Over the past year the commercial real estate leasing market has dramatically slowed down and tenants have more choices than ever when selecting an office space.  In this market, the key to leasing a vacant space is to provide a better alternative than your competition at aggressive rental rates with flexible terms.

Spaces that look the best tend to lease the fastest.  The answer for landlords is “Spec” suites.

Often times when a suite becomes vacant, it has been occupied for some time and is tired and dated.  Tenants often have difficulty imagining how the office will look once the finishes and improvements have been updated to modern standards. At the end of the day, the spaces that look the best tend to lease the fastest. The answer for landlords is “Spec” suites.  These are suites that are put into move-in condition prior to identifying a tenant who will ultimately lease the unit. This leasing strategy has been implemented by many building owners over the last few years and proved to be very successful. Each suite is made to be ready for occupancy and has been efficiently and aesthetically designed to accomidate a typical professional

office tenant.

With the uncertainty in the economy, many tenants prefer lease terms in the one to three year range, instead of committing to five year leases as they did in the recent past. The Barbakow-Mott Team of NAI Capital, Inc. located in Encino, CA suggests that selecting the right finishes, such as laminate wood flooring, for a Spec suite not only provides at a low cost look desired by many Tenants, but is also durable enough that it does not need to be replaced if the space is only occupied on a short term basis. 

According to Barbakow, “Building ‘Spec’ suites are a win-win for both the landlord and the tenant.”  By building several “Spec” suites simultaneously, the overall costs are reduced due to savings in design fees and construction expenses.  This approach also expedites the lease negotiation process, eliminates construction time, and results in earlier tenant occupancy dates, which all means that the landlord receives rent sooner.  A building that implements this “Spec” suite concept can expedite the leasing process along with making it much more hassle free for the tenant.

As a landlord you must be educated to ensure that an existing tenant renews at your building.  It is just as important to know your own property as it is to know the options that the tenant may be considering for relocation.  Not only do you need to know the alternatives in the market, but understanding the exact office space requirements of the tenant is a crucial  factor in determining how a landlord should approach a specific tenant’s renewal terms.  If the tenant’s existing premises has offices that are too large for their current needs, an inefficient layout, or is not the right size for their number of employees, then you should expect that a more aggressive transaction will be needed to convince the tenant to stay

Conversely, a landlord who knows that the tenant currently has all their needs met can stick close to their desired numbers because the cost of relocating rarely can be overcome by a slightly lower rental rate or other terms being offered at a competitive building.  In the event the tenant has hired a broker to represent them, make sure to offer a 4% commission because you don’t want to motivate their agent to guide them towards another location.

Please call Jeremy Barbakow at (818) 905-2400 ext 146 to further discuss all of our strategies on how to keep your existing Tenants and the “Spec” Suite Leasing Concept.