The uncertainty of the current economy – courtesy of COVID-19 – has left landlords to beg, borrow, and barter with their current and prospective tenants. Here are a few ways landlords can maintain their tenants and recoup concessions.
Office space leases run the gambit, so landlords may need to loosen their grip if they wish to maintain their tenant line-up. Economic uncertainty can make tenants jump the gun as they desperately look for lower rental rates to cut their losses.
Provide them a sense of certainty with early lease termination options or short-term leases. Offer a free rent period for new tenants or free parking for renewing tenants whose leases are set to expire. More service options and holding rental rates at their current level will attract those current tenants with wandering eyes as well.
Tenants Need Their Space
Whether your current tenants are economically secure or not, space incentives must be considered. Don’t sell yourself short by setting a renewal rate that will prevent the building’s value from growing with the recovering economy.
Takedowns allow tenants to pay on less space during a three- or five-year lease. You’ll be able to recoup the balance of the space later in the term. It will also entice tenants to fill space, thus ensuring longer lease commitments.
Let tenants cover the cost of their improvements instead of an expense-only lease. It’s a win-win in which tenants get locked in with reasonable rent, and you can rest easier knowing you’ve lowered upfront capital investment.
Concession For Long-Term Loyalty
It’s just as important to entice current tenants as it is to attract new blood. You have to give a little to get a little, which may involve contractual sparring to find a compromise that suits both parties. Beware competing with other buildings by offering incentive packages. Rent will continue to drop, and municipalities will suffer.
Short-term lease extensions will help kick higher rental rates to the curb, and you’ll be able to recover your losses after the economy rebounds. External signage is another bargaining chip that may bring in the tenant boost you need to keep a leg up on the competition.