Landlord's Market Should Stabilize This Year

Overall on a national basis, office landlords definitely gained ground in 2006 as rents rose at the fastest pace in six years. The final figure for 2006 was that office rents rose an average of 9% nationally, the biggest increase since the tech boom peaked in 2000.

But such a big jump is probably not sustainable and rent increases should moderate in 2007. In fact, in reporting the yearly figures, research firm Reis Inc. noted that office space demand began to decelerate as early as the end of last year, with fewer firms taking big blocks of space.

Job growth has also been tapering off, and U.S. payrolls expanded at the slowest pace in two years in February. Economic growth in the U.S. was only 2.2% in the fourth quarter of 2006, with predictions it will stay in that range most of the year. So while positive, things are cooling off a little in the economy.

For the office space market, the figure to watch is the absorption rate, which is the change in the net amount of occupied space. The absorption rate, while still positive, was down in the fourth quarter of 2006 to a net 7.6 million square feet of space. Compare that to 11.6 million in the third quarter and the 15.9 million in the second.

A big factor in the absorption rate is new construction, and Reis calculates 72 million square feet of new office space will come on line this year, the highest level in several years. This will present pockets of opportunity in local markets that a well-informed tenant representative should be able to identify. With an overall landlord-favorable market, now more that ever tenants need the right representation to identify and negotiate for the best possible lease terms.

Conflicts of Interest Affect Real Estate Deals

Wikipedia defines a conflict of interest as "a situation in which someone in a position of trust has competing professional or personal interests. Such competing interests can make it difficult to fulfill his or her duties impartially."

In the world of commercial real estate, conflicts of interest arise because there are real estate firms that represent both landlords and tenants, and that often manage and sometimes even own properties. There are ways to mitigate conflicts of interest, but these remedies may not be satisfactory in real estate negotiations.

Elected officials are required to disclose their financial interests, and some professions are required to disclose actual or potential conflicts of interest. But would you actually feel better if your commercial real estate advisor disclosed that he or she represents not only the landlord of the building you are interested in, but the landlord of the building you are currently in or the one that is the backup to your first choice?

People who have a conflict of interest can also recuse themselves from a situation, but would you want your advisor to remove him or herself from negotiations at a critical juncture? Shouldn't it work just the opposite?

A firm may say it has a code of ethics, but such guidelines should outline how to avoid conflicts in the first place, not how to resolve ones that occur naturally in the course of day to day business.

The best way to avoid a conflict of interest in your next commercial real estate transaction is to remove all potential conflicts by engaging an exclusive tenant representative in the first place. With a true tenant representative whose firm never represents landlords, you can be sure there is no hidden agenda that could directly or indirectly work against your best interests.

Should Management Read Employee E-mail?

Despite repeated warnings, it's easy to forget that e-mail is not really private, but is more like a postcard with copies stored on computers you have no control over. And when it comes to e-mail sent from company computers, management has an established right to monitor and control that traffic.

Corporate e-mails are increasingly serving as evidence in high-profile legal cases. Therefore it is important for companies to have clearly stated policies concerning e-mail and Internet use, spelling out expectations and permitted practices to employees. And from an employee standpoint, the safest assumption is that everything sent over an employer's network can and probably will be monitored. Deleting it only clears it from a person's desktop files, not from corporate backup tapes or the storage media of whoever received the e-mail. That's why this sort of record is one of the first things lawyers look for in corporate lawsuits.

What about using private e-mail services such as Yahoo! Mail, Microsoft's Hotmail, or Google's Gmail? While they are a good idea for keeping personal e-mail separate at work, employees still access them from work, and that means the traffic can be monitored. Also, employees may be tempted to forward work-related e-mails to their personal accounts for reference at home or on the road. That can expose the company to risks, and should be covered by company policies on Internet use.

The bottom line is that companies are really being forced to monitor employee e-mail, and should make sure employees know that.