Wendy and I recently returned from a trip to Kona on the Big Island and we had a chance to visit a dozen or so retail and mixed use properties during our stay.  Lots of independent shops in the touristy Ali’i Drive areas and national anchored shopping centers as well including Walmart, Safeway, Costco, Longs Drugs, (haven’t seen a Longs since CVS acquired them), and locally owned KTA Super Store Supermarket.  I spoke with a couple of shopkeepers who complained of business being more slow this time of year than usual.  Likely a combination of the still recovering big island economy, lukewarm anticipated tourism growth and elimination of direct flights to Kona from Japan as reported in West Hawaii Today on Tuesday.

Of course the mom & pops are always on my mind in sluggish economies especially in big anchor centers where national anchors have leases with negotiated discounted rental and triple net rates, usually at the expense of the small guys.  Did they have the opportunity to sweeten their own deal with the landlord?  Did they represent themselves in the negotiation?  Were they cajoled by the property owner’s leasing agent or just represented by a friend with a real estate license and little or no commercial lease experience?  Too often well meaning small business owners, whether retailers, office or industrial users think leasing space means personally contacting the property owner or owner’s representative and well, just renting the space.  Here’s why that is often a mistake…

Here in Nevada and in Hawaii, there’s nothing illegal about an agent representing the landlord and tenant in the same transaction as long as it is properly disclosed to both parties.  When a potential tenant reaches out to a landlord’s agent, a dual representation relationship develops.  Inevitably this creates some conflict of interest, (just ask any attorney), as this landlord’s agent is now trying to represent the best interests of both landlord and tenant.  But as a tenant, will you get the best deal if the agent represents the landlord’s interests as well?  For the tenant, unfamiliar with the mechanics of commercial leasing, perhaps ignorant of incentives other landlords are offering in the market, or not recognizing poorly located space in a center, this lack of knowledge and information is so costly many small businesses have trouble sustaining a start-up especially during a downturn and end up with a lease that’s overpriced with hidden expenses and inferior space.  For the landlord, especially one that is actively participating in the operation of their property, they know what incentives are in the marketplace, what actual, not asking market rents are and what space is inferior in their development.  What’s the landlord’s incentive for disclosing these things to a potential tenant?  Zero.  We saw two centers, one in Kailua and another south of town with space that should concern any potential renter.  One, a large corner space with disproportionately small store frontage, the other with small spaces tucked back in little alley ways that looked cute on some architects drawing but is dismal space to lease for lack of visibility and/or foot traffic.  In my experience the landlord would talk up cuteness and cheaper rents to lease these spaces but I guarantee cheap rents wouldn’t be cheap enough.  What to do…

If you plan to open your business in leased space, whether retail, office or industrial, get in touch with a neutral party, licensed agent with commercial leasing experience.  It will cost you nothing as your representative’s fee is paid by the landlord in 99% of all cases.  If you need someone to help you with leasing space whether you’re just starting out or looking to expand or move, contact me through this site and I can put you in touch with someone who can help.

Aloha!

P.S.  My most impressive Mom & Pop business owner we visited on on the Big Island was Umeke’s.  Two locations now for the best Poke on the island.  There newest location on Palani Road is a sit-down restaurant with full bar and a small fish market with the freshest most reasonably priced fish in Kona.

Kona Sunset

Kona Sunset

I am very excited about the launch of this blog and the chance to help business owners safely and confidently lease commercial space.

From developers to investors, brokers, and agents, tenants and landlords, everyone in real estate today is struggling in a market that few have ever experienced.  If you’re a shopping center tenant that signed a lease between 2006 and 2009 you’re likely overpaying by 10 to 40% in today’s market.  This is just one of the things your landlord would rather you didn’t know.

Additionally, over the last 30 years I have seen hundreds of small business owners get trashed by their landlords.  Most had signed very complicated triple-net leases without fully understanding what they were agreeing to.  Only later did they realize that what they had signed obligated them to years of paying unanticipated recurring costs that continually go up.  Eventually they became a slave to a minimally profitable business or they simply failed.  The “net” charges in “triple net” and the reason and rationale for having to pay these as a commercial tenant is a convenient landlord mystery.

As a commercial property manager for 25 years, I was often the one doing the trashing.  I grew very tired of seeing good people suffer and fail, in fact I was ashamed.

Then I decided to do something about it.  To seek redemption.  To help protect business owners from unscrupulous landlords and their leasing agents; from real estate agents pretending to honestly represent a tenant’s vital interests and avoid the ethical issues that always occur when tenants and landlords are represented by the same agent in the same transaction.  (The latter generally being a disaster waiting to happen for the tenant).

In future posts you will learn secrets to protecting yourself when leasing commercial space.  You will read stories of business owners and how they lost everything because they didn’t have competent advice before signing a lease.  You will also learn tricks from some of  the dirtiest landlords imaginable and how to avoid their traps.

Please browse around the site and feel free to comment on what you like or don’t like.  Plus if you’re a commercial tenant,  take advantage of my FREE lease analysis.  I will be able to tell you where the problems lie in your lease, (which for the most part you already know), but more importantly what you can anticipate as the lease term matures and how you can possibly fix these issues now.

Here’s to 2010 and your prospering business.  Cheers!

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