Put two multi-tenant buildings on the same block, similar vintage, similar size, and they will often achieve materially different rents. Location is identical, so location is not the explanation. The differences are almost always in a short list of things that are visible if you look for them.
Effective rent, not face rent
Start by checking you are comparing the same thing. A building quoting a higher net rent while giving nine months free and a large improvement allowance may be achieving less per year than the one next door quoting lower with nothing. Landlords defend face rent because lenders and appraisers look at it. Compare the fully loaded annual cost across the whole term.
Additional rent
An occupancy cost is net rent plus operating costs, taxes and insurance. A building with older mechanical systems, a large parking lot to maintain, or a higher tax assessment can carry several dollars a foot more in additional rent. Tenants who only compare net rent regularly sign the more expensive lease.
Measurement
Rentable area includes a share of common area, and the standard applied — and when it was last applied — varies. Two buildings quoting the same rate per rentable foot can deliver different amounts of usable space. Ask for the measurement standard and the date.
Condition of the space, not the lobby
Tenants tour the premises. A demised, clean, well-lit shell leases faster and at a better rate than the same area full of the last tenant’s fixtures. The cost of clearing and repairing is almost always lower than the additional vacancy it prevents.
Improvement position
The landlord who can say at the first tour exactly what allowance or turnkey scope is available converts tours into offers. The one who has to go away and think about it loses the tenant to a decision made elsewhere.
Parking, loading and power
For office, the parking ratio and whether stalls are reserved. For industrial, clear height, dock and grade loading, and available power. For retail, exposure, signage rights and the co-tenancy. These are not details; for many tenants they are the decision.
Who else is in the building
Co-tenancy affects rent in both directions. A strong anchor or a complementary mix supports rate. A half-empty building, or an incompatible neighbour, discounts it — and restrictive covenants held by an existing tenant can eliminate whole categories of prospect.
The landlord’s reputation
This one appears in no report and is entirely real. Tenant representatives know which landlords respond quickly, approve drawings without drama, pay allowances on time, and reconcile operating costs transparently. That knowledge moves deals.
What to do with this
If you own a building that is underperforming its neighbours, the fix is usually not price. Work through the list above and you will generally find two or three specific, fixable items. If you are a tenant, the same list is the basis for a well-founded negotiating position.
Talk it through with Rimrock
Rimrock Sales & Leasing works with owners, investors and tenants across Calgary, Edmonton and Lethbridge. Get in touch or call 403-910-4611.