Lease Negotiations Post PandemicJune 30, 2021
Commercial real estate office markets swing back and forth from favoring Landlords to favoring Tenants. Depending on the market, you will usually see one side get more of what they want in a lease negotiation. It is fair to say that in a lease negotiation, timing can be everything.
When Landlords get the upper hand, a Tenant can find themselves accepting language in the lease that favor the Landlord and the rents are usually higher. However, the lingering effects of the pandemic are still with us and the result is a number of vacancies in the office market. These vacancies have softened the market and this now shifts leverage in lease negotiations to the Tenants.
If you are a Tenant that has a lease coming up for expiration within the next 12-18 months, you have an opportunity to realign your lease with the market and lower your rent plus now is the time to work on removing onerous clauses in your lease that were the result of the prior market conditions.
Given the current marketplace, the leverage has shifted in the negotiation to the Tenant’s side. An opportunistic tenant would be wise in new or existing lease negotiations to explore the following.
- Push for lower rent, free rent or later rent/lease commencement.
- Negotiate sublease requirements if applicable.
- Negotiate to reduce holdover amounts.
- Negotiate to reduce landlord favorable timelines in the lease.
- Look for newly introduced clauses that give the landlord a work around to collect rent in the event of another government shutdown.
- Remove any personal guarantees.
- Negotiate to remove or reduce future expenses pass throughs and negotiate for a revised base year.
- If you ever had to concede to any terms/clauses in the past, now is the time to try and reverse it.
Don’t be bashful presenting any new or existing lease agreements or questions about your lease.
If you have any questions about your lease, the market, or what is reasonable to ask for in your lease negotiation, please don’t hesitate to give me a call. I can be reached on my cell phone at 510-95-7645.