

An “as-is” delivery clause means you accept the space in its current condition, with no representations by the landlord about its fitness for use, compliance with applicable codes or the condition of building systems. In a space that has recently been vacated, “as-is” can hide deferred HVAC maintenance, ADA compliance deficiencies, code violations, environmental conditions or simply poor cosmetic conditions that you will be required to bring up to standard at your expense. Before accepting any as-is delivery, negotiate a landlord warranty that the building systems (HVAC, plumbing, electrical and life safety) will be in good working order on the delivery date, for a defined period after you take possession, and require that the landlord bring the premises and base building into compliance with applicable codes, including the ADA, at the landlord’s cost. Do not accept as-is delivery blindly.

Red Flag #14: Tenant Responsibility for Structural Repairs and Building Systems

In a well-balanced commercial lease, the landlord retains responsibility for the building structure (roof, foundation, exterior walls) and the major building systems (HVAC, plumbing, electrical), while the tenant is responsible for their own interior improvements. Landlord-drafted leases sometimes attempt to shift HVAC maintenance, repair and even replacement obligations to the tenant, particularly for units that are “dedicated” to the tenant’s suite. Over a long lease term, HVAC system replacement alone can cost $20,000 to $50,000 or more per unit. Negotiate to clearly delineate landlord vs. tenant maintenance obligations in writing, with major systems (HVAC, plumbing, electrical) remaining the landlord’s responsibility for repair and replacement, and tenant obligated only for routine maintenance.

Red Flag #15: Missed Renewal Option Deadlines

Most commercial leases don’t renew automatically. Instead, renewal is a tenant option that must be exercised by written notice within a specified window, often 6 to 12 months before expiration. Miss that deadline and the option is typically lost, leaving you to negotiate a renewal with little leverage or to relocate on a compressed timeline. Option deadlines are often buried in the lease body rather than highlighted in any summary. Calendar every option and notice deadline from day one of your lease, negotiate a clearly defined exercise procedure, and ask for a provision requiring the landlord to notify you before the option lapses. Most importantly, don’t wait for the deadline: begin evaluating your renewal and alternatives 18 to 24 months before expiration, while you still have time and leverage.

Quick Reference: All 15 Commercial Lease Red Flags at a Glance

The following table summarizes all 15 commercial lease red flags, the specific clause name to look for in your commercial lease agreement, and the core risk each poses to your business if left unaddressed.

What to Negotiate Instead: Counter-Terms for the 5 Highest-Risk Clauses

Identifying a red flag without knowing what to push for is only half the job. The following table shows the specific counter-language that experienced tenant advisors negotiate as standard in each of the five most consequential clauses.

Frequently Asked Questions

The post Commercial Lease Red Flags: 15 Terms to Watch Before You Sign appeared first on Hughes Marino.

      

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Commercial leases are drafted by landlord attorneys and optimized for the landlord’s interests. Every provision that is left vague, every right that is not explicitly granted and every deadline that is not calendared works in the landlord’s favor by default. This guide walks through the five steps of leasing your first office, from understanding what you’re actually signing to knowing which terms to lock down in the LOI before you commit, so you go into the process with a clear picture of what you’re agreeing to and what to ask for.

Step 1: Understand the Different Types of Office Leases

The first thing to understand about leasing office space is that the monthly rent quoted to you is not necessarily your total monthly cost. The relationship between quoted rent and actual occupancy cost depends on the type of lease structure, and getting this wrong is one of the most common and expensive mistakes first-time tenants make when comparing spaces. There are four main types of office leases, each with a different relationship between the quoted rent and your total cost:

Most first-time office tenants will encounter a full-service gross (FSG) lease structure, which is the most straightforward for budget planning. Your monthly rent covers base rent plus operating expenses up to the expense stop. The important caveat: FSG leases typically include an expense stop, set at the landlord’s actual operating expenses in the base year, and any increase in operating expenses above that stop gets passed through to you on a pro-rata basis. In a year with a significant property tax reassessment or major insurance increase, this can add meaningful cost above your quoted rent.

Before signing any lease, have a tenant advisor model your total occupancy cost, not just the quoted rent, so you’re comparing spaces on an apples-to-apples basis. Two spaces at the same quoted rent per square foot can have very different actual costs depending on lease structure, expense stop and the building’s historical operating cost track record.

Step 2: Complete a Needs Assessment

The single most effective way to avoid overpaying for office space is to know what you actually need before you walk into a single space. Most first-time tenants approach the search with a rough headcount and a vague sense of what feels right. Landlords and their brokers are skilled at showing you spaces that feel just large enough to justify the asking rent, and at nudging you toward more square footage than you need.

How Much Space Do You Need?

Check out our Office Space Calculator to help you plan your future workspace. But keep in mind, it isn’t only about the square footage. There are many factors that go into determining what is right for your company now and looking ahead. Here is our resource on Needs Assessments and why they are a valuable step in the process.

Understand Usable vs. Rentable Square Footage

Office space is quoted in rentable square feet (RSF), which includes your usable square feet (the space you actually occupy) plus your proportionate share of common areas: lobbies, hallways, restrooms and mechanical spaces. The percentage by which RSF exceeds usable SF is called the load factor or add-on factor, and it typically ranges from 10% to 25% in multi-tenant office buildings. A space quoted at 3,000 RSF with a 20% load factor gives you approximately 2,500 usable square feet. Higher load factors mean less actual usable space per dollar of rent.

Building Class

Class A buildings command premium rents and typically offer the best amenities, building systems and location quality. Class B buildings offer a middle ground, often well-maintained, slightly older or less amenity-rich, with lower rents. Class C buildings are the most value-oriented but require careful evaluation of building systems, maintenance standards and the quality of ownership. For a first lease, be honest about what your business needs vs. what impresses, as clients generally care less about building prestige than founders do.

Lease Term

Landlords generally prefer 5- to 10-year terms for office space. Shorter terms are available but typically come with less favorable economics: lower TI allowance, less free rent, higher per-SF rent. First-time tenants should think carefully about a term that balances the economic benefit of a longer commitment against the flexibility risk of locking in for a period longer than their business visibility.

Parking & Location

Define your parking requirement (spaces per 1,000 SF leased is the standard metric) and your location criteria before starting the search. These are significantly harder to negotiate after you’ve fallen in love with a space than before you’ve seen anything. Note that parking charges are in addition to rent – and very rarely included.

Step 3: Work With a Tenant Rep Broker at No Cost to You

One of the most persistent misconceptions among first-time commercial tenants is that working with a tenant representative broker will cost them money. It will not. The landlord pays both brokers, the landlord’s broker and the tenant’s broker, out of a leasing commission that is built into the economics of every deal. If you do not bring your own broker, the landlord’s broker typically collects the full commission. You do not save money by going unrepresented; you simply allow the landlord’s representative to collect both sides of the commission while representing the landlord’s interests.

What does a tenant rep actually do? They identify every available space that meets your criteria (including spaces that are not publicly listed), negotiate economic terms using current market data on comparable transactions, review the LOI and lease for provisions that require modification, coordinate the build-out process and advocate for your interests at every point in the transaction. An experienced tenant representation broker knows the actual rents landlords are accepting, not just the asking rents they’re posting, and what concessions the market supports. In a first office lease, that market intelligence is worth far more than the fee you’re not paying.

One specific risk to understand: the landlord’s listing broker is legally obligated to represent the landlord’s interests, not yours. In states that allow dual agency, where the same broker represents both parties, this conflict is disclosed on paper, but the practical dynamic remains: the broker’s relationship and repeat business come from the landlord, not from a first-time tenant they will likely never transact with again. The incentive structure matters. A dedicated tenant representative has no landlord relationships to protect and no reason to steer you toward a deal that benefits the landlord over you.

Step 4: Evaluate Spaces and Understand the Full Cost Stack

When you tour spaces and receive proposals, the quoted rent per square foot per year is only the beginning of what you need to understand about each option’s total cost. First-time tenants often make location decisions based on the headline number, then discover the full economics later, sometimes at lease signing, sometimes not until the first annual operating expense reconciliation arrives.

Tenant Improvement Allowance (TI)

Almost all office leases include a TI allowance, the landlord’s contribution toward building out the space to your specifications. In today’s market, TI allowances in Class A and B office buildings typically range from $50 to $150 per rentable square foot, depending on market, building quality, lease term and your credit profile. A space with a higher quoted rent but a generous TI allowance may cost less in net-present-value terms than a lower-rent space with no allowance because you’re paying the build-out cost in one case and the landlord is in the other. Always model TI against total cost, not separately.

Free Rent

Free rent, months during which you occupy the space but pay no base rent, is a standard negotiating concession in virtually every commercial office market today. Typical free rent ranges from 1 to 2 months on a 3-year lease to 4 to 8 months on a 5- to 7-year lease, depending on market conditions. First-time tenants frequently leave this on the table by not knowing to ask. A tenant representative negotiates free rent as a standard component of the transaction, not an exceptional request.

Operating Expense Pass-Throughs

As noted in the lease type section, operating expenses above the base year stop get passed through to tenants in FSG leases. Before signing, request the building’s historical operating expense data for the past 3 years and have your advisor assess the typical year-over-year increase. A building with a history of large annual reconciliation billings is a real cost factor that doesn’t appear in the quoted rent.

Step 5: Negotiate the LOI Before You Agree to Anything

The letter of intent is the document that establishes the agreed business terms before the formal lease is drafted. It is the most important document in the lease process for a first-time tenant, because every term that is left out of the LOI will be filled in by the landlord’s attorney in the landlord’s preferred language. Once the LOI is signed and the lease drafting begins, your ability to introduce new provisions or reverse unfavorable terms is significantly diminished. The landlord’s team will defend every provision in their draft as “standard” or “consistent with what was agreed.”

At minimum, the LOI should specify: base rent (by year, with escalation rate defined), lease term, tenant improvement allowance (amount, delivery method and timeline), free rent (number of months and scope), renewal option (number of options, notice period and rent determination process), personal guarantee limits, permitted use definition, parking commitment, signage rights and, if applicable, an early termination option. Everything that matters to you as a tenant should appear in the LOI before you sign it. A tenant advisor will draft or review the LOI and ensure these provisions are present, specific and protective before you commit.

The LOI is also where your leverage is highest. The landlord is motivated to close the deal, and you still have competing options in play and the freedom to walk away at no cost. That motivation window closes once the LOI is signed. Use it.

Frequently Asked Questions

The post Your First Office Lease: A Step-by-Step Guide appeared first on Hughes Marino.

      

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The truth is straightforward: a tenant representative costs you nothing. In commercial real estate, the landlord pays the brokerage commission, and that commission is budgeted as a cost of leasing the space regardless of whether a tenant representative is involved. When there is no tenant broker, that portion of the commission doesn’t get passed to you. It stays with the landlord’s broker. What you lose, meanwhile, is an advisor whose sole job is to represent your interests in a transaction where the other side has a professional doing exactly that. This guide explains why the landlord’s suggestion to skip having your own broker is self-serving, what a tenant representative actually does and what going without one typically costs in concrete lease terms.

Hughes Marino’s Commitment to Tenant-Only Representation

Hughes Marino was founded on a simple premise: tenants deserve an advisor whose loyalty is undivided. In more than 30 years of practice, we have only strived to serve the interests of tenants and buyers. Every transaction our team has ever completed has been on behalf of a tenant or occupier, not a property owner, not a lender, not an investor. That singular focus is not a marketing position. It is the only way to eliminate the structural conflicts that define most commercial real estate brokerage.

The dominant model in commercial real estate is full-service brokerage: firms that simultaneously represent landlords on lease-up assignments, manage buildings on behalf of property owners, sell and acquire investment assets and occasionally represent tenants. In that model, your broker’s firm may have a significant existing relationship with the landlord of the building you are considering, a property management contract, an investment sale assignment or a leasing agency relationship worth far more than your transaction. Understanding whose interests are truly being served in a negotiation requires understanding who the broker’s firm is paid by across its entire business. At Hughes Marino, that question has one answer: tenants.

Why Landlords Make This Suggestion & What It Actually Means

To understand why a landlord would encourage you to skip your own broker, you need to understand how commercial real estate commissions work. When a commercial lease is signed, the landlord pays a brokerage commission, typically calculated as a percentage of the total lease value. That commission is budgeted into the deal from the beginning. In other words, it’s a cost the landlord expects to pay as part of filling their building.

In a standard transaction with both a listing agent (the landlord’s broker) and a tenant representative, that commission is split between the two brokers. When there is no tenant broker, the listing agent earns the entire commission. The landlord’s total cost is the same either way, but the distribution is what changes. When a landlord or their broker suggests you don’t need your own representation, they are telling you to remove the person who would otherwise be paid to advocate for your interests, while the person paid to advocate for the landlord’s interests remains and is even paid more to work against your interests.

The occasional offer to “pass along commission savings” deserves direct scrutiny. This typically takes one of two forms: a modest discount on the asking rent, or a nominal increase in tenant improvement allowance. The math rarely favors the tenant. A 1% reduction in rent on a five-year, 5,000 SF lease at $50 per SF is worth approximately $12,500 over the term. A skilled tenant representative typically secures rent reductions, free rent and TI allowance improvements worth multiples of that figure, negotiated from a position of market knowledge and adversarial professional experience that no landlord’s broker will ever provide, not to mention the 50+ non-financial issues they work to protect you on.

Who the Landlord’s Broker Works For & What That Means for You

The listing agent is not a neutral facilitator. They are a licensed real estate professional with a fiduciary duty to the landlord. That duty is not informal or aspirational. It is a legal obligation that requires them to act in the landlord’s best interests, which in every commercial lease negotiation means maximizing rent, minimizing concessions, securing the longest possible term and protecting the landlord’s rights under the lease.

That does not make listing agents dishonest. Most are professional and courteous. But courtesy is not advocacy, and being helpful with logistics is not the same as fighting for your economics. A listing agent who shows you available suites, explains the building’s amenities and walks you through the standard lease form is doing their job, for their client. The question you need to ask is who is doing that job for you.

The listing agent cannot share information that would disadvantage the landlord: including how long the space has been vacant, how eager the landlord is to fill it, what concessions other tenants received or what the landlord’s true walk-away position is.

The listing agent cannot advise you to push harder: recommending that you ask for more free rent, more TI allowance, a lower rent or better lease protections would directly conflict with their client’s interests.

The listing agent prepared the lease on behalf of the landlord: when you ask them to “explain” a clause, you are asking the person who drafted it in the landlord’s favor to tell you whether it is fair.

The listing agent’s commission is larger without a tenant broker: they have a financial incentive, not just a professional one, to close the deal without introducing tenant-side representation.

None of this is illegal or even unusual. It is simply how the commercial real estate industry operates when tenants choose not to engage their own representation. The listing agent does their job. The problem is that no one is doing yours.

The Market Intelligence Gap: Tenant Rep Resources & Data Fluency

One of the most valuable things a tenant representative brings to a commercial lease negotiation is not a particular negotiating tactic, it is information. Specifically, it is access to and fluency in the data that determines whether the deal in front of you is competitive. Without data, experience and market insight, you are negotiating from instinct and from whatever the landlord’s broker chooses to share. Below are a few examples of how market fluency comes into play:

Asking rent vs. effective rent: The landlord’s asking rent is rarely what comparable tenants are actually paying once free rent and TI allowances are accounted for. Net effective rent, the economic reality of a deal, can be 15% to 30% below the face rate in today’s office market. Without market comp data, you have no way to know whether the rate being quoted to you is at market, above it or significantly above it.

Sublease availability: In major U.S. office markets, sublease availability is running 5 to 11 percentage points above direct vacancy rates. Much of that supply, often at below-market rent, with existing improvements already in place, is invisible to tenants who only engage with the landlord directly. A tenant rep presents the full market, not just the landlord’s available suites.

TI allowance benchmarks: Tenant improvement allowances vary significantly by building quality, market, lease term and tenant credit. Knowing what the market is actually delivering in TI, not what the landlord offers first, is the difference between a space that meets your budget and one that doesn’t.

Lease comp protections: What free rent periods, renewal option structures, sublease rights and CAM caps have tenants in comparable buildings actually received? Without comp data, you have no anchor for what is achievable. The landlord’s broker knows. You should too.

The Two Broker Models: A Direct Comparison

The following table illustrates the core differences between working with the landlord’s listing agent directly and engaging your own tenant representation broker. The contrast is not about personality or effort. It is structural, built into how each party is hired, paid and legally obligated to behave.

What Unrepresented Tenants Leave on the Table

The economic difference between represented and unrepresented tenants is material and consistently documented across markets. The following comparison reflects typical outcomes in commercial lease negotiations in major U.S. markets, based on Hughes Marino’s transaction experience. These are not theoretical gaps. They are the lease terms that skilled tenant advisors routinely negotiate as standard, and that unrepresented tenants routinely fail to achieve.

To put this in dollar terms: on a 5,000 SF, five-year office lease at $50 per SF per year, the gap between an unrepresented outcome and a represented one, across rent, free rent and TI allowance alone, commonly ranges from $150,000 to $250,000 in total occupancy cost over the lease term. The tenant representative’s fee, which the landlord pays, is a fraction of that gap. The tenant captures the difference (not including all of the non-financial concessions the tenant representative is able to secure).

How to Choose the Right Tenant Representative

Not all tenant representation is equal, and understanding the differences matters before you engage an advisor. The most important distinction is whether the broker or their firm also represents landlords in any capacity. A broker at a full-service firm who “primarily” represents tenants is not the same as a broker at a firm whose business model is built exclusively around tenants. The difference shows up in subtle but important ways: which buildings they feel comfortable pushing hard against, which landlord relationships they protect and how willing they are to recommend relocation when the economics of staying are genuinely unfavorable.v

Verify exclusivity: Ask directly whether the broker’s firm represents landlords. If yes, ask whether they have any existing relationship (management contract, leasing agency or investment sale) with the landlord of the building you are considering. Conflicts are manageable only if they are fully disclosed.

Understand the fee structure: In almost all commercial tenant representation transactions, the landlord pays the broker’s commission. You should not be paying your tenant rep out of pocket. Confirm this structure up front and get it in your representation agreement.

Assess market coverage: If you are considering space across multiple markets, or if you think relocation to a different submarket might be worth exploring, make sure your broker has genuine coverage and transaction experience in all relevant areas, not just the building’s immediate neighborhood.

Start early: Tenant representatives are most valuable when engaged 18 to 36 months before your lease expiration, not 90 days out. Early engagement creates time to build genuine alternatives, run a full market survey and negotiate from a position of credible optionality rather than time pressure.

If you already have a lease you believe may contain unfavorable terms, or if you want to understand what your current lease says before you begin a renewal process, a lease audit is the right starting point. Hughes Marino’s team reviews existing leases to identify overpayments, missed options, unfavorable clauses and negotiating opportunities that may exist before the next lease cycle begins.

Frequently Asked Questions

The post My Landlord Says I Don’t Need a Broker. Is That True? appeared first on Hughes Marino.

      

Related Stories

• Commercial Lease Red Flags: 15 Terms to Watch Before You Sign
• Your First Office Lease: A Step-by-Step Guide
• What Interviews Reveal That Resumes Never Will

 

At Hughes Marino, we often say our culture is the one thing we can never outsource. We’ve grown across the country, but what makes the company feel the same in every office isn’t a playbook; it’s our team. That’s what makes hiring one of the most important things we do, and it’s why I care so much about getting it right.

After interviewing thousands of candidates for Hughes Marino—and tens of thousands throughout my career—I’ve learned that the best hires are rarely the ones with the most polished resumes. Experience and technical skills matter, and a resume can tell me where someone has been. What it can’t tell me is how they think, how they communicate or how they approach a challenge. Those things show up off the paper: in how a candidate prepares before we meet, the questions they ask when we talk and the way they follow through afterward. As small as they seem, those moments are usually a preview of how someone will do the work, support their colleagues and take care of our clients long after the interview is over.

Ownership Starts Before Day One

One of the first things I notice has nothing to do with experience. It’s whether someone takes ownership of the interview process itself, and what I love to see is initiative. When a candidate helps coordinate scheduling, comes in with thoughtful questions ready or follows up without being prompted, it tells me they’re already invested. It’s never a mark against someone who waits for direction, but the people who take those small steps on their own tend to bring that same energy to everything they do.

The same pattern shows up when I ask about projects that didn’t go as planned. The strongest candidates don’t start by explaining why someone else was responsible. They acknowledge their role, what they learned and what they’d do differently. Accountability isn’t about having a perfect track record; it’s about owning the moments that aren’t perfect.

These behaviors often translate directly into the workplace. Whether someone is supporting our advisors, managing a construction project or working with clients, success comes from thinking ahead, anticipating needs and adding value before someone has to ask.

Curiosity Says More Than Confidence

I’ve interviewed candidates with exceptional resumes who spent the entire interview asking about compensation, hours and benefits. While those are fair questions, the candidates who stand out to me are usually the ones already thinking about how they can contribute. They ask what training looks like, how different teams work together, what a typical day really feels like and how they can create value for our clients and our company.

That curiosity doesn’t disappear once someone is hired. The people who keep asking thoughtful questions are usually the ones who keep learning and finding better ways to support teammates and clients.

A Resume Tells Me What You’ve Done, A Conversation Tells Me Who You Are

Something that surprises candidates is that I don’t immediately jump into technical questions. I spend the first few minutes simply having a conversation. We might talk about the weekend, a recent vacation or something happening in the background. It’s not small talk. It’s the fastest way to see how someone actually thinks and naturally communicates.

Hughes Marino is a client-facing professional services firm, and across every department, our teammates build relationships. Technical skills are the foundation of the work, but they’re only part of what makes someone successful. The ability to communicate clearly, build trust and connect with clients matters just as much.

Those few minutes reveal how someone naturally engages with people in a way a resume never could. As technology reshapes hiring, those kinds of authentic conversations have become even more valuable.

Hiring Shapes More Than Your Team

If I could offer one piece of advice to other business leaders, it would be to stay involved in hiring. It can be tempting to delegate hiring to HR or department managers, but those decisions shape your culture for years to come.

At Hughes Marino, our leaders meet with candidates early in the process, not just at the end. Those conversations help candidates understand where we’re headed while giving our leadership team insight into what motivates each person beyond what’s written on a resume.

Every formal interview also includes a conversation about our company, structure and core values. Those aren’t simply talking points; they are the principles we rely on when making decisions and solving problems.

What This Means for Our Clients

We’ve built this discipline into our hiring process because our business is built on trust, and trust is not something you can evaluate after the fact. When a client chooses Hughes Marino, they are not just hiring a company; they are trusting the judgment, expertise and character of the people representing them throughout their real estate journey.

Everyone who joins our team carries a responsibility that extends beyond their role. The same thoughtfulness and scrutiny we apply before bringing someone on board helps ensure our clients are supported by people who take ownership, think ahead and create value at every step.

That’s why we treat every hire with such care. The strongest candidates aren’t always the ones with the most impressive credentials; they’re the ones who show ownership, curiosity and a genuine desire to create value for the people around them. Get that right, and you’re not just filling a role. You’re protecting the culture that clients feel in every interaction and the reason our team continues to do its best work. For any business leader, that is worth slowing down for.

The post What Interviews Reveal That Resumes Never Will appeared first on Hughes Marino.

      

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How the IE Stacks Up to Other Major U.S. Markets

From 2023 to the present, consumer behavior has drifted toward pre-2020 norms, and the demand for industrial space has also reversed due to the slowing of imports coming into the United States. When compared to the nation, the Inland Empire has shifted from being one of the tightest industrial markets in the country, to now one of the top five softest at just over 14%. Overall, the national industrial markets are not healthy and have moved solidly into leaning toward being tenant-favorable, and only Los Angeles and San Francisco are still marginally below 10%, considered to be somewhat in landlord territory.

The Inland Empire Swing—the Biggest in the U.S.

The Inland Empire regional industrial market has become very tenant-favorable post-Covid, as supply and demand conditions for industrial space have shifted such that availability rates around the region have spiked in the last three years. Availability has more than doubled since pre-Covid from just under 7% to now just over 14%, and still rising. An even more troublesome benchmark is that the IE market availability today is four times higher than at the tightest market conditions in recent memory when IE availability was approximately 3.5% towards the end of 2021.

Oversupply Contributors

Much of this availability spike is based on speculative overdevelopment of industrial buildings built from 2020 to 2025 to support the surge of online consumer purchasing during the early years of Covid. Nationally, between 2020 and 2025, 1.2B SF of industrial space was built around the country, a historic supply increase of 13.11% over those five years, of which 111.9M SF was added to the Inland Empire inventory, the largest amount of new construction in any market in the United States.

The second contributor to this oversupply is that the region has been haunted by a spike in industrial sublease inventory, averaging 14,000,000 SF for three years running. A national phenomenon, many industrial companies are looking to shed excess space they leased during the 2020-2022 run-up. The specific reduction of imports coming into Southern California, and an increase in warehouse options in the Los Angeles area, have caused many Inland Empire operators to lean down their footprints and put excess space on the market for sublease. There are values to be had throughout the region in all size ranges. This sublease condition is expected to last well into 2027 and 2028, and creates a condition where tenants have become landlords’ biggest competitors.

How the Submarkets Stack Up

The chart below shows how every IE submarket is at 10% or higher availability, with the Temecula/Menifee region having the biggest uptick at over 25%, one of the highest availability rates in the entire U.S. With the exception of Corona/Eastvale, every other submarket has doubled availability as compared to the start of 2020, with Temecula/Menifee tripling since and Chino/Chino Hills increasing by 5x—one of the highest proportional spikes in the entire country. Warehouse space for lease often has been on the market for a year or two. While landlords are reducing rents, and free rent of a month per year has become table stakes, even on renewals, building owners have entered into a knife fight over tenants as demand continues to be tepid, and many tenants that do enter the market are looking to downsize.

Overall, the Inland Empire and national industrial markets have done a massive pivot in the last year where many U.S. metro areas have higher availability, a reversal in rents and a spike in concessions. We are dealing with a new normal where tenants can expect to continue to find good values and numerous opportunities for several years to come, as long as they are proactive in addressing their lease expirations and aggressively go to market with the right tenant advisor who is free of landlord listing conflicts of interest, to create the proper leverage and optionality.

Market statistics provided by CoStar Group.

The post The IE Industrial Market Firmly Tilts Toward Tenants appeared first on Hughes Marino.

      

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Over the past few years I’ve written a lot about the ways we bring color and joy into our offices, from playful artwork and polka dot murals to comfy couches in emerald green, royal blue and vibrant red. It all comes back to one simple belief: the spaces we ask our teams to spend their days in really do shape how they feel, how they connect and how they do their best work. I want to keep that conversation going with something that’s been on my mind lately, which is the wonderful link between creativity and how good we feel.

When was the last time you made something simply for the joy of making it? Not because it was part of your job or because someone asked you to, but simply because it brought you joy?

This year, The New York Times ran a piece in its Well section about how art and crafting are good for both our bodies and our minds. It highlighted the work of researcher Dr. Daisy Fancourt, who describes engaging in the arts as “the forgotten fifth pillar of health,” alongside diet, sleep, exercise and nature. That really resonated with me, because it put some real science behind something we’ve felt in our bones at Hughes Marino for years: being around creativity is good for us, and taking the time to create something ourselves might be even better.

We tend to treat creativity as a “nice to have,” reserved for the designers and artists among us. But more and more research says it belongs right alongside the rest of our wellness. The studies also show that engaging with art or other creative activities, even for a few minutes a day, can reduce stress, improve well-being and even support our long-term health. And when we go from looking to actually making, the benefits can be even greater. Whether it’s painting, crafting or another hands-on activity, creating gives us a chance to slow down, recharge and return to our work with a fresh perspective.

That’s a big reason creativity is baked into how we take care of our team. Some of our favorite team building activities include watercolor painting and “crafternoon” sessions, where teammates pause for a bit and enjoy spending time making something around the farm table together. There’s no pressure to get it right—only color, laughter, conversation and the happy feeling of creating side by side. Afterward, everyone feels a little more connected and a little more creative when they return to their desks.

One of my favorite thought leaders, Ingrid Fetell Lee (author of Joyful), likes to remind us that the ordinary things around us have real power to shape how we feel. Creativity is one of those everyday superpowers hiding in plain sight, and the best part is that inviting more of it into your office barely costs a thing. You can add it to any workplace, in any industry, a little at a time. Here are a few easy ways to start:

Curate Inspiration

Beautiful art and photography give the eyes somewhere fun to wander and the brain a chance to reset. Whether it’s a statement painting, striking photography or curated pieces from local galleries, art has a way of making the workplace feel more alive. You’re not simply decorating a space; you’re creating an environment that inspires people every time they walk through the door.

Make Room to Create

Tuck a few supplies into a cabinet for hands-on breaks: sketch pads, watercolors, a lump of clay to shape or a puzzle that’s always in progress (one of our favorite activities!). A few minutes of making can turn a rough afternoon around better than another cup of coffee.

Schedule Creative Time Together

While the design of a workplace matters, so do the experiences that happen within it. Put an hour-long painting session or “crafternoon” on the calendar and treat it as seriously as any strategy meeting. Making things together alongside teammates you might not normally spend much time with gets everyone laughing and builds stronger relationships that carry back into the workplace.

Press Play

Never underestimate what a little music can do for a room. A thoughtful playlist in your common spaces can lift the mood, ease the afternoon lull and get creative wheels turning, sparking a little conversation and camaraderie, without adding a single object to the space.

Create an Atmosphere That Inspires

Sometimes the smallest details have the biggest impact. Fresh or faux flowers can be a welcoming pop of color at the reception desk, and beautifully designed books or thoughtfully chosen decor can all contribute to an environment that feels welcoming and intentional. These elements may seem simple, but together they create an atmosphere that feels alive. They remind people that their workplace was designed with intention and that the experience of being there matters.

None of this takes a big budget or a design degree. What it takes is a little intentionality and a real belief that the spaces we build for our teams are genuinely worth it. Creativity isn’t a distraction from the real work. The science increasingly shows it’s part of what keeps us healthy, connected and inspired enough to do that work well. So this week, see if you can inject a little more of it into your office. Whether it’s a beautiful new piece of art, a painting afternoon with your team or simply a playlist that changes the mood of the room, my guess is you’ll notice the difference in the energy of your workplace. And more importantly, so will your team.

The post Injecting Creativity into the Office: The Art of Designing Spaces That Inspire appeared first on Hughes Marino.

      

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By Owen Rice & Gavin Curtis

One of our clients in the professional services industry had spent nearly 30 years in the same building. When their lease came up, the obvious move seemed simple: renew or find another office of comparable size. Instead, we took the company through a comprehensive needs assessment, and the conversations that followed changed the entire trajectory of the project.

The company ultimately relocated from 60,000 SF to 40,000 SF, yet its headcount grew. A smarter, more efficient workplace transformed roughly 20,000 SF of savings into a far better building that better supported its employees and long-term goals. In rent alone, rightsizing by 20,000 SF saved the company roughly $13 million over the term of the lease. On paper, it looked like a downsize. In reality, it was an upgrade.

We’ve seen this story countless times. Companies often begin a real estate project convinced they know exactly what they need. More often than not, they discover something they didn’t expect.

A workplace needs assessment is one of the first steps in any successful commercial real estate project. It combines a structured questionnaire with thoughtful conversations designed to understand how a company works today, where it’s headed tomorrow and what its workplace needs to support along the way. Done well, it shapes every decision that follows. Done as an afterthought, it’s often where expensive mistakes begin.

The Wrong Question

One of the first questions executives ask is, “How much space do we need?” Ironically, that’s an answer we don’t get fixated on.

The square footage number in your head is probably wrong. It’s usually based on today’s office, yesterday’s assumptions or simply the amount of space you’ve always occupied. Our job isn’t to validate that number. Our job is to understand your business well enough to determine whether it’s actually the right one.

Instead, we ask questions that lead us to the answer. How does your team actually work? What’s helping you attract and retain talent? What operational requirements could influence your real estate options? Where do you realistically expect to be in five years? Where are you investing in space that no longer delivers value?

Answer those questions well, and the square footage solves itself.

The Best Discoveries Are Often Internal

You know your business better than anyone. What you may not know is how that business translates into real estate. That’s where experience matters.

One of the most valuable parts of a needs assessment is uncovering blind spots before they become expensive decisions. We’ve worked with companies that were convinced everyone loved the office, only to learn that commuting challenges, a lack of privacy or outdated workspace design had quietly become frustrations for much of the team.

That doesn’t mean every employee makes the final decision; too many voices make consensus hard to reach. Instead, gather input from a core group that spans the business, not only executives, but the people across departments who see what leadership doesn’t. Anonymous feedback in particular can surface opportunities leadership didn’t know existed.

Every company assumes a needs assessment will confirm what it already knows. The best ones don’t. They reveal something unexpected.

The Cost of Waiting

The biggest mistake we see isn’t choosing the wrong building. It’s starting the process too late. When time is short, companies naturally focus on finding space instead of understanding what they actually need. The needs assessment becomes another task to complete instead of the strategic exercise it was meant to be.

The cost of changing direction early is minimal. The cost of changing direction after you’ve negotiated a letter of intent, signed a lease or begun construction can be substantial. Every decision made after that point has the potential to increase project costs, delay occupancy and reduce your negotiating leverage. That’s why the planning stage matters so much. It gives you the freedom to ask difficult questions, challenge assumptions and make adjustments while they’re still easy to make.

Where a Needs Assessment Pays Off

A thoughtful needs assessment doesn’t just help you find the right space. It helps you negotiate from a position of strength.

Understanding your requirements before negotiating a letter of intent allows your team to identify building improvements, operational requirements and future flexibility up front. Knowing your requirements is leverage.

Rightsizing cuts your total cost of occupancy, not just base rent: less tenant improvement to fund, less furniture and IT to buy, lower operating expenses year after year.

It also helps you plan for growth realistically. Most companies have a good sense of where they’ll be in a year or two. Beyond that, nobody has a crystal ball. Rather than planning for year 10 of a lease, we encourage clients to plan around realistic growth over the next five years while building flexibility into the lease for whatever comes next.

Perhaps most importantly, it saves executives both time and money. Real estate is rarely a CEO’s, CFO’s or HR leader’s primary responsibility. A thorough needs assessment filters out buildings that were never going to work, avoids unnecessary tours and minimizes costly course corrections, allowing leadership to stay focused on running the business.

Sometimes the process confirms exactly what you believed from the beginning. Great. Now it’s no longer an assumption. It’s a decision backed by thoughtful analysis and made with confidence.

The best needs assessments don’t simply confirm what a company already believes. They challenge assumptions before they become expensive decisions. Because when you ask the right questions at the beginning, every decision that follows becomes smarter.

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After touring thousands of office buildings over the course of our careers, paying attention to details becomes second nature. Long before we discuss square footage, lease terms or build-outs, we’re reading the small signs. Those details are clues to bigger things: how ownership actually operates and what you can expect over the life of the lease.

It Starts Before We Walk Through the Front Door

The tour begins in the parking lot, not the lobby. Does the building project the image our client wants? Is parking convenient or congested? Is it easy for employees, clients and visitors to find their way into the building?

From there, we’re paying attention to the condition of everything around us. I often compare it to the curb appeal of a home. The landscaping, exterior finishes and arrival experience all give you a sense of how much pride ownership takes in the property. We’re also looking at things that can’t easily be changed, like overgrown landscaping that blocks views or a neighboring building that permanently limits natural light. If maintenance has been deferred outside, there’s a good chance we’ll see similar patterns once we walk inside.

For industrial properties, we’re looking at many of the same things, just through a different lens. Some wear and tear from truck traffic is expected, but we’re paying close attention to the condition of the yard area, asphalt and concrete. We’re also looking at whether neighboring businesses are using their parking and truck storage areas appropriately.

The Common Areas Tell the Story

Before we ever enter the available space, we’re evaluating the building itself. We’re looking at the lobby, hallways, elevators, lighting, carpeting and restrooms. Are the elevators operating properly? Are the walls and common areas in good condition? Are the restrooms clean and well maintained?

None of those things alone determines whether a building is the right fit. Together, though, they tell us a lot. Within the first few minutes, you start to get a sense of how the property is managed and what you can expect over the course of a long-term lease. Your visitors read the same signals, forming an impression of your company before they reach your door.

Stained carpet, cracked tile, broken fixtures or deferred maintenance aren’t necessarily deal breakers, but they do tell us something. If visible maintenance has been deferred in the common areas, it’s reasonable to ask what the building will look like five or 10 years from now.

Look Past the Cosmetics

Once we step into the available space, we’re looking beyond the cosmetic finishes. Fresh paint and new carpet are relatively easy to replace. Are the ceilings and lighting current and code compliant? What condition are the plumbing fixtures, sinks and appliances in? That’s important because once you get beyond paint and carpet and start replacing lighting, ceilings, moving walls and plumbing, a build-out can easily cost three or four times more than a cosmetic update.

We’re also paying close attention to the orientation of the space, which deserves more consideration than it usually gets. In warmer climates, south- and west-facing windows can generate a tremendous amount of heat throughout the day, often forcing occupants to keep the blinds closed. North- and east-facing spaces typically provide more comfortable natural light, allowing employees to enjoy the daylight without the same heat and glare.

Who Else Occupies the Building?

One thing many tenants don’t think about is who they’ll be sharing the building with. We’re always analyzing whether the other tenants are compatible with our client. Medical offices, government agencies, call centers and other high-traffic users may be perfectly appropriate in one building, but they aren’t always the right fit for a financial services firm, law office or corporate headquarters. The tenant mix affects everything from traffic patterns, both on the road and in hallways, to the overall experience employees and visitors have each day.

Some Things Can’t Be Negotiated

Clients sometimes ask whether issues we notice in the common areas can simply be negotiated with the landlord. Sometimes they can. More often, those spaces serve the entire building and aren’t easily changed for a single tenant. More importantly, we’re not just evaluating whether a cracked tile or worn carpet can be replaced. We’re looking at what those details tell us about how the property has been managed over time.

Individually, these observations may seem minor. Together, they paint a much clearer picture of the building than the available space alone ever could. That’s why those first five minutes matter so much. A lease is one of the largest commitments a company will make, often lasting 10 years or more. Our job is to help clients understand not just the space they’re considering, but the building they’ll be occupying for years to come.

At Hughes Marino, we represent occupiers of space, not landlords. When we tour a property, our only interest is what that building will mean for our client’s business over the life of the lease. That’s the benefit of decades of experience and thousands of property tours: helping clients make one of the largest commitments their company will ever make with confidence.

The post Behind the Scenes: What We Notice in the First Five Minutes of a Building Tour appeared first on Hughes Marino.

      

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We sent the same set of questions to our advisors across the country, expecting the answers to split by geography and by the kind of space involved. But they barely split at all. The same lessons came back phrased a dozen different ways. These are the ones we find ourselves repeating, and the ones we wish every leadership team understood before stepping into the market.

Start Earlier Than You Think

If our advisors could offer a company only one piece of advice, most of them would spend it here: start earlier than you think. Companies routinely begin their real estate process four to six months before a lease expires, which is precisely when they have the least room to maneuver. Starting 12 to 18 months out changes everything. That runway is what gives a company time to tour real alternatives, gather competing proposals and let the facts, rather than the calendar, drive the decision. Time is leverage.

The most common misconception we encounter is the belief that there is plenty of time to figure it out. Most companies have less than they think, because the useful part of the process happens long before anyone tours a building: defining what success actually looks like, pulling comparable transaction data and deciding what the company is willing to trade for what. Skipping that groundwork is what leaves a company negotiating on the landlord’s terms.

You Have More Leverage Than You Realize

Companies also routinely underestimate how much pull they have. Landlords need occupancy and net operating income, and a well-informed tenant with genuine alternatives carries real weight, particularly in a market with elevated vacancy across nearly every major office submarket.

Many companies also assume their lease is static, that nothing can be done until it expires. In reality, there are often opportunities to restructure early, reduce occupancy costs, expand, contract or sublease well before the expiration date. They also tend to underestimate the value they create for their landlords, and therefore how much of that value they are entitled to share in.

Rent is Rarely the Whole Story

Ask a company what matters most in a lease and the answer is almost always the rent. Understandable, though it usually means the rest of the economics get far less scrutiny than they deserve.

There’s an old notion that real estate is a company’s second-largest expense after payroll. In practice, that is rarely true. For a distribution or manufacturing company, rent can fall into the low single digits as a share of total costs. For an office tenant, it often lands somewhere between four and six percent. We’ve seen office clients whose executive travel and hotel costs for the year outran their rent. The transaction feels enormous because it arrives all at once, but as a share of annual cost it is seldom the giant it appears to be.

Chasing the lowest rate can quietly cost a company far more than it saves. A poorly located building, one in weak condition or under indifferent management, or one that does nothing for recruiting or the brand, can undermine everything the savings were meant to protect. “The goal isn’t to get the lowest price,” says Senior Executive Managing Director David Marino. “The goal is to get what you want at the lowest price.” Concessions, operating expenses, taxes, parking, tenant improvements, moving costs and downtime all belong in the math.

Be Careful What You Commit To

Some of the most expensive mistakes we see are made by the most sophisticated companies, and they tend to cluster around the length of the commitment. Signing a longer lease to capture a few extra months of free rent can feel like a win, but doubling a five-year commitment to 10 years for marginal gains is rarely worth it. When a space requires significant tenant improvements or capital, a longer term can make sense. Absent that, every year beyond five deserves hard scrutiny.

The life science sector today is full of companies still paying for 10-year leases signed against growth plans that never materialized. Senior Managing Director Will Tober frames it as a question worth asking up front: “How long will this space meet my needs?” The answer, he notes, comes down to planning ahead. “If you’re thinking about expansion and contraction scenarios up front, you can build the appropriate flexibility and optionality into your lease.”

A related habit is the reflexive exercise of renewal options. These options are defensive by nature, and negotiating as a free agent, outside their parameters, almost always produces a better outcome. A renewal option is worth exercising only when the option terms beat what you could negotiate on the open market, or if the landlord wants your space for another tenant or use.

Create Competition, Even When You Plan to Stay

Companies often negotiate solely with their current landlord, even when renewing is the likely path. “Evaluating credible alternatives gives tenants leverage and almost always results in a better renewal deal,” Managing Director Austin Lashley points out. Credible means a real proposal from a competing building, priced and dated. It never has to be the space you choose, but it does have to be one you would actually sign.

The Advice Nobody Wants to Hear in the Moment

Some of our most valued counsel is the counsel clients least want at the time. Now and then, that means telling a company we don’t think a transaction is right for them, even one they have fallen for. A beautiful, extensively built-out space might call for a seven- to 10-year commitment when the stability of the business warrants something shorter. Executive Managing Director Owen Rice has had that conversation more times than he can count. Clients who walk away and land somewhere better tend to offer some version of, “I’m glad you didn’t let me force that one.”

There is one more piece almost no one wants to hear: signing the lease doesn’t mean the work is done. Someone has to track critical dates, confirm the tenant improvements are delivered on time and on budget, make sure free rent is honored and hold operating expense caps to what was negotiated. The language around operating and capital expenses, easy to gloss over during negotiations, can carry major financial consequences across the full term.

Treat Your Advisor as a Partner

If there is a thread running through all of it, it’s this: the companies that get the most from the process are the ones that treat their advisor as a true partner. For Executive Managing Director Alex Musetti, it comes down to candor. “The clients who explain their thinking out loud often see the best results.” The more we understand about where a company is trying to go, the better we can advise on how to get there.

What ties these lessons together is a single conviction: that a company is best served by an experienced advisor who sits on its side of the table. Hughes Marino only represents users of commercial real estate, so our advice answers to one interest alone: the company signing the lease.

These lessons are what that focus produces across three decades of negotiations. For any leadership team about to enter the market, the advantage is not any single tactic on this list. It is having an advocate in your corner whose only job is to work for you.

The post Insider Perspective: Advice We Find Ourselves Giving Again & Again appeared first on Hughes Marino.

      

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Information is power, and the other side has more than you

Most businesses don’t relocate every time their lease is expiring. As a result, lease renewals are far more common than lease relocations. Unfortunately, your landlord knows this firsthand. I sometimes say, “Nine times out of 10, businesses don’t want to relocate, and 10 times out of 10, the landlord knows this.” Which can make for challenging negotiations when a business seeks to renew an existing lease. I wrote about this previously, and about the premium rents landlords try to extract on renewals, and I gave it a name, the “Lease Renewal Loyalty Premium.” This article is about an important additional detail: As a business owner, you make things dramatically worse with a single decision—when you decide to go it alone.

What do you do when you want to relocate your business? You almost certainly hire a broker. They know the market; they can find the buildings and drive a competitive process to identify and negotiate for the best possible outcome. That’s what good brokers do. But hey, if you’re not looking to relocate, then what do you need a broker for? You like your building and you like your landlord. You don’t need to see other buildings; you just need to negotiate a fair contract extension. You’re an excellent negotiator. You negotiate contracts every day. What’s more, with AI as a tool, now you can research the market, find your own comps to understand what others have paid and where market pricing is today.

If only it were that simple. But knowing a few recent comps and getting there (or better) with your current landlord do not go hand in hand. To borrow a phrase from my adventuring days, the map is not the territory. Knowing where you want to go and getting there are two very different things. And here’s the problem: When you approach your landlord directly, you’ve made it crystal clear that you are not looking at competing buildings because you haven’t hired a broker to scout out those locations. You’ve telegraphed your punch and confirmed what the landlord already suspected, that this is a renewal, and that they are not going to need to compete with the open market in order to keep you in the building paying rent.

Just how far will landlords go in order to enjoy occupied buildings with rent checks coming in? They will go as far as they need to go, every time. And if they don’t need to stretch in order to keep you in the building, then they won’t stretch. Why would they? It seems crazy to think that the single action of hiring a broker can shift the game so entirely. And it does. Every time. When you telegraph your punch and engage directly with your landlord in negotiations to renew an existing lease, it’s like you are trying to bluff while playing poker with your cards face up, against a professional poker player. In my opinion, this is not a recipe for riches.

There’s a better way. Don’t telegraph your punch. Don’t go it alone, even and especially when you’re certain you’re staying. And definitely do not try to bluff when all your cards are face up.

The post You’re Telegraphing Your Punch (On Your Lease Renewal) appeared first on Hughes Marino.

      

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