Don’t let cash-strapped landlords threaten your business’s success by refusing to make improvements for your commercial real estate lease.
Rarely will you find the perfect commercial real estate space for your exact needs. As a tenant representative, we at Commercial Real Estate Group of Tucson more commonly see that changes and improvements are required so that the space works for your business. They can range from upkeep and upgrades such as paint and carpet to major changes like computer wiring or space build-out.
Who pays for these tenant improvements and how much that costs you are part of negotiating a new or renewed lease for office, retail or industrial space.
This negotiating point becomes crucial in today’s weakened economy, despite the recent declaration of the end of the Great Recession.
Like the rest of the country, the Tucson commercial real estate market has far from recovered. While the free-fall has stopped for now, most experts worry about loan defaults and equity reductions continuing into 2012.
Yes, the current market gives tenants considerable leverage in negotiating outstanding, low-cost terms. But that doesn’t help if your landlord can’t afford to make the tenant improvements you need to make your business succeed.
We recommend these strategies during contract negotiations to protect your investment.
- Understand how much it will cost to improve the space for your needs. You don’t want to be shortchanged because you low-balled the true cost.
- Clearly understand your responsibility for base-building upgrades such as mechanical, electrical and fire/safety systems.
- Examine the landlord’s finances to assure that assets are available for financial recourse if a problem arises.
- Create an escrow account into which the landlord places the funds for improvements.
- Gain a rent reduction if the improvements aren’t done.
- Delay payment of rent or agree to a reduced rate early in the lease in exchange for making the improvements yourself.
A related issue is whether the landlord can afford to conduct general maintenance and repair on the building and common areas. You could offer to handle some of these tasks in exchange for a rent reduction or cost offset.
Landlords want to keep and gain tenants to maintain a healthy cash flow. We often see that they will consider creative ways to have your business in their space.
Commercial Real Estate Group of Tucsonspecializes in representing tenants and corporate users across the United States, Latin America, Europe and Asia as a member of ITRA. For more information call 520-299-3400.