Tenants Have Negotiating Edge On Rent | Landlords are more likely to provide biz-friendly deals
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Jim ElCock, Colliers Meredith & Grew.
Amid the current economic uncertainty, commercial property owners have come to a strong realization: vacancy is the enemy.
It used to be that commercial landlords could use vacancy to their advantage. It helped tell the stories they used to pitch their buildings to prospective tenants.
But all that has changed. In fact, commercial real estate brokers say landlords are becoming positively aggressive about offering certain extras to convince tenants to stay.
And Class A and Class B landlords in suburban Boston see threats everywhere they turn. They “are more motivated than ever to secure tenants rather than lose them to competitive buildings or other submarkets,” according to a second quarter market report from Boston commercial broker Colliers Meredith & Grew.
Tool Box
What that means is the tools every landlord has in his or her toolbox come out more quickly, and are more likely to be used exactly the way tenants prefer, according to Jim Elcock, a Colliers senior vice president and head of the firm’s suburban group.
For a tenant whose lease is close to expiration, rental rates are up for negotiation. The terms of leases are more flexible. The build-out of existing space or new space within the same building or complex can probably be accomplished on the landlord’s dime. And many landlords are also willing to give tenants a rent-free month or two as a thank-you for re-upping.
Landlords are also becoming more agreeable when it comes to lease renewal, expiration and contract options for tenants, Elcock said.
“Vacancy in this market is not good,” Elcock said. “These are tools that are always used in a deal. They’re used in 99 percent of all deals…what we’re seeing is landlords saying, ‘I don’t need to hold out. I can afford to do more on the rental rate. I can be a little more creative and give a little more on an equipment allowance or a month or two of free rent.’ For Class B landlords, getting a building leased is a number one priority.”
According to John Eysenbach, executive vice president with R.W. Holmes Realty Co. Inc. of Wayland, the same urgency hasn’t spilled over into the industrial real estate market.
That market “has been much more active,” he said, “especially in (Interstate) 495 South, where vacancy is some cases is under 10 percent.”
Eysenbach said leasing has been especially active this summer among manufacturing facilities as the weak dollar as spurred increased exporting by local companies.
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