Issue link: https://read.dmtmag.com/i/45004
48 • NOVEMBER 2011 • WORLD FENCE NEWS If there's any silver lining to our dark economic cloud, it has to be the attractive leasing deals many business tenants are enjoying in most parts of the country. For the first time in many years tenants are in demand. No secret why: There's too much space around for the number of active businesses. No one likes to see anyone shutter their doors, but the fact remains that for every business that closes some more space comes onto the market. "Thanks to the current vacancy rates tenants are seeing the biggest se- lection of space and the most accom- modating landlords since the early 1990s," says Robert Bach, chief econ- omist at Grubb & Ellis, a commercial real estate services and investment How to negotiate a better property lease BY PHILLIP M. PERRY company based in Santa Ana, Calif. "Landlords are nervous so therefore tenants can get better deals." All sectors of business are benefit- ting. In recent months the nationwide vacancy for retail space has climbed to the highest level since the mid-1990s, reports Bach. That's considerably more than the sector's "equilibrium rate" — the rate at which rents increase by no more than inflation. For office space the vacancy rate has been running at the highest level since the first quarter of 2005 and a hefty margin over that sector's equi- librium rate. About 9.5 percent of industrial space is unoccupied, the highest since the second quarter of 2004 and much more than the sector's eight percent equilibrium rate. For anyone grappling with a tough selling climate, all that empty space translates into a stronger negotiating position come lease renewal time. "It is a tenant market right now," says Sharon Kahan, first vice president of CB Richard Ellis, a Chicago-based retail specialty brokerage. "If you are a tenant then you are in a good position. There's quite a lot of space on the market and probably more still coming." Negotiate rates So what steps can you take to cap- italize on the favorable market? For starters, dust off your lease and take a fresh look at the numbers, even if the renewal date is still some time down the road. "Business owners should be seek- ing relief right now from their land- lords," says Andy Fried, director of the Small Business Development Center, Coles College of Business, Kennesaw State University, Kennesaw, Georgia. "If the market is a whole lot lower than what's being paid on a given lease, negotiations should be initiated," said Fried. Maybe your first thought is a sim- ple reduction in the monthly rental rate. And while that's not out of the question, another tactic is more likely to bear fruit with the same bottom line results: Free rent for a determined number of months. "Landlords don't like to reduce rent," explains Fried. "Many landlords buy real estate for investment purposes so they want to keep what they call the 'capitalization rate' up. The higher the rent roll the higher the value of the building." To maintain their investment, landlords will often opt to grant free rental months rather than cut the offi- cial rental rate. In fact, throughout the country many tenants are now routinely asking landlords for free rent as well as re- ductions. At Western Tube & Conduit customer satisfaction and quality are the first order of business. Our Fencepost and Fencerail production is ISO-9001:2008 certified - and our products are manufactured to meet all the applicable state, federal, industrial and regulatory specifications and requirements. While we regularly stock standardized products and sizes, we are happy to provide custom dimensions as well. All our Fence products are galvanized with high purity zinc. We use high frequency welding (ERW) to turn the highest quality strip steel into tubing, and then a continuous hot-galvanizing process to zinc-coat the products smoothly and evenly. A zinc-rich interior organic coating, a chromate conversion coating, and a clear exterior organic coating provide the complete finish package that gives them superior protection against the elements and long life as a result. Gal-Z serves customers looking for shaped Fence tubing as well as corrosion-protected mechanical tubing. It can be purchased in squares and in rectangles, and it provides excellent environmental durability while also fulfilling the need for strength and weldability. "This trend is new," says Bach. "I have never heard of this happening be- fore at such a wide scale." So how many free months can you get? "It varies by area," says Bach. "The tenant must check around the market to see what deals are being of- fered." Bach said he has heard of some tenants receiving six months free rent. Do your homework That phrase — "checking around the market" — holds the key to your success in a lease renegotiation. "You have to do your research and line up your ammunition," says Kahan. You will want to answer two questions: What rents are others pay- ing? And what space is available for you to move to? With the answers to those ques- tions in hand you can approach your landlord with a little more power. And one more thing: Show your own numbers. Today more landlords are having to take into account what a continued on page 50