Why Covid Has Made Commercial Leasing Better for a Tenant

If you are an existing tenant or a potential tenant considering leasing commercial (office and retail primarily) space, COVID has created some good leasing benefits in your favor. Many tenants are missing out on these benefits because they aren’t aware of them or don’t know how to get them. They won’t last forever, so the sooner you make a deal the better.

One of the main benefits for commercial tenant leasing space is a lower rent and/or more tenant concessions (free rent, improvement allowance, moving allowance, etc.). Landlords vary quite a bit on how they will give a tenant a credit here and it really many times depends on whether the landlords want quick cash flow or want a higher resale value. You have to find out what the landlord’s goal is before you start negotiating to get your best deal. A landlord that wants quick cash flow will usually give you a lower rent. A landlord that wants a higher property value will usually not lower the asking rent much, but will instead give you free rent and more tenant improvements and other similar types of concessions.

Another COVID lease benefit that favors a tenant is the lease language itself. Landlords are more open to clauses that favor tenants like not having to pay rent if COVID continues to shut down a tenant’s business or even cause less income for a tenant’s business.

I have found that if a lease is carefully and artfully negotiated, a tenant at this time will pay less than before COVID started by a quite a bit. This is especially true in the first year of the lease since the landlord knows the space he has might sit vacant for another year or more without a tenant.

Each situation is unique and needs to be figured out carefully. A tenant will do best if they hire an experienced broker to help them; a tenant should not negotiate on their own. I have negotiated many leases since COVID occurred and in my 35 plus years of negotiating commercial leases, I have not seen such favorable tenant terms. If you would like to find out how you can save money on your next lease, please contact me as follows:

David Massie

DJM Commercial Real Estate

david@djmcre.com

805-217-0791

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