When I logged in to The News Funnel this afternoon, I saw an article about a co-working space opening in Newark. Do you think they read my FunnelCast from last week? But, that’s a story for another day.
Early in my career, I was annoyed when landlords used “Negotiable” as their asking rental rate. When putting together information for a client, “Negotiable” isn’t an option, so a phone call to the landlord or their broker becomes necessary. It’s not painful, but time consuming when compiling information.
Now that I also represent many landlords in the market, I have a different opinion and use that tactic often. In fact, roughly 40% of the market in Northern and Central New Jersey doesn’t report an asking rental rate. This obviously skews the statistics when looking at average asking rental rates.
In 2009, when we were in the beginning of the recession, I often told my clients that asking rents were meaningless. Landlords often provided first proposals that were several dollars lower than the asking rate and taking deals were even lower.
However, in the last few weeks, I have received three proposals that were above the quoted asking rent for the building. While you may think this is a reflection on the activity level on each building, it is also a product of the lack of available space in certain pockets of the market. One of the buildings is less than 50% leased, and while I would have been more aggressive to win this particular deal, I assume they felt bullish given the lack of competitive space in the market.
What these landlords may not realize is the way these proposals are perceived by the tenants. In each case, the tenants were disappointed, confused and turned off. They typically asked if the landlord wanted to do business with them, not because they felt the proposals were high, but more because the asking rental rate sets an expectation.
A “Negotiable” asking rental rate allows landlords to change the numbers quickly, either up or down in response to market conditions, without the numbers being public. While I am not advocating the use of this tactic, in a rising market, it may help landlords avoid setting rent expectations and having a negative perception once a proposal is received.
By: Jeremy Neuer
Senior Vice President | CBRE
Jeremy Neuer is a Senior Vice President with CBRE in the East Brunswick, NJ office. He specializes in office leasing throughout New Jersey and also represents several large corporations on a national basis.
Email Jeremy: firstname.lastname@example.org
Follow Jeremy on Twitter: @JNeuer19
Follow CBRE NJ on Twitter: @CBRENewJersey
Read more of Jeremy's blog posts on NeuerSpace
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