Running From Being Nickel and Dimed

12-17-2019 | by Neal Lerner

I speak to a lot of tenants.  I frequently hear, from the small and solo crowd that they "hate" their present landlord because the get nickel and dimed for every little thing that they use.  You'd really be surprised how many times I hear this during the year.

In coaching my advertisers, I always tell them that the most desirable listings will incorporate an "all inclusive" model.  For example, what most people don't like is:

  • Base rent, plus
  • Electric, plus
  • Real Estate Tax, plus
  • Kitchen supplies, plus
  • Copy/Scan/Fax, plus
  • Phones & Internet, plus
  • Hourly conference room use
  • ...and so on.

Let's say your single office has a $2,350 per month rent plus everything above, because all you're trying to do is recover your escalating costs.  I would suggest that the most honest model is least appreciated by individual office renters.

Rather, you'd be much better off incorporating all of the above into a single number with fixed increases each year.

Remember, the small or solo practitioner is looking to simplify their life, not add complication.  An aspect of individual office rentals (or licenses) that is most appealing to subtenants (or licensees) is that they can pay a single fixed monthly amount for everything - and someone else will manage the office and its provisioning.

As a sublandlord, when the agreement with your subtenant becomes complex, you are subjecting them to exactly what they were trying to get away from in the first place.

The space above would be much better received if the deal (for example) was:

$2700 per month, all inclusive rental, with a 4.5% annual increase.

That would be much better received.

As a small business, we happen to be one of our own customers.  We rent offices in a law firm on an all inclusive, fixed monthly rental, with an annual escalation that mirrors the sublandlord's annual increases.  We're perfectly happy with that because it is simple and direct, and we always know what the cost will be.  As a small business person, cost projections are very important for long term survival.  Flat rate rents are an important component of the subtenant's understanding of future capital needs.

Sometimes this is not possible, particularly when there are some "either-or" items.  For example, telephone answering or use of the phones and internet could be optional.  The base rent would vary with respect to which options were chosen.  In this case, the subtenant is making a choice and as such, doesn't mind paying for something outside of the rent - as long as cost of the item can be clearly defined...it is that "cost certainty" that many people looking for space, generally always seek.

The all-inclusive rental is a convenience that has value to the small tenant searching for new offices. To make your offering most appealing we always suggest that you offer a rental that has all the bells and whistles incorporated in a single price.

If you have any questions about how to present your listing, we're happy to help you figure out the best way to tell your story to our audience of professionals.

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