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Flex Space – Cheaper Alternative to Leasing Austin Office Space

If your looking to lease Austin office space or if your office lease renewal is coming up you may have noticed that office lease rates in Austin have skyrocketed.

Austin, Tx is one of the hottest cities in the country. More people want to live here and do business here. And because of that vacancy rates continue to drop and rental rates continue to rise.

Because of that many tenants are starting to look at flex space as a lower cost alternative to renting traditional office space.

What is Flex Space?

Flex space is a type of industrial space that can be used for office or warehouse use. They are typically single story buildings with an entrance and windows on the front and are found in small business parks or semi industrial areas. You see them built out as 100% office or a combination of office upfront and warehouse in the back.

How Much Does Flex Space Cost in Austin?

When combining ALL expenses flex space will cost about $15 to $20 sf per year depending on the property, location, and terms. Compared to the cheapest office space in Austin which will range from $21 to $25 sf.

Unlike most traditional office space, tenants that lease flex space will be responsible for paying their own electric, janitorial (if they want), and hvac maintenance and repairs.

You may see flex space base rental rates quoted monthly or yearly. In Austin average base lease rates for flex space range from $13 to $16 sf per year. If quoted monthly that would be $1.08 to $1.33 sf

Don’t forget that in addition to the base rate tenants are also responsible for the operating expenses (aka NNN), as well as electric and janitorial (if needed). The NNN’s will cover all of the buildings taxes, insurance, and common area maintenance costs. In Austin, NNN costs will range from $0.25 to $0.35 sf monthly, which is $3.00 to $4.20 sf yearly.

To budget for electricity costs I would budget for somewhere between $1.50 to $3.00 sf per year depending on your use and power needs.

Benefits of Flex Space Over Traditional Space

Lower overall monthly and yearly lease cost

Have control over the cost and level of janitorial service

Don’t have to worry about after hours hvac charges since you manage and maintain the units

More usable space since there is not a common area

Have own bathroom

Have own entrance

Don’t have to spend time going up and down elevators

Have the ability to have office and warehouse

Easier to configure and build out than a traditional office space

Cons of Flex Space

Tenant is responsible for all the costs to maintain, repair, and replace (if needed) the HVAC units. This is negotiable however.

Have to clean and maintain repairs on bathroom

Parking might be a challenge since industrial space assumes more storage and less parking spaces

Usually found in more industrial areas or in Northeast and Southeast Austin.

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Where to Find Cheap Office Space in Austin Tx

If you are a new business or startup you are probably on a tight budget. You would love to lease that cool creative office space in downtown Austin however with the least expensive rental rates being $45 sf gross up to $65 gross that location is probably not going to work.

If you are looking for the cheapest office space in Austin you are more likely to find that in the Northeast and Southeast part of town.

Northeast or Southeast Austin may not be a desirable location for your business however at this time it’s really the only areas of town where you will find rental rates ranging from $21 to $25 gross. That includes electric and janitorial.

Keep in mind that in most cases the cheapest office space is also going to be older Class C office buildings. These buildings are typically older (10-15 years or more) with few improvements and may not be maintained as well as other classes of buildings.

You could also consider renting flex office space which is typically found in semi-industrial areas in NE and SE Austin as well. The inside will still be built out as office however the buildings will be single story tilt wall buildings that look kind of industrial.

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Negotiation Tips When Subleasing Commercial Real Estate

Commercial real estate subleases can be great in that you are typically able to lock in below market rental rates, shorter lease terms, and free furniture, however negotiating commercial real estate subleases can be tricky if you don’t know what you are doing.

Negotiating the basic sublease terms is the easy part, but because most commercial sublease contracts are tied to the original master lease between the tenant and landlord it’s important that you and your attorney carefully review that before signing any sublease contract. Below are a few things to consider before signing a commercial sublease contract.

(Note: In a sublease transaction the company wanting to sublease the space is the Subtenant, the company that currently leases the space would be the Tenant or Sublandlord, and the building owner is the Landlord)

Financials

Just like a Landlord or Subllandlord would want to review the Subtenants financials to ensure that they can afford to pay the rent, it’s important that the Subtenant review the Sublandlord’s financials. The reason is that in most leases if the Sublandlord defaults because they don’t pay rent then the landlord can lock the doors and ask you to move out. You won’t have any rights to stay. You need to make sure that the Sublandlord is financial sound. There are no guarantees however it will help mitigate your risks.

Restoration Clauses

Negotiate to avoid having to restore the space to it’s original condition. Many leases or subleases have a restoration clause. Be sure to include in your proposal for the subtenant to not be required to remove any of the original tenant improvements or restore or remove any subsequent alterations or improvements allowed to be made by Subtenant. The same goes for phone and data cabling. In most leases tenants are required to remove the data cabling on or before they move out of the space. Removing cabling can be expensive so Subtenants want to avoid this if at all possible and ensure that they are only “using” the existing cabling and not be responsible for removing after the sublease expires.

Landlord Consent & Recognition & Subtenant Attornment

With any sublease between a Subtenant and Sublandlord the Landlord (aka building owner) has final approval. This is usually stated in the Master Lease, and the terms and conditions of the consent is on a Landlord Consent to Sublease document that is attached to the sublease contract.

If you are the Subtenant you want to also negotiate with the Landlord the right to occupy and lease the space in the event the Sublandlord defaults (e.g. does not pay rent, goes bankrupt, etc…). The termination of the lease by Landlord should not terminate the sublease, nor shall the Landlord disturb the Subtenants use and possession of the space.

Additionally the Subtenant would have to Attorn to Landlord, which means the Subtenants obligations (e.g. to pay rent) are transferred to the Landlord. Without the landlord’s recognition, if the Sublandlord defaults and the master lease is cancelled, the sublease would not continue in full force and effectand the Subtenant would have to move out of the space.

If the master lease is terminated for whatever reason the Landlord and Subtenant could create a new lease or continue the sublease. In any case the Subtenant needs to ensure that the the terms of the sublease remain the same.

Right to Sub-Sublease

Just because the original lease has a sublease / assignment clause that does not mean the sublease / assignment right conveys to the Subtenant.

The Subtenant needs to negotiate the right to sublease themselves in the event they need to dispose of the space. This might not be possible however you need to seek it when possible. The sublease option would have to be approved by both the Sublandlord and Landlord.

Make sure to specify the time allowed that all parties have to consent or disapprove. If you let too much time go by you risk killing the deal.

Related Images:

[See image gallery at www.austintenantadvisors.com]

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Office Buildings With Fitness Center In Downtown Austin

When leasing office space in downtown Austin it’s important that you pick a building that has the amenities that will make your employees happy and productive. If they are fitness buffs like me then having a building fitness center complete with showers would be a must have. Not every office building in downtown Austin has a fitness center as it’s expensive to install and operate them, and finding the ones that do can be difficult. To make the process of finding a building in downtown Austin that has a fitness center we have compiled a complete list. If you have any questions feel free to give us a call.

Building NameAddress Littlefield Building106 E 6th St Westview316 W 12th St 400 W 15th St400 W 15th St Austin Centre701 Brazos St One Eleven111 Congress Ave 301 Congress Ave301 Congress Ave San Jacinto Center98 San Jacinto Blvd 500 W 2nd St500 W 2nd St 5th and Colorado201 W 5th St 300 West Sixth300 W 6th St 100 Congress100 Congress Ave Frost Bank Tower401 Congress Ave One American Center600 Congress Ave 701 Rio Grande St701 Rio Grande St IBC Bank Plaza500 W 5th St

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Downtown Austin Office Buildings With Parking Garages

If you are leasing office space in downtown Austin and want the convenience of having the parking garage attached to the building you are not alone.

Office lease rates are pretty consistent no matter which building you lease in downtown Austin and parking is hard to find, so you might was well make sure the building you are leasing has it’s own parking garage. To make your search easier we have listed the office buildings in downtown Austin that have their own parking garages.

Building NameBuilding Address Bank of America Center515 Congress Ave IBC Bank Plaza500 W 5th St Chase Tower221 W 6th St 211 Seventh211 E 7th St 400 W 15th400 W 15th Austin Centre701 Brazos St 720 Brazos StPerry Brooks 405 Colorado St405 Colorado One Eleven111 Congress Ave

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How Long Does My Office Space Lease Term Have to Be?

The length of your office space lease term is a negotiable item however it depends on a number of factors such as market conditions in your city, the cost of tenant improvements, or simply the landlord’s preference. At the end of the day you, the tenant, have to determine what is right for you. Negotiate the office lease term based on your needs and risk tolerance. If you are a startup and unsure of where the business is going then only talk to landlords that will do a shorter term lease (less than 3 years). You won’t be able to have much leverage during negotiations to get tenant improvement allowances, free rent, etc, however you will mitigate your risks. If your company is more established then you should consider a longer lease so that you can win more concessions at the negotiating table. When we talk about short term leases we mean office lease terms less than 3 years. 1-2 years is the norm. Longer lease terms are considered to be 3-5 years or longer. Below we discuss some of the factors involved in determining how long your office lease term will have to be.

Office Space Market Conditions

If you live in a city where there is extremely low office space vacancy (e.g. Austin, Tx) you are in what’s called a landlord’s market. Deal points can still be negotiated however if the landlord has a lot of interest from other parties they have more leverage in the negotiations and will likely require a minimum of 3-5 year leases. In some cases even longer. This is especially true if it’s one of the more popular buildings or locations. Landlord’s prefer longer leases as it makes their investment more stable so if they have leverage they will do whatever it takes to lock in a longer lease.

Landlord’s Preference

In some cases, regardless of market conditions, the landlord just won’t budge on office leases shorter than 3 years. It doesn’t matter if they have had a space vacant for 6 months. You see if a multi-tenant building is mostly occupied (e.g. 85%) and the landlord is still profitable they don’t have any reason to offer a shorter lease. Unlike a single house that sits vacant for 6 months office landlords are still making money. In some cases it just comes down to the landlord’s preference and risk tolerance. They take the chance of passing on a shorter lease hoping that another tenant comes along willing to do a 3-5 year lease.

Cost of Tenant Improvements

When leasing office space you typically negotiate for the landlord to give you a tenant improvement allowance (TIA) as part of the deal. The more TIA they give you the longer the office lease term they are going to require. The reason is that they need time to amortize the costs over the term. It wouldn’t make sense for them to give you $24,000 TIA for a 12 month lease that only generated $1,000 per month in rent would it? They are in the business to make money so they need enough time to spread out the lease costs and ensure they are profitable. Alternatively maybe you, the tenant came out of pocket $50,000 above and beyond the TIA the landlord gave you. In that case you would probably want to sign a 3-5 year lease, or longer to ensure that you recoup your cost.

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How to Negotiate Free Rent in An Office Lease

When leasing office space there are typically concessions that you can negotiate for that will give you a better overall deal. Once of those concessions is free rent. Depending on how active the market is and the type of space you should be able to negotiate to receive free base rent or free base rent and operating expenses for a certain number of months.

The problem is that most tenants don’t know what to ask for, or they are afraid to ask for it. Because of that they end up leaving money on the table. As you tour office spaces and meet with landlords and landlord agents always ask if free rent concessions are available. They won’t always tell you however it’s worth trying. You could also visit nearby tenants and ask what free rent concessions they were able to negotiate. As you negotiate your office lease below are a few strategies to consider when asking for free rent.

Justify Why You Need Free Office Rent

Don’t just ask for it for no reason. You can increase your chances of getting it if you have a business case. For example, If your business is seasonal and you are opening up during the slower part of the year then that would be a good reason to ask for free commercial rent. Do some research and find out what free rent (if any) the landlord is offering to new tenants. If the landlord is giving new tenants 4 months of free rent you should ask for the same whether you are leasing space at that location for the first time or negotiating a lease renewal. Existing tenants have proven themselves and are less of a risk to landlords than new tenants. If other comparable properties are offering free rent then you should negotiate for free rent with your existing landlord.

Build-Out Period

Tenants should never have to pay rent during their build out phase. You should be able to negotiate at least 60 to 120 days for building out your space, during which time no rent or operating expense payments are due. Don’t let the landlord refer to this as Free rent as it is not.

Base Rent Free OR Base Rent & Operating Expenses?

Again get to know the landlords and market however when negotiating free rent you can ask for only base rent OR base rent and operating expenses (aka nnn). It’s good to always start with base and nnn then work from there. In most cases landlords would like to at least cover their nnn costs while you enjoy free base rent. If they won’t agree to abate nnn then you could ask for more free base rent then you had planned on. In Austin landlords are more likely to require you to pay for operating expenses during your free rent period.

Early Occupancy

Let’s say you signed a 6 year lease and the commencement date is set for January 1st. You could negotiate with the landlord to start the commencement date July 1st (6 months later) but allow you to open for business on January 1st as originally planned. It’s worth it to some landlords to wait a few months for rent payments to start if they have a good long term tenant in tow. Depending on their cash flow needs some landlords may agree to this and some won’t, however if you don’t ask you will never know.

Ask For More Free Rent Than You Need

Don’t ask for what you expect to get. Ask for more than that. If you ask the landlord for 3 months of free rent you may end up only getting 1. If you ask for 5 you may get 3. Again if you don’t ask you will never know. However don’t low ball just because. Make intelligent offers based on your market research. If you low ball some landlords won’t take you seriously.

Consider Adding More Term to The Lease

If a 3 year lease is on the table and the landlord won’t give you 3 months free rent, consider offering to increase the term to 33 months. Free rent concessions reduce a landlords rate of return, however adding term may make up some of the difference and incent them to give the concession.

Offer to Spread The Free Rent Out Over a Period of Time

If a landlord has any reservations about your financial situation they won’t want to give free rent. They would be afraid that you would go out of business soon after the free rent period which means they won’t recoup what they gave. A way to counter this is to offer to take the free rent over a period of time rather than all up front. For example in a 5 year lease with 5 months free rent you could negotiate to receive 1 month of free rent in January of each year. That way it spreads out the landlords risk, but you still get 5 months free rent.

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Rent Escalations in Commercial Leases

Rent escalation is a pre-negotiated lease clause in which a tenants base rent is increased on an annual basis.

Rent escalation clauses in commercial leases are negotiable however landlords push for this for two reasons

To keep up with inflation

Increase revenue and the commercial property’s value

When leasing commercial real estate for terms longer then 1 year you will typically see rent escalation clauses throughout the lease contract. Below are a few types of rental escalation clauses typically used.

Stepped Rent Escalation Clause

The most common stepped rents are increases by a negotiated dollar amount each year. For example, let’s say your first years base rent is $20 sf. In years 2-5 your base rent is increased by $0.50 each year. It depends on the market you are in however in most cases annual increases will be anywhere from $0.50 to $1.00 sf.

Stepped rents are useful when a tenant needs to conserve cash during the first couple years of their business and needs a lower rent amount. The landlord may have lower cash flow at first however they will recoup that in the later years. In a strong market you will see yearly increases regardless.

Consumer Price Index ( CPI) Rent Escalation

In this situation, the landlord wants to make sure their base rents are keeping up with inflation. Rents will be escalated according to the Bureau of Labor Statistics CPI index. In recent years the average is 3% to 4% however during times of high inflation they can sky rocket. The key here for a tenant is to negotiate a fixed annual percentage increase. That way if the CPI increases at a faster rate you are protected. An open ended CPI increase is more beneficial for the landlord as it protects them from rent erosion during times of inflation during soft markets.

Operating Expense Increases

Operating expenses are the taxes, insurance, and maintenance charges for the property that are typically passed on to Tenants. You may see leases structured as Base Year or NNN (Triplenet) leases.

Operating expenses are “estimated” each year based on historicals. At the end of the year landlords will reconcile their books to determine their actual operating costs. In a NNN lease Tenants will be charged operating expense costs that exceed the original estimates. In a base year lease the tenant will be charged the amount that exceeds their pre-negotiated base year expense stop.

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Things to Look For When Touring Warehouse Space

Before beginning your search for warehouse space, it’s crucial that you know your current and future business needs when it comes to industrial space because not every warehouse property has the same features. For example, some have truck courts big enough to accommodate 18 wheelers, and some don’t. Some have dock high loading, and others only have grade level. It’s important that you pick the right property because renting the wrong one can cost you hundreds of thousands, so make sure to do a lot of due diligence (or have your agent do it for you) because you can’t only rely on what the landlord’s listing agent tells you.

Once you have a handle on your current and future business needs and have a rough idea of your ideal location, size, layout, and budget, then you are ready to start your warehouse property search and tour spaces to figure out which ones will work best. Because every industrial building is not created equal, you need to ask a lot of questions to find out the features of each and determine which ones will work best.

Questions To Ask About Industrial Properties

What is the property zoning?

You need to ensure the area and building is zoned for industrial use

What “Use” is the property approved for?

If the property was previously used for manufacturing and your use is warehousing, you will need to apply for a change of use permit with the city.

What building power is available?

If you’re in manufacturing, then you may need more electric power than the average company. For example, the equipment you use may need 3 phase power.

What is the building clear height?

Clear height is the warehouse ceiling height. The more you have, the higher you can stack

What are the warehouse loading options?

Does the space have dock high or grade level loading? If you ship and receiving using 18 wheeler, then you need dock high.

How big is the truck court?

You need to make sure the truck court is big enough for 18 wheelers to maneuver around.

Does the warehouse have a fire sprinkler system?

Some businesses are required to have fire sprinklers in the warehouse. Check with your insurance agent and/or the clients you work with.

Can I park delivery trucks or trailers overnight?

If you plan on leaving trailers or trucks on the premises overnight make sure you are allowed to.

Do you have any industrial yard space?

Some businesses need outside storage to store raw materials.

We have only scratched the tip of the iceberg here. As you can see, there is a lot of info you need to know about each industrial building so you can make sure to ensure they will meet your needs. When searching for warehouse space for rent and touring properties make sure you know your needs and what questions to ask property owners and landlord agents. If you are unsure or don’t have much experience, then consider hiring someone who is. If you need helping finding warehouse space for rent Austin Tx give us a call.

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What is a Tenant Improvement Allowance?

When leasing commercial real estate properties such as office space, retail space, or warehouse space, landlords will typically offer incentives to get tenants to lease space in their building. One of those incentives is offering a tenant improvement allowance (aka TI Allowance or TIA) to build out the space custom to your needs. 

The tenant improvement allowance is the amount of money that landlords are willing to spend or give to a tenant to renovate an office space in the landlords office building. It’s typically offered as a total dollar amount or a dollar per square foot and negotiated up front.

The goal of the tenant should be to negotiate enough tenant improvement allowance to cover most (if not all) of the total construction costs.

For example say you like a space, however it would be even more perfect if you could have 2 more offices and a break area with plumbing.  During the negotiation process you would want to ask for an allowance (MONEY) to build out the space.  The amount is typically negotiated and contingent on your credit, length of lease term. rental rate, market you are in, etc…

How Do You Get It?

It’s handled differently depending on the type and size of commercial space you’re renting. 

Landlord Controlled

At lease signing you have to write a check for any construction costs that exceed what the TIA will cover. Then the landlord will pay the contractors and all other vendors directly for all construction costs.

 In most cases with smaller office space (less than 10,000 sf) if the landlord has a construction manager they will want to hire the contractors and oversee the process. This is because they know the building well, have experience with office space build-outs, and have relationships with a lot of different contractors which they can leverage to keep costs to a minimum. When a landlord manages the construction process it’s known as a “Turnkey Build-out”.

Having the landlord manage this saves you time however their interests may not line up with yours. They may not seek as many competitive bids or have any incentive to cut costs, and if you make changes after the architectural plans have been approved you will be charged change order fees.  Also, if the construction costs end up being less than the TIA you will not receive the difference. For example if the TIA was $25 sf and the construction costs ended up being $20 sf you will lose the $5 sf.

If the landlord insists on managing the construction process then make sure to request that you have the ability to be a part of the general contractor approval process and that you are given a detailed work letter that outlines the construction process from beginning to end.

Tenant Controlled

The time frame of payment of the TIA is determined during lease contract negotiations. It will either be paid out after the construction has been completed and landlord receives all the receipts, OR be paid in cash at lease signing. You could also negotiate to have it paid a progress payments as work is completed.

For larger spaces you or a project manager you hire would want to manage the construction process. This will give you more control over the costs, timing, and details of the project. In addition you have the power to select the contractor that you want.

What is the Average Tenant Improvement Allowance?

The tenant improvement allowance you receive will depend on a number of factors such as the market, lease term, your credit, type of space, etc. In general if the space is brand new (aka in shell condition) Landlords might offer $25 to $40 sf. If the space is 2nd generation (has been leased occupied before) landlords may offer $20 or less. 

At the end of the day it’s important for the tenant to have a general idea of how much the construction will cost. During the negotiating process it would be a good idea to get at least 1 or 2 preliminary construction bids. You don’t want to accept a tenant improvement allowance of $15 only to find out that the total costs will be $25 sf.

If you are not able to negotiate enough tenant improvement allowance to cover the total costs then you could ask for additional tenant improvement allowance to be amortized.

How Do you Calculate the TI Allowance?

The tenant improvement allowance is typically given based on the rental square feet (RSF) of the commercial space. To calculate the Tenant improvement allowance simply multiply the RSF by the TI allowance you have negotiated.

For example if the square footage is 5,000 RSF and the tenant improvement allowance is $20 RSF. 5,000 x $20 = $100,000

What Does it Cover?

The tenant improvement allowance typically covers architectural, engineering and space planning fees as well as the total hard construction costs. In addition, if negotiated such allowance may be used at Tenant’s option for the cost of consultants, legal fees, moving expenses, equipment, fixtures, furniture and/or signage.

Tenant Improvement Allowance Must Be Negotiated

Again the tenant improvement allowance is a negotiated amount that the landlord will spend to customize the space to your particular needs and is typically quoted in dollars per square feet.  They won’t always agree to pay for 100% of your ideal layout….especially if you are asking for hardwood floors, granite countertops, and other above standard finishes. Again landlords won’t just give you a tenant improvement allowance. You must know the market and negotiate well.

When evaluating spaces make sure to take note of your needs such as the ideal # of offices, break area, conference rooms, etc.  If you need a more customized layout make sure you ask for it before signing a commercial lease.  You want to compare how much allowance each landlord is willing to give.  Ideally you want them to pay for 100% of your build-out costs, however it all depends on your credit, length of lease term, the rental rate, and on whether it’s a tenant or landlord market.

Who Gets To Keep the Improvements?

The landlord is giving you a tenant allowance in return for your tenancy, and you may end up spending additional money out of your own pocket above and beyond the TIA however all the leasehold improvements will convey with the landlord. Tenant improvements-allowance.

Example of TIA in Commercial Lease Agreement

Construction Allowance.

Provided Tenant is not in default on the lease contract, Landlord agrees to give up to $300,680.00 (the “Construction Allowance”) to the cost of Landlord’s Work. Any costs of finishing Landlord’s Work above the Construction Allowance shall be Excess Costs (as defined below). Tenant shall pay Landlord a construction management fee equal to 4% of the cost of Landlord’s Work to compensate for its construction management services in connection with Landlord’s Work. Landlord shall deduct such fee from the Construction Allowance. The Construction Allowance is available for Tenant’s use from the date of this Lease through the last day of the twelfth (12th) full calendar month following the Commencement Date, after which Tenants right to same will expire and be of no further force and effect.

1.3 Additional Allowance. If the total construction costs exceed the Construction Allowance, Tenant may, before Landlord’s Work has been completed, ask that the Landlord increase the Construction Allowance by the amount of the excess, up to $60,420.00 (the actual amount of the increase being the “Additional Allowance”). If Tenant asks for the increase in the Construction Allowance, then Landlord shall raise the Construction Allowance by the amount of the Additional Allowance. Landlord shall prepare, and Landlord and Tenant shall promptly execute an amendment to the Lease increasing the Base Rent by the amount needed to amortize the Additional Allowance over the Lease Term at 9% per annum, with the increased payments starting with the first Base Rent payment due under this Lease.

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Can You Renegotiate a Commercial Lease?

Renegotiating a commercial lease is possible if your business or the market changes and you are unsatisfied with your current situation. There are no guarantees that the landlord will agree to your requests however you will never know if you don’t ask.

Business climates and markets can change which at some time or another will require you to make some changes to what you are doing. You have many things to consider and one of those could be making changes to your commercial lease. You might be in a situation where you need to try and renegotiate a commercial lease with your landlord. For example:

Business not doing well and having a hard time paying rent

Need to expand however your existing building does not have anymore space available

Lost a big client and need to reduce the size of your space

Market conditions dictating better lease terms

It doesn’t matter if you are only in year 1 or 3 of a 5 year lease, contracts can be renegotiated, however knowing how to renegotiate a commercial lease is key to your success.

How to Renegotiate a Commercial Lease

Start the process sooner than later – The more time you have to the better. Commercial lease negotiates take longer than you think. 

Get some help – Consider hiring a commercial real estate attorney and commercial real estate agent to assist you. They know the laws and the current market conditions and will be able to consult you on your options.

Get educated – Get up to speed on market conditions and read your commercial lease contract thoroughly. It’s important that you understand how to interpret the lease. Your agent will be able to get you up to speed on the market.

Schedule a meeting with the landlord – When trying to renegotiate a commercial real estate lease it’s better to do it in person. If the landlord sees that you are sincere and being proactive you will have a better chance.

Be prepared to trade concessions – Landlords are not going to just give you everything you want. They will typically want something in return. For example if you want more tenant improvement allowance you may have to commit to more lease term. Or if you want to get out of your lease they may require you to pay some money upfront.

Communicate with the property manager – Just like with the landlord you want to have a personal relationship with them. They will have more incentive to work with you if they like you.

If you have any questions or need help renegotiating a commercial lease in Austin Tx give us a call.

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What is Rent Abatement in Commercial Leases & How To Get It?

Rent abatement in a commercial lease means that the tenant does NOT have to pay rent for a certain time period during one of the following scenarios:

During the initial tenant improvements,

As a concession in lieu of a reduced rental rate,

Or when the tenant is not able to occupy the space because major property repairs are needed.

Rent abatement is a negotiable item in a commercial lease that must not be overlooked. To ensure that you negotiate rent abatement effectively it’s important that you consult with a real estate attorney and your commercial real estate agent because once the terms are finalized the clauses will be outlined in the lease contract and set in stone. Whatever happens after that will all be handled according to how the language is set forth in the contract.

Rent Abatement During Initial Tenant Improvements

Sometimes when you lease commercial real estate (e.g. retail space) the space is either in shell condition (brand new) or is 2nd generation space that needs a lot reconfiguration and improvements. Depending on the size of space, existing condition, and if a construction permit is required it could take anywhere from a few weeks to 6-9 months for any improvements to be completed.

It would not make sense to pay rent during the construction period so it’s important that you negotiate to have rental payments not start until substantial completion of all the tenant improvements.

Rent Abatement as a Concession

When negotiating commercial leases you ask for all kinds of concessions such as tenant improvement allowance, lower rate, expansion options, etc. Rent abatement (aka Free Rent) is also something that you can negotiate for. Investors that own buildings can have different investment objectives. Some prefer to cash flow a property and more likely to offer a lower rate. Others maybe trying to sell or refinance the building and more likely to offer free rent instead of a lower rate. You see the rents the landlords collects on a commercial property dictate the market value. The lower the rates the lower the potential value. It’s important to understand the investment objective of each building owner. 

Anytime you can negotiate to get rent abatement in addition to a tenant improvement allowance and other concessions you will be better off in the long run.

What happens if you get abated rent and default on the lease?

Getting rent abatement can help you lower your overall monthly rent costs or help you pay for tenant improvements that are above and beyond what the landlord is willing to give an allowance for. However keep in mind in most cases if you default or don’t fulfill the entire lease term you will be required to pay back all or a portion of any free rent given. This is also known as a clawback provision. During negotiations if a landlord is going to demand a clawback in the event you default or break the lease try to negotiate to where you only pay for unamortized free rent. For example if you were given $12,000 in rent abatement and the lease term was 3 years it would be amortized over 36 months ($4,000 per year or $333 per month). If you broke the lease after the 12th month you would have to pay back the rent abatement for the remaining 24 months or $8,000……..which is the unamortized portion.

Rent abatement on the base rent and nnn or just the base rent?

Rent abatement is negotiable. If the landlord agrees to it they would rather just give you free base rent and you pay the operating expenses (taxes, insurance, maintenance). That way they are at least covering their operating costs.

As a tenant you would rather receive free gross rent (not pay base rent or the operating expenses). Do your best to negotiate this. In the end free base rent is better than nothing.

Rent Abatement Due to Commercial Space Being Untenantable

In most commercial leases there is a Casualty clause (like in the example below) that talks about rent abatement in the event the tenant is not able to occupy or access a space because of fire or other casualty. It could be a partial rent abatement or full abatement depending on the scope of damage and what portion of the space the tenant has access to.  Potential scenarios could be fire or flooding, natural disasters such as earthquakes, tornadoes, and hurricanes, or condemnation by the city or government.

Rationale Behind Rent Abatement

Commercial property owners typically have business liability insurance on their building. The insurance would cover any damages to the property in addition to the abatement of rent. Personal property of a tenant that is damaged would be covered by the tenant’s own insurance. It’s a good idea for the tenant to have business interruption insurance as well to cover any potential financial losses. Since both parties have insurance – the tenant on personal property and the landlord on the property – the abatement puts the lease contract between landlord and tenant on hold until the property can be occupied again.

How Long Does the Abatement of Rent Continue?

The abatement last from the date of the casualty until the date the landlord has substantially completed the repairs and restoration. Rather than just let tenants out of a commercial lease when a casualty occurs Landlords want the ability to try to cure the defects first within a certain time period (which is negotiated). The restoration could take weeks or months however at some point if the insurance company or contractors determine that the repairs will take longer than the negotiated time frame then the tenant or landlord could terminate the lease.

Tenants Must Negotiate to Not Let Rent Abatement Be Nullified

Tenants need to negotiate to require that no matter who caused the casualty the abatement provision will still exist. For example some landlords have language in the lease that says if the tenant or tenants employee causes the casualty then the abatement clause is nullified and the tenant must continue paying rent while repairs and restoration is being conducted.

Commercial rent is income for a landlord which is paid for by tenants. Part of the rent a tenant pays includes the building insurance coverage. If the abatement clause is nullified then the landlord is able to double dip by getting rent from the tenant and file the claim with their insurance company.

Sample Rent Abatement Clause in Commercial Lease

To see an example of a rent abatement clause in a commercial real estate lease or if you are looking for commercial space for rent in Austin Tx feel free to give us a call at 512-861-0525

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Before Leasing Retail Space Try These Alternatives First

Leasing retail space is expensive so before rushing out to sign a commercial lease it’s important that you prove that your products will sell. This applies to anyone wanting to open a retail business including health spas, restaurants, hair salons or any store that sells merchandise. 

Do people want to buy your products at a price that you can profit from? If you don’t know you need to determine if their is an active market before doing anything.

Ways to Sell Products Without Leasing Retail Space

1. Flea Markets

Consider renting a booth at a local flea market. There are a great way to test the market with your products. You can rent on a daily or weekly basis. You can find flea markets that are outdoors, indoors, upscale, or downscale. Just ask a lot of questions about each one and what type of customers typically visit each. Then pick the one that more closely relates to your target audience

2. Sell Retail Products Online

Amazon is huge right now. Looking into selling on Amazon whether you ship or if you use FBA. You can also test the marketability of your products on Ebay and Craigslist.

3. Wholesale Products to Local Retailers

Talk to existing retail shops who sell products that could potentially compliment yours. Do your homework to determine which ones sell to your target customer. Try to make distribution deals with these existing retailers. This might require that you discount your products and potentially not make much or any profit however it will help you figure out which of your products will sell………..and…………..at what price.

4. Home & Office Product Parties

Talk to a bunch of women and find out what types of products similar to yours that that interest them. Then organize small parties or meetups for groups of women who are interested in buying your type of products. You could also invite a few other retailers. This would be a low pressure atmosphere.

5. Restaurant Retailing

Visit a few restaurants and ask them if they would let you model your accessories. You could go from table to table showing off your products. Offer to give the restaurants commissions on any sales generated.

Benefits of Selling Products Before Leasing Retail Space

If you are able to try selling your products at different venues you will gain a lot of valuable information about your target audience and how to position your product to sell the best. Below are a few benefits:

You find out which products will sell

You discover the best selling environment for each product

You determine the best price at which your products will sell

You learn how to sell your products. Which sales approach works best for the type of customer that you want to attract

You will generate cash to run your business

You will know what products to stock in your store and how to price and package them

You will know where products sell the best

Gives you the opportunity to fine tune your products.

By not leasing retail space and first testing your ideas and sales via person to person, home based parties, etc if gives you the opportunity to fine tune your products and marketing. Once you determine that your products will sell at a price that you can profit from then you are ready to find and lease retail space. If you need help finding Austin retail space for lease give us a call at (512) 861-0525

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515 Congress Ave Austin Tx 78701 – Bank of America Center

The Bank of America Center is a class A office building located in the heart of downtown Austin at 515 Congress Ave Austin Tx 78701. If you want to be at the center of it all, and within walking distance of the Warehouse & 6th street entertainment districts, the Texas State Capital, Austin Convention Center, and Lady Bird Lake this is the perfect class A office building for you.

If you are interested in leasing downtown Austin office space and would like help finding the options that best suit your needs call (512) 861-0525.

Building Size – 263,058 SF

Building Height – 26 Floors

Typical Floor Plate – 14,000 SF

Parking – Building has a parking garage with 340 spaces. Parking ratio of 1 per 770 sf at $195 per space per month. 

Access – 7:00 a.m. – 7:00 p.m Monday thru Friday. 8:00 a.m. – 1:00 p.m. Saturday

Security – Landlord provides on-site 24 hour access control (both manned and card key), 7 days per week. Card key access is required after hours for entrance and exit doors, & the elevators.

Amenities – Bike storage room, Jimmy John’s Deli, Coffee bar, Cava Grill. Also a 4,300 sf for profit fitness center with showers and locker rooms in lower level of project.

Asking Base Rental Rate – $39 (as of 1/1/2019)

Estimated Operating Expenses – $23.31 (as of 1/1/2019)

For information about available space at 515 Congress Avenue or other class A office buildings in downtown Austin give us a call. We will help you find great space and negotiate the best deal possible.

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Event Transcript: Refugee Policy in the 21st Century

In September 2018, the Niskanen Center hosted two panels exploring refugee policy in the 21st century featuring leaders from academia, government, think tanks, and refugee resettlement organizations. The first panel explored the strategic and national security case in favor of refugee resettlement, and the second examined how the U.S. can harness private sector support to improve refugee resettlement outcomes.

The event was co-sponsored by the National Immigration Forum, the International Refugee Assistance Project (IRAP), Human Rights First, and the United States Conference of Catholic Bishops.

C-SPAN coverage is available for the first panel and for the second panel; the transcript is also available for the first panel and second panel. The links below provide highlights from both panels.

Panel I: The Strategic Case for Refugee Resettlement 

Idean Salehyan outlines the strategic case for refugee resettlement.

Idean Salehyan contextualizes the security risks of refugees.

Idean Salehyan explains the refugee resettlement procedure.

Idean Salehyan speaks about the skills that refugees bring to America.

Idean Salehyan explains the history of bipartisan support for refugees

Linda Chavez explains how refugee resettlement is important to the idea of being an American.

Linda Chavez discusses “I came to America as a refugee.”

Linda Chavez compares American and European refugee integration.

Linda Chavez explains how fears about assimilation are not new, but unwarranted.

Scott Cooper explains how refugee resettlement furthers a valuable national narrative.

Scott Cooper explains how refugee resettlement is crucial for maintaining regional stability and maintaining important alliances.

Panel II: Community Involvement in Accepting Refugees

Jennifer Bond outlines the general success of private resettlement in Canada.

Jennifer Bond explains why communities need to lead the resettlement process.

Jennifer Bond talks about the value of community sponsorship in expanding overall support for refugees.

Chris Gersten explains how the refugee program is essential for American moral leadership.

Chris Gersten recommends that governments partner with sponsorship groups.

Chris Gersten defends the refugee program.

Chris George outlines the growth of IRIS and community based sponsorship in Connecticut.

Chris George explains why community based sponsorship delivers better results than traditional resettlement methods.

Chris George highlights the growing interest of the American people in resettlement.

The post Event Transcript: Refugee Policy in the 21st Century appeared first on Niskanen Center.

from nicholemhearn digest https://niskanencenter.org/blog/event-transcript-refugee-policy-in-the-21st-century/

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Niskanen Center Releases New Policy Vision Paper

Today we are excited to release a new paper that provides a detailed overview of the Niskanen Center’s distinctive policy vision. Entitled “The Center Can Hold: Public Policy for an Age of Extremes,” the paper was coauthored by Niskanen scholars Brink Lindsey, Steven Teles, Will Wilkinson, and Samuel Hammond. You can find it here. 

In the paper, we argue that American liberal democracy is currently experiencing a crisis of legitimacy. That crisis began with Donald Trump’s victory in the Republican primary and was underscored by his improbable elevation to the presidency: Neither of these events could have occurred in a healthy, stable, well-governed polity.

We contend that new governing approaches are needed to resolve the crisis:

There is only one sure way to quiet our populist distempers and restore faith in democratic institutions, and that is for those democratic institutions to deliver effective governance. The failures of governance are what got us into this mess; public confidence in government will return only when government demonstrates through successful problem-solving that such confidence is merited.

Success in this effort will require not just new policies, but a whole new way of thinking about policy. The center can hold, but first it must be fortified with new convictions. There are, to be sure, many reasons why our political system has failed to address the mounting problems and dissatisfactions of the 21st century. But one crucially important and widely neglected factor is that the two prevailing ideological lenses, on the left and right, have gaping blind spots that render the most promising path forward invisible.

On economic policy issues, the traditional axis of conflict is “pro-government” on the left and “pro-market” on the right. Overcoming our present malaise, however, will require bold moves in both directions simultaneously. We need both greater reliance on market competition and expanded, more robust, and better-crafted social insurance. We need more government activism to enhance opportunity, and less corrupt and more law-like governance. To clearly see these needs and how best to answer them, it is necessary to use a new ideological lens: one that sees government and market not as either-or antagonists, but as necessary complements.

Rejecting today’s ideological polarization over the size of government as a false dichotomy, our hybrid vision combines the best aspects of the “pro-market” right and the “pro-government” left:

Another way to put the same point is to say that we reject both market fundamentalism on the right and democratic fundamentalism on the left. In other words, we don’t believe that either a well-functioning market economy or a well-functioning representative democracy is self-creating, self-executing, or self-sustaining. Market fundamentalists are prone to arguing that all you need to get markets up and running is to get government out of the way—in other words, the less government, the better. Democratic fundamentalists make the mirror-image mistake, arguing that all you need to get democracy to work better is to grant government more powers—that is, to shift more and more decision-making from private actors to officials of a democratically elected government. We, by contrast, believe that the functioning of both markets and democracy depends on how they are structured: the right structures produce good results, while the wrong structures can cause disaster.

To restore flagging economic dynamism, we advocate far-reaching regulatory reforms to unwind distorted rules that favor privileged insiders at the expense of everyone else:

Regulatory capture is broadly defined as insider domination of the policymaking process resulting in regulation for the benefit of the industry rather than the public. This dynamic has led to badly distorted policies that throttle innovation and growth even as they redistribute income and wealth to a favored elite at the top of the socioeconomic scale. The result is massive misallocations of resources ranging from the financial sector to health care to where Americans live and work, and a corresponding diminution of economic dynamism and opportunity.

At the same time, however, we need to bolster programs of social insurance to address dislocations caused by creative destruction and maintain political support for robust market competition:

It’s worth reminding ourselves what is at stake in this discussion. In the face of inevitable shocks caused by creative destruction, political systems can be fundamentally destabilized in the absence of effective systems of social insurance. The contemporary rise in anti-market populism in the United States is a clear case in point….

Preparing for the next economic shock, be it from trade, a recession, or rapid technological change, calls for major enhancements to our unemployment and income security systems, up to and including a dedicated federal funding stream for subsidized employment programs.

Without strong income supports that put a floor beneath displaced workers and systems that smooth the transition to new employment, political actors and the public tend to turn against the process of creative destruction itself. Put differently, a lack of social protection begets protectionism, as the quite reasonable demand for economic security is instead translated into popular support for trade barriers, inflexible labor regulations, industry bailouts, and precautionary impediments to new technologies, all of which conspire to further undermine economic security over time through sclerosis and stagnation. This is why countries with some of the largest welfare states also have some of the most dynamic private-enterprise systems, and vice versa. By filling in for missing insurance markets, a robust welfare state works hand-in-hand with flexible market processes to produce broad-based prosperity.

Our policy vision represents a sharp break from the prevailing orthodoxies of left and right, and is therefore hard to pin down with a handy, reductive label. Although we make the case for bold reforms, we believe the essential spirit of our project is one of moderation:

The goal of the moderate is not to achieve perfection according to a single, unbending standard, but to strike a rough and workable balance among a variety of valid yet competing and perhaps unreconcilable objectives. In these disordered times, restoring balance will require major policy changes, and we do not shrink from the challenge. Yet our goal is not to make the world conform to some abstract, rationalistic schema. Rather, it is to work successfully and effectively within the world as it actually is, with all its messiness and confusion.

In the spirit of moderation, we have attempted to learn from and incorporate what is best in competing ideological traditions. We hope that the new synthesis we offer can help move our divided society toward the best version of itself and away from the toxic tribalism that afflicts us today.

Read our entire policy vision here.

The post Niskanen Center Releases New Policy Vision Paper appeared first on Niskanen Center.

from nicholemhearn digest https://niskanencenter.org/blog/niskanen-center-releases-new-policy-vision-paper/

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Tim Wu’s Morality Play: A Review of “The Curse of Bigness”

Robert Bork began his influential 1978 book, The Antitrust Paradox, with the story of a prominent attorney (and future Supreme Court justice) at an American Bar Association meeting of several hundred antitrust lawyers, arguing that a good antitrust regulator behaves like “the sheriff of a frontier town: he did not sift the evidence, distinguish between suspects, and solve crimes, but merely walked the main street and every so often pistol-whipped a few people.”

Tim Wu, a law professor at Columbia University, argues in his new book, The Curse of Bigness, that American antitrust enforcement should return to that bygone era. Among other policy proposals, Wu recommends a “simple but per se ban on mergers that reduce the number of major firms to less than four.” He also proposes that regulators use breakups rather than consent decrees because they are “self-executing” and “a much cleaner way of dealing with competition problems.”

In his narrative history of American antitrust law, Wu’s hero is Louis Brandeis, who served on the Supreme Court from 1916 to 1939 and coined the phrase “curse of bigness” to refer to the societal problems he saw as engendered by Gilded Age monopolies. Bork is the villain of the story, having spearheaded the Chicago School’s role in narrowing antitrust regulation to economic concerns and establishing consumer welfare as its lodestar.

The Small Business Myth

While it is understandable that Brandeis suspected there was a curse of bigness in the economy given the paucity of data available at the time, the same cannot be said in Wu’s case. In their book published earlier this year, Big Is Beautiful, Robert D. Atkinson and Michael Lind show that large firms pay their employees more than small firms, give their employees better benefits, create more jobs on a net basis, and employ a more diverse workforce. Big business is more likely to be unionized than small business, and workers in large firms are less likely to be laid off or injured on the job. Large companies are also an engine of productivity growth, investing more in both research and development and in employee training.

Source: Jacobin

Source: Jacobin

Citing much of the same evidence, socialist writer Matt Bruenig has tried to persuade the left that small businesses are overrated, noting that “In reality, small-business promotion is mostly a bad idea. Small businesses pay lower wages, provide worse benefits, are often exempt from important worker protections, and are incompatible with the way unionization works in the U.S.” Rejecting the myth of small business is thus neither a left- nor a right-wing conspiracy, as in Wu’s cynical narrative of the Chicago School. Rather, recognizing the value of bigness is possible whether your primary concern is for the well-being of workers or economic productivity overall.

Conflating Natural Monopolies and De Jute Monopolies

But maybe bigness tips from a positive to a negative when a single firm takes over a whole market. Monopolization enables companies to raise prices and lower output for the sake of maximizing profits. However, if we are to vanquish the evils of monopoly, we must distinguish between its sources. Natural monopolies, which exist due to high fixed costs or economies of scale, differ from government-granted monopolies, and the two require distinct policy responses. Here again, Wu’s analysis falls short.

In the most infamous case of abusing market power in recent memory, Martin Shkreli, now in prison for securities fraud, raised the price of an infectious-disease drug from $13.50 to $750 overnight. In his retelling, Wu fails to mention that Shkreli was only able to profitably jack up the price of this lifesaving drug because of a regulatory backlog at the FDA. Daraprim, the drug in question, was no longer under patent, but no other producer was approved to sell the generic, and the approval process is notoriously long in the United States.

Similarly, whenever discussing Big Pharma or hospital monopolies, Wu erroneously characterizes them as the consequence of derelict antitrust regulators lacking sufficient will to enforce the laws on the books. Yet in many of these cases, the lack of competition is a result of poorly-designed patent laws and exclusionary regulations, from certificate-of-need laws to occupational licensing. As my colleague Will Wilkinson put it, “There are companies that do nothing but hoard pre-existing tech patents and then sue everyone who comes within a country mile of infringing on one of them … Just buy up little state-sanctioned monopolies, then make a mint destroying rather than creating economic value.” This is monopoly at its worst, yet Wu’s framework provides little help in understanding it.

The inability to distinguish between natural and government-granted monopoly is most glaring when Wu says the “original Boston Tea Party was, after all, really an anti-monopoly protest.” Yes, but it was a protest against government-granted monopoly. The British government had passed the Tea Act of 1773 to reinforce the East India Company’s monopoly on the sale of tea in the colonies. If private power had been the real concern of the protest, maybe the colonists would have revolted against the East India Company instead of King George III.

Simple Industry Concentration Ratios Can Be Misleading

“In a run that lasted some two decades, American industry reached levels of industry concentration arguably unseen since the original Trust era. A full 75 percent of industries witnessed increased concentration from the years 1997 to 2012,” Wu explains. He goes on to use increasing market shares by companies ranging from AT&T to Bayer to Ticketmaster to sound the antitrust alarm.

But market share statistics, which are used to define a monopoly in structural analysis, often obscure more than they reveal about the state of competition in an industry. To deal with this problem, antitrust economists have developed more advanced analytical tools for studying market power, such as diversion ratios, the Gross Upward Pricing Pressure Index (GUPPI) test, and merger simulations. A deeper look at the beer, airline, and book retailing sectors shows how relying solely on the structural framework leaves much to be desired.

Mergers in the airline industry have left us with only three traditional major airlines. That must lead to monopoly profits, right? In fact, as the Priceonomics blog notes, “six major airlines went through bankruptcy in the 2000s, and from 1979 to 2014, airlines lost $35 billion.” One recent paper in the American Economic Review was simply titled “Why Can’t US Airlines Make Money?” Airfares are also down by about a third over the same period. It is hard to conclude that allowing mergers in a persistently unprofitable industry with falling prices and rising output is really what ails our society.

Source: Priceonomics

Source: Quartz

The book also notes ominously that after recent mergers and acquisitions in the beer industry, “Anheuser-Busch InBev and MillerCoors control over 70 percent of beer sales.” But there are more than 6,000 breweries in the United States, a 150-year high. Is this really a market that lacks choice or is difficult to enter? Of all of its markets, Amazon is most dominant in books, which is no surprise considering it was the product category that launched the company. So did Amazon kill the independent bookstore? Not quite. The number of indie bookstores is up by about 35 percent in the last decade.

Source: Brewers Association

Source: Quartz

The trickiest part of market definition in antitrust analysis is determining the boundaries of the market. Which products are inside or outside of the market? In modern antitrust analysis, this question is important but not essential, as there are many other factors for determining competitive effects. In the old, structural approach, which relies on bright-line presumptions based on market shares, market definition is pivotal. Consider Amazon, which has 49 percent of the U.S. e-commerce market but only 5 percent of the U.S. retail market. Which one is the appropriate market for structural analysis? Or take Google and Facebook. In the U.S., together they control 57 percent of the digital advertising market but only 25 percent of the total advertising market. Which one is the appropriate market for structural analysis?

The second-to-last chapter of Wu’s book is titled “The Rise of the Tech Trusts,” and the extra attention these companies receive is understandable given their prominence in the economy. But before we break up Big Tech, there are other important facts about the tech industry to consider. The top five companies that spent the most on research and development last year were all tech companies. Combined spending on R&D and capital expenditures at technology companies is increasing as a percent of revenue over time. The Big Five — Apple, Amazon, Facebook, Google, and Microsoft — may be dominant, but they also compete against each other in a wide range of product categories. Big tech companies simply are not acting like the complacent monopolies Wu portrays.

Source: Recode

Source: KPCB

Most importantly, policymakers should be cognizant of the cyclical nature of the tech industry. AT&T was dominant in telephone service; IBM in mainframe computing; Microsoft in desktop; AOL and Yahoo in Web 1.0; Google and Facebook in mobile. As Benedict Evans shows, each cycle in tech allows a few dominant companies to build a moat and create quasi-monopolies. No competitor ever does cross the moat — the castle just becomes irrelevant when the next cycle begins.

Economics Is Not a Morality Play

Nobel Prize-winning economist Paul Krugman once wrote: “Economics is not a morality play. It’s not a happy story in which virtue is rewarded and vice punished. The market economy is a system for organizing activity … with no special moral significance. The rich don’t necessarily deserve their wealth, and the poor certainly don’t deserve their poverty.”

In the early chapters, Wu makes a strained connection between the Social Darwinists and the Gilded Age monopolists, claiming they were motivated by the same eugenicist ideology as applied to society and business. The problem with inferring moral motives behind economic decisions is that they don’t neatly map onto the good and bad teams. Teddy Roosevelt, the trustbuster himself, was also a eugenicist, an inconvenient fact left out by Wu.

In a letter to Charles Davenport, one of the leaders of the American eugenics movement, Roosevelt wrote that “society has no business to permit degenerates to reproduce their kind …  Any group of farmers who permitted their best stock not to breed, and let all the increase come from the worst stock, would be treated as fit inmates for an asylum … we have no business to permit the perpetuation of citizens of the wrong type