Have you ever been a tenant in an office building that was sold? The aftermath of the sale is a tenuous time. Oftentimes a new property management and leasing team are brought on board, so there is a ramp up time as they get a handle on the building, the accounting and the tenants. This new team has made commitments to the new owner to increase the value of the property by perhaps lowering expenses and raising rents. The landlord typically makes improvements to the common areas of the building and the infrastructure (i.e. elevators, air-conditioning, etc.). Why should you care?
The most important reason is the chance that your rent could increase in the next year. There are two possibilities for this increase: 1) the real estate taxes could increase due to the increase of the assessed value of the property and 2) operating expenses could potentially increase due to changes made by the new ownership and property management. I must add the caveat that operating expenses don’t always increase. I recently came across a property that significantly decreased costs because the new ownership had determined ways to lower expenses without cutting services. They were the exception to the norm.
If your lease is up for renewal in the first 12-18 months of a new owner, you could get the brunt of the new leasing guidelines. New leasing guidelines = increased rent usually. The new owner bought your office building on the assumption that they could increase rents and they know that usually over 75% of office tenants renew their leases. If your lease is large enough, your transaction might need lender approval which adds another approval layer and takes up more valuable transaction time.
Navigating a lease renewal in the aftermath of a building sale is a tricky process. You need the expertise of a seasoned tenant rep broker to guide you through these turbulent waters. If your building is for sale or has just sold, give us a call or shoot us an email so we can discuss your unique situation. We can create a strategic process for your office lease renewal.