Know Your Numbers … The Real Cost of Leasing Office Space

by CoyDavidson on August 19, 2012

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Learning to Think and Speak Like a CFO

The newbie that enters the commercial real estate brokerage industry has much to learn and typically the first piece of advice they get from senior brokers is to learn the marketplace. For leasing brokers, both landlord agents and tenant representatives, this means getting very familiar with the space inventory in the market you plan to serve. Your expected to be an expert on the market so that means what space is vacant, what it rents for as well as the physical characteristics and nuances of all the property in your market area.

Equally as important, is the comprehensive understanding of the economic components of a lease transaction and for tenant reps, the technical ability to measure occupancy costs. Every office tenant wants the highest quality office space available that fits within their budget. In other words, they want the best value that fits within their total overhead cost structure.

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That’s an Impressive Spreadsheet…What Does it Mean?

Today, computer software makes it relatively easy to crunch the numbers and produce impressive looking reports. However, I am often surprised at how many agents even with a few years experience lack the financial expertise to speak the CFO’s language and effectively advise their clients.

I learned the economics of a lease transaction with a financial calculator and a legal pad and I think young brokers should do the same. If you are going to lay that impressive spreadsheet on your clients desk, you should be able to explain what the numbers mean and more importantly why “they are what they are.”

Here are three posts from the archives of The Tenant Advisor, that address the economics of a lease decision.

Financial Analysis for Office Lease Transactions
The decision to renew a lease or relocate your office facilities requires thorough financial analysis of the anticipated lease costs within the marketplace. This requires the technical ability to analyze the cost associated with various facility decisions … read the full article

Financial Analysis as a Negotiation Tool
Effective negotiations for an office lease require a thorough understanding of the underlying economics of the transaction. Great deals are not only found, but also negotiated … read the full article

Is Your Rent-to-Revenue Ratio on Target?
Most companies use a few basic metrics when comparing various office locations from a transactional standpoint or attempting to benchmark the performance of various operating properties across their real estate portfolio … read the full article

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