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Real Estate Tactics For The Upcoming Market Change

As a business owner, are you concerned about the status of your company?  Have you had to think about mitigating expenses?  , or do you worry your office workforce will decrease dramatically in the coming months?  The size of your lease may have been a perfect fit for six months or even six days ago, but your needs may have changed as your company tries to navigate the uncertain economic times we find ourselves in.  The global economy was gathering momentum heading into 2020. Assuming infections globally will abate by mid-year, and with more government stimulus now going into the markets, conditions will be primed for a robust rebound as pent up demand is unleashed.

That said, it is never too early to revisit your lease and consider what options you may have to mitigate your business expenses.  Typically real estate is in the top tier of high costs, making any adjustments and right-sizing of leased space or monetizing un-used space in your owned facility a significant area for economic improvement.  Our commercial property advisors att Benchmark Commercial are well versed in how to address market cycles like we find ourselves in today and are here to give you advice and prudent counsel on how to protect your business and your real estate during these uncertain times.

Early Lease Renewal:

An early lease renewal is a new lease agreement and renegotiation of existing lease terms.  Typically, there are two main conditions to consider before pushing for an early renewal; you are more than halfway through the current lease term, or you have sound creditworthiness and a good payment track record on your rent.  If you’re within two years of the end of your current lease, now may be the time to conduct a comprehensive review of your space requirements and to closely examine your landlord’s needs and potential pressure points to see if you can leverage the situation to your benefit via an early lease renewal.

Understand The Financial Role Your Early Renewal Has

Landlords enjoy financial benefits when they renew agreements with existing tenants. When a tenant leaves, the landlord stands to suffer a loss in rent, as well as incur additional expenses needed to make updates or renovations, as well as advertise and market the vacant space. This presents the opportunity for a successful negotiation.

It is essential to know the dollar amount associated with keeping you as a tenant, and leverage that information to help win back a portion of this profit when renewing your lease.

Get Tenant Improvement Dollars to Renovate Your Space

If your office space needs renovation or retrofitted to encourage productivity, employee retention, rebranding, or only a refresh to a more contemporary design motif, beginning the renewal process early may give you the leverage required to negotiate the tenant improvement (TI) allowance you need.  A tenant improvement allowance is a money from the landlord you can use to renovate your office space.

By renewing early, you can negotiate a higher TI allowance that will give you more opportunity to renovate and improve your office space to better fit your company and its mission, without coming out of your pocket for the expense.

Typically, less TI is allotted by landlords for lease renewals. However, with proper posturing and guidance from an exclusive advisor like Benchmark Commercial – landlords see the value if it keeps their buildings occupied to avoid any building vacancies and to maintain their cash flow and ability to pay their underlying debt. By ensuring the landlord you will stay in your space, they may be more likely to give you concessions such as an improved and more competitive TI allowance during your renewal in return for the additional lease term and long term stability your tenancy provides.

At Benchmark Commercial, our tenant rep brokers and commercial real estate advisors may recommend you look at other spaces on the market to create leverage. Your landlord may be more likely to allow you concessions to keep you if they believe there is a strong likelihood you will vacate at the end of your lease.  We leverage this process to provide our clients with the utmost in negotiation position and to ensure the renewal lease is the best choice upon careful consideration of the market options.

Finding the  Right-Size Space

If you’ve recently downsized your office, or your company has not grown as quickly as you had previously anticipated, you may no longer need your full space.  At Benchmark Commercial Real Estate, our savvy tenant rep brokers can work with the landlord to help you right-size your lease during an early renewal. If this can be negotiated, it can help you save thousands of dollars in rent on unused space.  In cases where an early renewal is unachievable, we can also help to alieve rental expenses by subleasing excess space to other commercial tenants.

Consider hiring a broker to help you negotiate properly.

If your company is not familiar with the market and rental negotiations, your office should consider representation from a tenant representation firm that can help win you the best deal. Take control of the situation by hiring a broker to aid in competitive negotiations. Benchmark Commercial’s brokers are always aware of current market conditions and opportunities and can help you leverage this information.

Engaging a broker adds value, not cost, and it will take time to understand your specific situation and business objectives. It is the only way to have a successful negotiation.

Here’s the bottom line: Your willingness to sign an early lease renewal can mean big benefits to you if the landlord needs the longer lease to meet their own business goals. It’s essential to keep in mind both the benefits to you, such as lower rent, and the leverage with the landlord can diminish as you get closer to the end of your current lease term. It’s essential to take advantage of the timing and to strike while you have maximum leverage.

Contact Benchmark Commercial Real Estate at 303-395-0111 or email our Managing Broker at Tanner@crebenchmark.com to learn more.