This is the latest in my continuing series on tenant representation. No time to read? Click here or on the video above. This month’s article is about price transparency – or the lack thereof. What is price transparency? Let’s take a look at Dollar Tree. At Dollar Tree, everything’s a dollar. No questions, no negotiation, no drama – and that is generally good for the consumer. What isn’t price transparency? Think about the auto industry. Who wouldn’t want a Lexus for $199 a month, but if you read the fine print, there is an additional $5,000 in up front fees.
While other issues are dominating the headlines, price transparency has been very much in the news. In October 2020, the U.S. Department of Health and Human Services enacted new rules on price transparency in the healthcare industry. Insurers will be required to post prices for standard medical procedures starting in 2022. By bringing pricing into the open, regulators hope to enhance competition and reduce costs to the consumer.
That’s great for healthcare, but price transparency is sorely lacking in commercial real estate. In fact, leasing an office space is probably worse than leasing a car and the fine print takes the form of a 30 to 40 page lease. Business owners today face an increasingly complex leasing marketplace.
There are net leases, gross leases, full service or modified gross. These leases can vary widely is in the way tenants are billed for operating expenses, and there are with many potential hidden costs. Who gets the electric bill, who pays when the air conditioner breaks? In some leases, tenants are responsible for insurance deductibles after a natural disaster. And what is the cost to build out the space, whs’s paying and how long will it take? In Florida, we also have sales tax on rent. To make it even more confusing, as I covered in an earlier blog, a square foot in one building can be larger than a square foot in another.
Property owners make it difficult to compare rates on an apples-to-apples basis and that is often by design. With my former company, we developed databases that allowed tenants to search for spaces by price. Our plan was to disrupt the office leasing market using artificial intelligence and price transparency. But our company was acquired and price transparency, at least for now, dissolved with it. Even on CoStar and LoopNet, the industry’s primary data source, you still can’t effectively search by price.
While price transparency helps simplify the process, no two spaces are the same and no two leases are the same. There are qualitative issues that can be more important than price. Does the space allow your employees to be more productive, does it help you to attract top talent and does it encourage collaboration with other businesses?
So how can the average tenant get information on pricing and other factors in order to make the best decision regarding their office space? I hope I’ve made a strong case for why you need someone who can help navigate you through the process. That is the job of a tenant representation broker.
You may sign a lease every three to five years, but I’ve negotiated up to sixty leases in a year. As a tenant representative, I know the buildings, I know the numbers and I know the pitfalls to avoid. I’ll answer all your questions plus a few you didn’t even know you needed to ask. I’ll find you the best deal on the right space and my fee is paid by the landlord so you get professional representation at no cost to you.
I can walk into Dollar Tree, buy a few things and feel confident I’ve gotten a good deal. But I won’t buy or lease a car without my auto broker. The less price transparency, the more you need professional representation. Maybe someday there will be a major disruption in the way we lease commercial space. But considering the qualitative aspects as well as the potential for hidden costs, a tenant representation specialist can save you time and money and help you position your company for success. And best of all, it costs you nothing.