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If you’re reading this, chances are you have some stake in commercial real estate. Otherwise, you’d be focused upon Mark Wicker’s review of the Laker’s roster.
Investors. You had it rough from 2009-2012! Vacancy was rampant, tenants were scarce and you made any deal to survive. Now – the proverbial worm has turned. Rents have spiked, values have peaked and you’re approaching a lease expiration with your tenant. Your time – right? Just keep in mind. If you hit your tenant too hard – he may relocate. Cool, you say. I’ll just lease the building at the increased market rent – no problem. Yes, but – re-leasing your building is not free. Downtime, refurbishment, tenant improvements, abated rent, broker’s fees – all diminish the new rate you achieve. Please do this simple exercise. Assume a market rent and term you’ll strike. Total that amount. Then compute the cost to originate the new deal – using the categories above. Subtract cost from total and voila! What remains is the net amount you’ll receive – if your assumptions hold true. Now, compare the net amount with what your existing tenant is willing to pay you to renew. Hmmm. Maybe keeping him is a good idea after all.