Success Stories

Agency Leasing:

R&A – Weighing
Leasing Alternatives

Abstract:

Urban American needed to lease a 10,000 square foot, full-block retail space on Madison Avenue between 110th and 111th Streets. They needed a broker not only to lease the space, but also to help them decide if leasing to a single retailer or subdividing the space would bring superior returns. While the space was marketed both as an individual and subdivided space, Admiral’s analysis ultimately showed that leasing to a single grocer at a lower rental rate was more profitable than subdividing the space. The grocery anchor required lower up-front investment, was less risky and provided a valuable amenity to renters in the apartment building above.

CHALLENGES:

  • Urban American needed a broker not only to lease the raw space in their newly renovated workforce apartment building, but also to help them decide how to maximize the income potential of the space.

Solution:

  • Urban American was able to depend on Admiral not only for leasing expertise, but also to help quantify the opportunities and risks of various leasing options and space plans.
  • Admiral put together a spreadsheet for the owner which compared the owner’s asking rent to the grocer’s counterproposal, and used this comparison to negotiate a compromise acceptable to both parties.
  • While the owner generally preferred to have a grocer in the retail space because it was an important amenity to its renters, the owner still needed to assess whether subdividing the space would increase its overall return.
  • Admiral then compared the final deal with the grocer, which had minimal free rent and downtime, to a scenario with multiple tenants, taking into account the higher rents smaller tenants would pay, countered by the higher owner costs resulting from greater free rent, commissions, and downtime alongside the upfront construction costs needed to break up the space into vanilla boxes.
  • The net result of the analysis was that the owner’s return was highest leasing to the grocer. The owner’s risk was also lower, since the deal with the grocer was close to complete, and the grocer was an established operator within the market.

Client BENEFITS:

  • Urban American was able to depend on Admiral not only for leasing expertise, but also to help quantify the opportunities and risks of various leasing options and space plans.
  • Admiral put together a spreadsheet for the owner which compared the owner’s asking rent to the grocer’s counterproposal, and used this comparison to negotiate a compromise acceptable to both parties.
  • While the owner generally preferred to have a grocer in the retail space because it was an important amenity to its renters, the owner still needed to assess whether subdividing the space would increase its overall return.
  • Admiral then compared the final deal with the grocer, which had minimal free rent and downtime, to a scenario with multiple tenants, taking into account the higher rents smaller tenants would pay, countered by the higher owner costs resulting from greater free rent, commissions, and downtime alongside the upfront construction costs needed to break up the space into vanilla boxes.
  • The net result of the analysis was that the owner’s return was highest leasing to the grocer. The owner’s risk was also lower, since the deal with the grocer was close to complete, and the grocer was an established operator within the market.