Categorized | Featured Articles, Management

Renting office space? Renegotiate now

By Pamela Smith    

You have heard of a buyer’s market and a seller’s market, but have you heard of alease tenant’s market? That’s what we are in now, and for anyone who rents office space, that’s good news.

A tenant’s market is one in which the tenant has the upper hand in office-lease negotiations—for both new and existing leases. Tenants (both current tenants and new tenants) have the power to negotiate terms that are to their liking. This power is driven by the market’s current high vacancy level—20% to 25% in the Jacksonville area.

With the current insecure economic climate, landlords are especially sensitive to retaining existing tenants in their office spaces, so early renewal opportunities abound. Tenants who landlords consider them “quality” can open negotiations early and offer to extend their leases by two or three years provided they receive competitive terms.

What are competitive terms? Consider asking for a reduced lease rate on the expanded terms; one or two months of free rent; or paint, carpeting, signage, or similar cosmetic improvements.

If you are a new tenant or someone who wishes to relocate to a new office space, you can get the most for your money by:

• Subleasing. Subleased space provides the most in overhead savings but you may run into some limitations. Sublessors will discount their leases substantially but will rarely offer any money towards redoing or updating a space. You may also be limited on the length of the lease.

•Upgrading. If you are looking to relocate, you may be able to upgrade your office space while paying the same rate per square foot that you paid in your previous, less attractive space. 

To get the most for your money, consider using the services of a tenant representative broker. This type of broker knows the market, the players, and the terms are being offered by landlords. The broker’s commission is paid by the landlord, who has generally already budgeted the lease commissions into the building’s cash-flow projections.

Every property is unique, and every landlord is unique. Some properties have a lower cost base of operations and can provide better lease terms. New properties usually have a higher base of operating costs and may be limited by their institutional ownership in the terms that they can provide.

Nevertheless, no property can sit empty for long. Now is the time for businesses to take advantage of the economic environment and reduce their overhead expenses. 

Pamela Smith has an MBA from Florida International University and a marketing degree from the University of Florida.  With 12 years of commercial office leasing experience, Smith owns and operates Smith Commercial Real Estate, which specializes in representing corporate office tenants. She can be contacted at 786-368-3707.

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