Within the industrial real estate landscape, there are two types of landlords:
- Institutional Landlords (pension funds; REITs; chartered banks; etc.)
- Entrepreneurial Landlords (Steve from New Jersey; the Smith family from Woodbridge)
Just like there are good tenants and bad tenants, there are good landlords and bad landlords. However, these two groups of landlords have different motivations and they will typically structure a lease term or lease negotiation accordingly.
Here are some key points:Institutional Landlord:
- Cash rich; deep pockets;
- Large leasing team that tends to be sophisticated; compensated via commission and performance;
- Willing to let a building go vacant if they don’t obtain the face rent or capitalization rate they need for their quarterly reports and pro-formas;
- Generally incent tenancies by way of: free rent, improvement allowances and/or cash inducements in exchange for the preferred face rent on the building;
- Tend to dispose of/acquire buildings by way of portfolio trades, rather than stand-alone building transactions.
- Wide range of ownership types; some may be very influential in individual markets, some may hold very few real estate assets;
- Tend to be adverse to long term vacancies within a building;
- Rarely face rate or capitalization rate sensitive;
- Generally not motivated to provide free rent or cash inducements to secure tenancies, but are often more flexible on the face rent.
These two types of landlords have different motivations and behaviours, so know who you’re dealing with. But while every landlord is unique, the one thing they have in common is that they – like all of us – are there to turn a profit. Want to learn more about negotiating your lease from a position of power? Download my eBook Should I Stay or Should I Go?