As the commercial real estate market continues its recovery, there may be opportunities for tenants occupying office or industrial space. In particular, this may be a good time to renew or extend your existing lease for space, or relocate to new space if your business is in a growth stage. Landlords may be willing to provide certain lease incentives in the renewal or move process.
The occupancy rate in the office sector has not yet fully recovered to previous levels. With a few exceptions in certain geographic locations, the inventory of available office space remains relatively high due to several years of high unemployment, over-building, and a weak economy resulting in limited growth or downsizing for businesses.
There may be good news for your business, however. The abundance of available office space means that rental rates are competitive. If you are still in a lease with above market rates, there may be room to negotiate. Additionally, landlords have been forced to become creative in their means to attract and retain tenants by offering certain incentives. Some popular lease terms and incentives that may be negotiated between the landlord and tenant include:
- Reduced rental rates, particularly if you are currently paying above market rates
- Periods of free rent, generally at the beginning of the lease term
- Contributions by the landlord to the tenant’s build-out costs
- Interior modifications or upgrades
- Parking lot improvements
While the industrial real estate market is strengthening as we move into 2013, there may still be opportunities to negotiate some of the favorable terms listed above. Relocation of a manufacturing facility or warehouse could be a costly and time-consuming experience, but negotiating a renewal of an existing facility lease with favorable terms may improve cash flow for your business and may be less disruptive to your operations.
Planning a potential move or extension of a lease needs proper consideration and an investment of time. Consider what options are available to you and what fits best with your long-term business strategy. We recommend beginning these discussions early (12 to 18 months prior to expiration of an existing lease) and including your trusted business advisors. As your business experiences growth that will require additional space, or if you are planning to renew or extend a current lease, now may be an opportune time to negotiate with the landlord for attractive lease terms that may have a favorable impact on the company’s cash flow.
To learn more about this topic or to discuss your company's needs, please contact us at Email.