Have you ever been in the hot, humid, Houston heat trapped inside of a building with no AC?  Imagine if you signed a lease in an office building and the chillers (AC) shut down for 4 weeks.  What would you do?

One of my clients sent me a referral to work with several tenants that were in this very situation.  When I walked inside of the building at 11 a.m. it must have been at least 90 degrees in the buildings.  There were tenants in the parking lots working out of their cards to avoid the heat and get AC.  Other business where shut down, some had already relocated, some even purchased portable AC units!

I can tell you several other stories like this, (especially after the last hurricane hit Houston) but I would rather share this for now.  Tenants, know your landlord!  Even though most of my clients do not ask, I volunteer the management history of a building so that the tenants have an idea of who they will be “living” with for the next several years.

Any tenant that has had a bad experience with a landlord will not sign a lease without having some kind of comfort level with the landlord’s history.  A good management company or landlord is like a good insurance policy.  You really don’t care about what they are doing until something breaks down.  When something happens,  (something always happens) talk to your broker before you sign a lease to make sure you know background  of the landlord and management company.

Here is the plug for using a Tenant broker like myself:

As a Tenant broker, I am able to present the most objective, accurate view of a property because I work for the tenant, and not any specific property.  The landlord broker is hired to get a tenant to sign to a specific building. We help our clients select the absolute best building based on the client’s criteria.

First off, let’s start with the BOMA definition of each building:

Class A

Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.

Class B

Buildings competing for a wide range of users with rents in the average range for the area. Building finishes are fair to good for the area. Building finishes are fair to good for the area and systems are adequate, but the building does not compete with Class A at the same price.

Class C

Buildings competing for tenants requiring functional space at rents below the average for the area.

I can add from my own experience that Class A buildings many times will have a restaurant, bank, 24 hour manned security, covered parking, ect.  Class B will have some of the amenities of Class A, but not all of them.  Class C buildings (greatest value, fewest amenities) may possibly have a deli, video surveillance, fewer floors, ect.  Every time I think the market will follow a standard, CoStar goes ahead and will turn a Class C building into a Class “A” building because of pressure from a REIT, owner, or broker listing the space.

Ultimately, a good tenant rep broker will make sure the market decides the true value of a building, not the letter classification!

My definition of a “misfit” tenant is an office space use that is allowed into a suite that does not fit the use of a traditional office tenant.  In softer markets landlords may attempt to maintain occupancy going a little further than giving attractive concessions.  When a landlord crosses the line and closes a deal with a “misfit” tenant, the entire building  (including the tenants) can suffer.

Now, I am represented or worked with almost all of the industries that I am about to name with the exception of abortion clinics.  Any good broker will direct these tenants to options that can adequately accommodate them.  If you happen to be a misfit tenant, get a broker with experience with working with your industry and start your relocation project at least 6 months to a year in advance before your move.

Characteristics of “misfit” tenants for office space can vary based on the building, but the most common misfit tenants are the following:

Salons and Barbershops – They use a lot of utilities, require a lot more build out, really thrive much more in a retail or mall environment where they benefit from the exposure and foot traffic.  If you walk into an atrium building immediately smell perm, weave, and shampoo…. You guessed it!  There is a “misfit” tenant in the building!

Deli w/out proper ventilation – Deli’s are great ….most of the time.  A deli without proper ventilation can have an entire building smell like a greasy kitchen inside of a month!

“Drug Centers” – These centers thrive in unregulated class C buildings where they can get away with the sometimes inappropriate or illegal activity that goes on in these centers.  I have seen a few reports in my years of thefts,  break-ins, even shootings where these centers have been located.

Educational Institutions –  High traffic and density are two of the major problems with these institutions in many buildings in the Houston market.  Most office spaces are designed to accommodate about 4-5 spaces per 1,000 sf of space.  Just one classroom alone can easily take up many of the prime/non-reserved parking that tenants would like reserved for their own visitors.

Call Centers -  Call Centers share the same issue with educational institutions high traffic, high density of employees.  Occasionally neighboring tenants will complain about call center employees not complying with a professional dress code.  Some buildings are a great fit for call centers in Houston.  Some are not.  There are several buildings that I know that are very well suited for call centers and I will always try these options first when working with this type of client.

Buildings with the right tenant mix really add value to all of the tenants.  At the end of the day, a “misfit” tenant has just not found the right fit for their industry and needs to make a change.  Many times, this change will ultimately save them time, money, and the headaches of dealing with angry neighboring tenants!

Time can be your best friend or worst enemy.  This is especially true when it comes time to renegotiate an office lease. Either landlord broker will come two years before your lease expires to renew a deal, or they will wait a until the expiration date is right over your shoulder before trying to work a deal.   In either case, any good Tenant Rep broker should be advising that you take at least one full year to take a good hard look at the market before getting a deal done.

A great first step in positioning yourself as a tenant to negotiate/renegotiate a lease is to hire an experienced Tenant Rep broker at least one year before the lease expiration date.  Starting early will allows the tenant to  control the clock instead of the landlord.  An experienced broker should lay out a timeline or some sort of gameplan on how to “attack” the market, gather options, educate the client, ect. so that the tenant is able to make select the option that fits the highest and best use for their business model and industry.

Less Time = Lost opportunities for tenant, Increased leverage for landlord

More Time = More market opportunities revealed, Increased leverage for the tenant (and a happier, less stressed tenant!)