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Stephen Beckham
04-27-2009, 3:14 PM
Well friends, looks like this laser guy is going to shut down or find a new place. My landlord just informed me that he wants to raise my rent from $.85 /sq ft to $1.50 /sq ft. That's a difference of $500 more a month! He likes the idea that I'm finally making money and feels that I can afford it.

I told him my profit is my profit and not his. Just because business has picked up for me, that doesn't mean the property value has increased... Well - that's what I wanted to say. Actually I simply told him I'll have to find a new place; that I can't afford that kind of increase.

At any rate, I'm pursuing a move back to the basement and picking up where I left off from there or finding a new place. I've got enough business that will follow me now so no hard feelings - it's a business move on his behalf and I'll make my business move on my family's behalf... It's a shame - I really liked this landlord...

It's all good, everything happens for a reason and the Big Guy will take me where I need to be!

Mitchell Andrus
04-27-2009, 3:43 PM
$1.50 /sq ft... Really? Is that per year or per month?

Ask him what his real estate tax and insurance costs are psf.

Tom Delaney
04-27-2009, 4:25 PM
Steve - if people are clammoring for your space, you're in trouble BUT if, like most of the U.S. - rental space is more empty than full - you should be in the drivers seat UNLESS he dropped his proverbials to get you in there in the first place. The issue he will have is somebody else will have to do FIT up and he will be out of the rent until he has somebody else to move in. Remind him that a 76% increase out of the blue is more than unreasonable and when you leave, he will have to foot the entire tax, security, etc until he fills the space.
Also, look at what your neighbors are paying (per sq. foot) - if you are way low --- somebody else might jump in. You have the alternative to move back to a basement dweller (as most of us are) - so you really are negotiating from a point of strength. You have an option and if you move out... where does that leave the landlord? A reasonable increase after being there a year... maybe ...but in this economy he should be glad to have somebody showing up to pay the taxes!

Mark Winlund
04-27-2009, 4:43 PM
I've got 12,000 sq ft for 40 cents sq/ft.... busy hiway, lots of office space, work space, warehouse space... in Oregon (highest unemployment in the nation.)

Mark

Ed Hazel
04-27-2009, 5:03 PM
Reminds me of a story from and old builder.

When anyone asks hows business say good.
If you say great your suppliers/landlord will up their prices. if you say slow then your customers think you should be happy to do jobs for less money.

Bottom line keep your business your business.

Bob Lloyd
04-27-2009, 8:52 PM
Stephen

What kind of lease agreement do you have and how long have you been there? Was it for a fixed term, do you have any right to extend or were you simply month to month or tenant at will? As a landlord in this economy that is an absurd increase unless he gave you a teaser rate to get you in or maybe has someone else lined up. As others have posted, in many areas there are lots of commercial spaces for lease. What are the going rates in your area? You posted that he wanted to raise your rent, is that how it put it or did he say that he would be raising it?

Bob

Stanley Waldrup
04-27-2009, 9:18 PM
I've got 12,000 sq ft for 40 cents sq/ft.... busy hiway, lots of office space, work space, warehouse space... in Oregon (highest unemployment in the nation.)

Mark
Sorry to differ with you but We have ya beat up here in Michigan 12.6 to your 12.1 We have all kinds of places to rent just no incoming to pay it..
Still above water in Michigan
Stanley

Stephen Beckham
04-27-2009, 10:49 PM
Well, the original lease runs out July 1st and that's when he wants the increase or have me leave - nothing binding beyond that. The building sat empty for over a year before I moved it because he was asking $750 a month. I knocked him down to $700 as a starter with an expectation of a 10% increase the second year to be negotiated of course - his negotiation went from 10% to mid 80% range.

The average cost per square foot in this town (smallest incorporated town in US according to Guiness Book) runs about $.60 low end up to $.90 high end. There are only three buildings (lest than 20 total retail spaces in town) for rent and they have been empty one year, almost three years and seven months respectfully. The average life span of a new business in our town is about 8 months. Then they leave to go somewhere that doesn't have the city tax sales tax (auditable and public info for gross ticket information).

He seemed a bit shocked and started asking for other concessions when I told him I wouldn't pay over $800. He asked me to wait three days and he'll come back with a counter offer. I suggested he come back with concessions because I would move at any penny over $800. Honestly, I'd love to move anyway since I can get 400 more sq/ft for the same $700. He said there wasn't anything that cheap to his knowledge in town. Again - he's from out of town and only comes up every other month. Not putting him down, but he's out of touch with the locallity and the local rates.

Craziest thing is he commented on how impressed he was with my business savvy when talking, but seems like he thinks he can strong arm me by telling me how much it's worth (in his mind - not the value he's paying taxes on - yea, I checked). He tried to convince me he's doing me a favor by giving me such a good deal. I had to look in the mirror to see if someone wrote SAP on my forehead... Maybe I should help him out with our new PVA and let her know that he's paying way under the taxes on the actual value he claims the property to be worth.

Well, anyway - I'm going to keep on keeping on. A couple members of the city council stopped in to make sure I'm okay and that they would do anything to help me out. They're somewhat excited that I'm brining business to their little town and want to help me stay there. It's good knowing that you're loved by someone (I think their salarys are paid by my city sales tax....:eek:)

Take care and thanks for the responses of encouragement!

James Jaragosky
04-28-2009, 2:02 AM
Oregon (highest unemployment in the nation.)

Mark I thought that Elk Heart IN had that distinction.

Rodne Gold
04-28-2009, 2:42 AM
Im not au fait with US legalities , but you might have some recourse to a doubling of rent , in fact over here in South Africa , you have pretty strong rights as a monthly tennant without a lease,
If you have improved the premises , you should be entitled to at least the cost of your improvements , providing the landlord knew about em.

Bob Lloyd
04-28-2009, 7:19 AM
Steve

It seems that you have the power in this situation. According to your numbers, you are already paying close to the highest rate in town. There are other vacancies and your space will join them if you move. If the rent was raised to $800, that would be a 14% increase, still a large rise. You said "Honestly, I'd love to move anyway since I can get 400 more sq/ft for the same $700." So why don't you just do that? Sure, it is a hassle to move but if you get more space for less money it is a no brainer! If you do move or stay, I would have the lease drawn up so that you do not find yourself in the same situation again. Get any increase fixed at a more normal 3-5% or have it tied to some index that adjusts for inflation. Also get yourself the option to extend the lease. That way you have the option of paying a predetermined amount or moving at the end of the specified term. As I mentioned at the beginning, you appear to have the power in this instance. Good luck.

Bob

Phil Thien
04-28-2009, 8:57 AM
I think that, almost without exception, you should be able to find lower rent than what you're paying, and get options on years 2 and 3 at the same rent. In fact, commercial landlords would rather forgo increases in rent and have locked-in leases because they need them in order to renew their loans every 3-5 years. And most are currently bleeding tenants.

I'd play a little hardball w/ this guy. Get some written comps from other places where you could relocate. Include options for additional years. Tell the current landlord he has to match the lowest one or else you'll bolt.

Scott Shepherd
04-28-2009, 8:58 AM
I contend the bottom is here. Why? All I hear is how awful the real estate market is. It's everywhere you look. We are in the process of moving as well, and we've called no less than 5 agents, with all of them working for large firms. Not a single one of them has asked for our name, our telephone number, our company, or offered to meet us at a location to show it to us.

We asked how much the cost per square foot was and two of them from different companies said "The total cost is _____, you figure it out, I don't have a calculator".

One place was what we wanted, but the price was way out of the market normal, and we asked the guy if they would take any less and he got hot about it. He said the price was what it was, take it or leave it.

For people who are supposed to be starving, darned if I can find one that's hungry enough to want to help us. We ride through a couple of office parks that have dozens of empty spaces and they people won't even call us back.

Darndest thing I've ever seen. We're TRYING to give our business to someone and can't find anyone to take it. I think they know the bottom is here and they don't want to write a ton of leases tying up all their space at low rates, so when the market comes back, they have nothing to offer at higher rates.

Phil Thien
04-28-2009, 9:10 AM
One place was what we wanted, but the price was way out of the market normal, and we asked the guy if they would take any less and he got hot about it. He said the price was what it was, take it or leave it.


I used to think that this was odd, too. But then it was explained to me that the value of the property is based on the rents. If they drop the rent, they drop the value of the property. Which also gets them into hot water when they renew their loans (every 3-5 years for commercial property).

So many would rather have a vacant spot or two than drop the rent.

Of course, many are now getting to the tipping point where they don't have enough tenants to cover their nut. But as a possible tenant there is nothing you can do about that. They are kinda damned if they do, damned if they don't.

My best advice is: (1) Avoid dealing w/ leasing agents, try to deal with smaller owners that handle leasing directly. (2) Try to find property that is owned outright.

Scott Shepherd
04-28-2009, 9:18 AM
Thanks Phil, I've also had that explained to me as well. Apparently the value of the building isn't much, it's the value of the tenant and how good their credit is and how long the lease is for. If they have a great credit rating and sign a long term lease, it gives the owner the ability to borrow against that value. So you'd be better off to rent to someone with great credit versus okay credit, even thought the rent is the same.

Makes sense, but like you said, it's costing you money to have it empty, and I'd like to make that problem go away from them plus have a place. We're looking at $7-8 a sq. foot here (annually) for flex space, and the small guys seem to want $10 a sq. foot.

Mike Null
04-28-2009, 10:02 AM
But in the area where Steve is doing business real estate prices are comparatively low. It may be wiser to buy or build.

In earlier conversations with Steve I gathered that a retail location was much to his advantage.

Dave Johnson29
04-28-2009, 10:10 AM
Makes sense, but like you said, it's costing you money to have it empty


Scott,

Don't forget "loss write-off" the company that owns the building probably owns others and it is good business to have a few of them vacant to drag down the Tax burden. As long as they cover their loan with the current tenants, they can wait forever.

As Phil said, look for "owner leased."

Stephen Beckham
04-28-2009, 11:44 AM
Thanks again for all the input and support.

Now I'm at a quandry... Less than 16 hours of calling around to get prices and availability and I've had leasers calling me to offer me space - the best offer was twice the space literally for the same price. One of them I never talked to, they heard I was looking so they gave me a cold-call... So I'm definately in the drivers seat here...

I put together a cordial email to my landlord and specifically quoted prices of two current buildings occupied and two that are open for me to go and look at. The most expensive one was still $.20 per foot cheaper than what I'm paying. Told him I would not renew.

Took about an hour before the landlord called to inform me that I can stay another year at the same exact price. I told him I appreciate it and would plan on it, but still have to do what is right for me. So I'm going to look at a building up the street in a couple hours. 200 more sq footage for $200 less a month - do the math.... And it's right behind the Dairy Queen!!!!! :D

Jack Harper
04-28-2009, 11:49 AM
I have been trying to rent out the other half of my building (about 12,000sf) for about 6 months now as my tenant is going under, 13 stores in total. I have had plenty of lookers and a some offers. The problem is, everyone is convinced the market is so bad that we will take any deal. The offers have been overwhelmingly low, so I don't give them a second look. They exceed any opening offer gambit. In addition to this, I have had several offers at or near my asking price but the owners were unwilling to sign personal guarantees for the lease. They seem to want me back their company when they won't. I know if I rent my space now, I will forever be fighting an uphill battle to get it back to market value after the markets heal. I find it better to take the hit now and wait it out so as not to damage the property value. It goes to show you there are two sides to this coin.

Mike Null
04-28-2009, 12:09 PM
Steve

The DQ would do it for me. I grew up on raspberry milkshakes.

With the extra $200 a month you can practically eat free there.

Dan Hintz
04-28-2009, 12:22 PM
The "situation" you're in is quite amusing... if the landlord had never tried to increase his rates (or maybe by a few percent), you may never have looked at what others are offering (or at least may not have had the gumption to do anything about it). Once he pushed you into a corner and tried to squeeze every last dime out of you, not only did he get nothing extra, he lost the sale completely. Classic sign of a poor businessman...

Peter Luch
04-29-2009, 12:37 PM
I really don't get this right now.

Everyone I talk to that rents for a business is getting increases in this bad climate.
What the heck are all these landlords thinking right now. Business is slow most everywhere and they are raising rents.
There are tons of places for rent here and landlords are raising rents???????

It just does not make sense?!?!?!?!?

Anybody else see this?

Aloha, Pete

Marc Myer
04-29-2009, 1:19 PM
Good reason to stay in the basement, so to speak.
I won't bore you with our stratospheric lease rents even in our semirural area, as you can guess. Limited space, no expansion anywhere.

But I'm helping a friend reopen a movie theater, and after a lot of negotiation, we got the same low lease as the previous tenant. And the shopping center is glad to have us. Now I just have to figure out how to make an 18' plexiglass sign with a 12" x 18" laser http://www.sawmillcreek.org/images/icons/icon7.gif

Stephen Beckham
04-29-2009, 3:32 PM
Now I just have to figure out how to make an 18' plexiglass sign with a 12" x 18" laser http://www.sawmillcreek.org/images/icons/icon7.gif

Marc - got to hold your mouth juuust riiight!


Well guys and gals, friends alike.... The saga appears to be over. The larger space down the road was nice, but lots of square footage lost to built in 'stuff' that would be useless to me. He said I could take out what I want, but would have to put it back to leave (if ever). I don't have the patience or time to undo someone else's handywork just to try and figure out how to put it back.

Sooo - Gonna stay put at the same amount for now. It's crazy, with all the empty buildings I too wonder why someone would want to raise rent and ruin a good thing. I agree with the comments about 'giving it away' and wouldn't lower the perception of my products by giving it away - so too - as an owner, I wouldn't want to give the property away. But there is a line that pushes greedy.... My guy's not there, but he approached it to see how strong I was in my business senses...

Take care and again - thanks for the input and wishes of good will...

Michael Simpson Virgina
04-29-2009, 4:54 PM
In this economy the craziness is not just with the landlords. The prices on some of the laserable products are out of control. I don't see how any of you make a profit paying those kinds of products. What the manufactures of those type products don't understand is that if many of the retail engravers go under their will no longer be a need for them.

On thing I find it hard to believe is that there is no competition in this market when it comes to products like LaserTile or the Cermark products.

Don't even get me started on the price of acrylic. Or how about the rising shipping prices.

If anyone thinks we have hit the bottom yet you had better think again. The bank problem is far from over. When I decided to purchase my laser I went to my bank for a loan.

I have a credit rating over 800. I have several thousand dollars in their bank. My Tax returns shows I made over $130,000 last year. I have collateral. And I was willing to pay 20% down. They turned me down. First time it has ever happened. If the banks are not willing to give loans with those types of conditions then there is no way they can survive. I say the heck with them. Let them go under as I feel most are crooked as can be.

I ended up paying cash for the laser. So now the bank does not have that money nor will they collect any interest. Go figure.

Dan Hintz
04-29-2009, 7:21 PM
I have a credit rating over 800. I have several thousand dollars in their bank. My Tax returns shows I made over $130,000 last year. I have collateral. And I was willing to pay 20% down. They turned me down. First time it has ever happened. If the banks are not willing to give loans with those types of conditions then there is no way they can survive. I say the heck with them. Let them go under as I feel most are crooked as can be.

I ended up paying cash for the laser. So now the bank does not have that money nor will they collect any interest. Go figure.
Almost word for word, I was in the same position (except for the paid in cash part... I put it on credit for a few months, final payment to be made in a few days, just in case something was wrong with the machine I would have the credit card company behind me). While the government was bailing out the banks, I was cheering from the sidelines hoping the greedy ones would fail.

Phil Thien
04-29-2009, 8:52 PM
In addition to this, I have had several offers at or near my asking price but the owners were unwilling to sign personal guarantees for the lease. They seem to want me back their company when they won't.

I wouldn't get too hung-up on that PG if the business looks viable and the principles seem normal. I know those are BIG ifs. But you're better off with a successful tenant and no PG than a crap tenant with a PG.

Remember than some overwhelming percentage (I don't know what it is since the laws were rewritten) of small business that fail result in personal bankruptcies for the principles as well.

Phil Thien
04-29-2009, 9:00 PM
Well guys and gals, friends alike.... The saga appears to be over.

Whatever you do, don't forget some options for additional years. The time to strike is when the iron is hot. They're only options, you don't have to exercise them. And if things deteriorate, you can always renegotiate when the time comes.

Options can be goldmines. I had a friend that had two five year options on a property. The landlord was approached by a national retailer that wanted the space (and was willing to pay substantially higher rent) for (get this) 25 years. My buddy was able to negotiate a relocation to a smaller space, and is paying nearly no rent for 10 years.

Stephen Beckham
04-29-2009, 10:11 PM
Whatever you do, don't forget some options for additional years.

Roger Phil.... The best peace of mind comes from the fact that I have options and I stayed cool through it all... Used facts not feelings... I think that is what won in the end. I wasn't tied into a trap so I held the chips.

Truly a blessing and trust me anyone that askes - I'll tell them straight up where it's all coming from. And short of being edited here - I'll stop with just a referrence to the Big Guy upstairs.... Have a good evening....

Jack Harper
04-29-2009, 11:28 PM
I wouldn't get too hung-up on that PG if the business looks viable and the principles seem normal. I know those are BIG ifs. But you're better off with a successful tenant and no PG than a crap tenant with a PG.

Remember than some overwhelming percentage (I don't know what it is since the laws were rewritten) of small business that fail result in personal bankruptcies for the principles as well.

Phil - I agree, the business must be sound. That is why, in addition to the PG, they have to submit three years of audited financial statements to my accounting firm for review/assessment. I did offer to back away from the PG on the last offer so long as their financials checked out, but they weren't willing to that either. I just remind myself, the only thing worse than no business, is bad business.

Bob Lloyd
04-30-2009, 6:56 AM
Steve

What Phil was referring to and I mentioned in an earlier post was not the option of moving elsewhere but having the lease written with wording that allows you to exercise options to stay at some point in the future. It is just that, options that you have control over and you can option to stay or move. Also I would strongly advise to get any acceleration clause capped so that you do not find yourself in the same situation in the future.

Bob

R. A. Mitchell
04-30-2009, 8:44 AM
I ran a business from downtown Philly and had to change locations four times. I sublet my space and was able to get deals from tenants who were locked into leases for space they didn't need.

The commercial real estate market is on the verge of collapsing, but it isn't there yet. The vast majority of landlords are leveraged to the hilt. They would much rather make deals using renovations and extras than rent reductions because their financing is based on the rent revenues. The bottom for this market will hit when the landlords go bankrupt. When landlords start walking away from the financing deals, then rents can readjust to the reduced values of the property.

Bill Cunningham
05-02-2009, 11:52 PM
In 2000 I was outgrowing my 16 x 20' garage, and had to choose between building, or renting a commercial space. My 'Garage' was already being taxed at the commercial rate, and I had been in business for 10 years, so I asked the town if I could build a bigger building for my 'legal nonconforming' business, and they said I could as long as it was not for human habitation (we were on a septic system at the time) So, the choice was easy, pay commercial rent for years, and then retire not even owning the doorknob, or add a building to my property and increase the value. It was a no brainer.. I had the space so I opted for the new building. The biggest problem I had, was finding a builder. The building industry was booming here at the time, and only one of the thirty builders I called even bothered to return my call. The one that did gave me a FOAD price (Ask Rodney what that means:D). I finally found a relative of a friend that was a framer & block layer, so I hired him to put in the foundation, frame, sheath, and roof the building. My son-in-law is a electrician, and my wife and I did all the other work, insulating,drywall, painting, general carpentry.. etc. We started in late October, and I moved the business to the new building in June of 2000.. The $25-30k it cost me to put it up, has now increased my property value about 60+k minimum. Now that we got sewers this fall, the human habitation thing is no longer a problem. When I retire and move, this will make a nice rental for someone (two floors 1200 sq ft)..

If you got the space, this is the only way to go..
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Frank Corker
05-03-2009, 7:52 AM
Well friends, looks like this laser guy is going to shut down or find a new place. My landlord just informed me that he wants to raise my rent from $.85 /sq ft to $1.50 /sq ft. That's a difference of $500 more a month! He likes the idea that I'm finally making money and feels that I can afford it.

That is one hell of a hike in price! I wouldn't even say it is reasonable or proportionate. I hope you find yourself the right place at the right price and he can go and lick his own wounds.