With the NBA Finals starting in a few hours, and the NHL Stanley Cup Finals already underway (LET’S GO RANGERS!), I have been locked in to the playoffs since mid-April. Last night, I was hoping the Rangers could steal Game 1 on the road and swing the home ice advantage in their favor.
Given all of the talk over the last six weeks about home court and home ice advantage, my partner Matt Wassel and I had an interesting debate recently. The question was, “what’s the real estate equivalent to home court advantage?”
Because we are both sports nuts, we had some fun with the topic, and settled on the following. A landlord, trying to renew an existing tenant, has home court advantage. Obviously, if the tenant is shrinking or growing, needs major modifications in their space, or wants to change their geography, it’s not applicable. But playoff teams are expected to win their home games and landlords should expect to keep their tenants, especially when they can stay in their existing space with little work.
While it’s not always that easy, it should be. Tenants don’t want to go through the expense or trouble of moving to a comparable building at a comparable rate. If a landlord is providing good service during the term of the lease, a tenant is unlikely to move. In fact, I heard a story earlier today about a tenant paying a $3.00/sf premium to stay in their building because they liked the landlord.
However, some landlords take advantage of this during renewal negotiations. They know a tenant will incur costs to move. We always say “the only way to get the best deal from your current landlord is to convince them you have one foot out the door.”
In some ways, it’s all about inertia. A happy tenant isn’t likely to move. They are comfortable in place and while they might look in the market, they are not a flight risk. On the other hand, if a landlord doesn’t provide the kind of service a tenant is expecting, the flip side of inertia can quickly take over. An unhappy tenant looking at buildings in the market is a dangerous thing.
I am rooting for the Spurs tonight and in the series. I would like to see Tim Duncan and Gregg Popovich win one more before they ride off into the sunset. If they take care of business at home, they can’t lose given that they have home court advantage. In most cases, landlords should be in a similar position with renewing tenants, if they take care of business.
The Rangers, on the other hand, need to steal a game in LA somewhere along the line. They need a break, they need the Kings to slip up or they need to be that much better than the competition, not unlike a landlord trying to steal a tenant from a competing building.
What’s your opinion about the analogy? Do you think landlords have an advantage? Please leave your comments below.