I had a visitor to this website yesterday that was looking for free advice. She wanted to know the Dallas office market rate for her office. She negotiated an office lease several years ago for his dental practice and the lease is up for renewal. A renewal option in her lease that stated that she could renew at a market rate.
She didn’t use a tenant representation broker for his original lease so he decided to search the internet for free information. She shared limited information with me. I only had a general location for her office but he wanted market information.
That is like asking a diamond appraiser to give the value of a diamond with out letting him seem the stone.
She dangled the carrot on a stick that he may work with me and she wanted to see what I knew. I wonder if the same applies for dental procedures. Does a patient get to have is tooth filled and then then decide if they like the dentist to pay her? I digress.
Based upon experience I have found that these types of calls are generally a waste of time. After all, he didn’t think think he needed tenant representation when he signed the lease. Chances are good that she will not use broker’s professional services when she renegotiates his lease and not have a clue what the Dallas office market rate should be.
Her delima is that he would like to define the market rent as a rental rate for a traditional office. When he signed his original lease she went for an office with a lower rental rate. Just like everything else in life you get what you pay for with real estate. She received a very low tenant improvement allowance and paid for the dental office improvements himself.
Being an experienced office lease negotiator he made sure to have a renewal option placed into the lease. It is typical that the renewal option will state that the renewal will be at the prevailing Dallas office market rate.
Well played except he didn’t take into account that he negotiated an office lease with a rental rate for a traditional office and at her own expense build a dental office. This type of space is significantly more expense to build. This will increase the market rental rate for the space beyond general office.
The construction of the space is always considered in the Dallas office rate calculation. Her renewal option should have specifically stated that the new rental rate would be for traditional general office space.
During my telephone conversation she had “done his research.” He’s been Googling and I am sure calling all the brokers signs in the area. She could tell me the quoted rates for all the buildings that gave her the rental rate he wanted. To a novice these rates would be office market rates. They are, except they are general office rates not dental office rates.
Dallas Office Market Rate Is Higher For A Dental Office
I attempted to explain to her that this is a completely new transaction. The landlord is looking a the space in its present condition. It is no longer a general office space it is a dental office. The new definition of market rate is going to be calculated differently.
My carrot dangler thought that she was being wronged and she should be paying general office rates. She wanted to use me as a witness in has arbitration. I tried to get her to understand that the best way to present her case is to get legitimate offers from landlord’s for his new office. Using a quoted Dallas office market rate from a legitimate offer for a dental office will carry weight. If she would hire me at his Dallas office tenant representative I would gather the information she needed to present a logical defense for what market rental rates are for his use in the office market she wanted. Getting a rate from loopnet for general office space is worthless.
The lesson here is there is no free lunch. Every transaction has to take into account the amount of construction required to get a rental rate. Using a professional Dallas office tenant representative will save you money, time and headaches. Please call me if you are looking for professional help and leave your carrots at home.