It used to be that if a new tenant requested carpet and paint changes before moving in, you could assume landlords would pretty much cover the request (within certain asking rates). They – especially institutional owners/landlords – would provide approximate leasing rates ahead of time and hold to them, if only making a few space modifications. But today, with construction costs continuing to increase over the years, even simple requests for new carpet and paint are tough to negotiate and justify. We're seeing more and more “as-is” deals, especially if existing conditions are decent.
To get the best deal, both parties need to work together to keep costs down. Tenants are beginning to understand that when construction costs exceed a landlord’s budget, something has to give.
Here are my five recommendations to help tenants cut their costs:
1. Make do with the existing layouts when looking at new spaces. Think creatively on how you can make it work. Think about it being functional, not perfect.
2. Understand the future value of your requested changes. Will they help or hinder ownership of the space down the line? An in-the-know broker can help you find the win/win sweet spot.
3. At any point, renegotiate your lease to extend its length. You may not be aware of motivations the landlord has to get you extended, and those could benefit you in the long run.
4. Work with a broker to review your existing terms a year ahead of any option or lease expiration. Is your base rent high because of some amortized improvements at the beginning of your lease? With those paid off, you might be able to decrease your base rent, thus lower your costs.
5. Decide which requested improvements are necessary and which ones you can leave for another time. Being flexible with the owner, opens the door for a better negotiation.
An experienced broker – especially one with ownership history – can provide excellent and objective strategies to help with your long range business goals and bottom line. At CEG, we’re here to help! Reach out to our team today if you have any questions. Or you can find me at 612-788-1552 or firstname.lastname@example.org.
Jeff Salzbrun is the owner and broker of Commercial Equities Group (CEG). As a veteran-owned real estate brokerage, CEG has been involved in thousands of sale and lease transactions, ranging from single offices to 250,000+ square foot buildings. At CEG, we get your deal done. We know space, and we know the CRE business.
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