Here’s what the CEO of Commercial Real Estate Software Solutions has to say about the role of a Lease Analyst in the Commercial Real Estate world.
Many small business owners find themselves becoming landlords in the later years of their careers. It often starts with owning their business building, and branches out into a few more bought for investment purposes later on when the owners sell their business interests to semi-retire. The typical portfolio holds less than a dozen buildings and they can be of various commercial uses: office, retail, and industrial types. Although the business owners were successful in their industry, they generally know little about and have little experience in being commercial landlords. They also aren’t really looking to invest a lot of time into the responsibility.
If you are a small-time landlord and are in this position, it pays to build a team to provide the expertise.
Most business owners know the value of a lawyer to review the legal implications of a contract, and in this case, a lease. Lawyers provide expertise in the law, and are good at finding and explaining the legal risks associated with the rights granted and responsibilities assumed in each deal.
Insurance brokers should be brought in to make sure you are covered for the property risks and liability coverages you will agree to. They will also check the requirements for each tenant based on the stated uses in the lease agreement, and will check things like subrogation rights between the landlord and tenant’s policies.
Real estate brokers do the work of finding tenants that are both a good fit for the building and the proposed tenant use. A commercial broker is skilled and knowledgeable in at least the basics of zoning bylaws and permitted uses, and know what the implications of most of the basic lease terms. They work to get you top market value for your space and the best qualified tenant.
So where does a lease analyst come into this mix? What specialty is met by their services?
A lease analyst is a specialist in the administration of the lease terms with respect to property operations. They use experience based knowledge to evaluate and assess the operational and capital costs and their impact on your current and future financial health as a property manager. Their skill is in the details of the lease contract, and it is vitally important. The sheer scale of the costs in a commercial property operation can easily eliminate the ROI generated from the base rent for several years just from one event. Parking lot resurfacing from a damaging frost cycle, premature roof membrane failure, or heating/cooling unit replacements can suck up more than a year of cashflow without adding to the asset value because of how commercial properties are valued based on the rents generated. Knowing which costs are recoverable from tenants and how that can be done is critical to understanding the real value of the lease deal. Doing a lease deal without understanding and accounting for the capital and operational expenses is like buying a car and not realizing it will also need fuel and maintenance.
Commercial property management isn’t a hobby and it carries significant financial risks. A lease analyst provides expertise in the lease terms and gives guidance on the financial implications of each negotiated clause within the document. Their experience counts, and can make the difference between success and failure of your commercial property investment.
CEO, CRESS Inc.
Commercial Real Estate Software Solutions