A decade ago at the height of the Great Recession, landlords were eager for tenants and willing to commit to aggressive concessions in order to stave off their own bankruptcy. Fast forward to 2018 and the industrial real estate market has become a “landlord’s market” where rents have seen near double digit year over year growth and vacancy rates in some markets are less than two percent.
Tenants that got incredible deals just years ago are now looking at renewal rents that will double or potentially triple as landlords increase rents to meet market conditions. However with the right timing and the right representation, businesses can leverage the economic value of their tenancy to secure valuable concessions even when market conditions would suggest otherwise.
“The ideal scenario is for tenants to start the renewal process 18 months,” says John Galaxidas partner at Renegotiate Lease. “Tenants need six months lead time to research the market, identify competitive alternatives and get additional offers for their tenancy that a firm like ours can leverage to bring proposed rents in line and gain concessions.”
The key is approaching the renewal process with the same economic scrutiny as the original lease says Jonathan Ferrini of Renegotiate Lease.
“Where businesses get in trouble is forgetting the fact that a building owner wants to maximize their return and so they build a friendly relationship with their landlord and when they are presented a ‘fair deal’ on a renewal they believe the offer is being made in good faith. When you present multiple alternatives and are no longer a captive audience, that’s when the real negotiating gets done.”
Landlords know that it’s incredibly disruptive for tenants to relocate with moving costs and labor pool disruption impacting their tenants appetite for another location which is why using a service like Renegotiate Lease is critical to the process because their may be off-market options literally next door that circumvent negotiating power and put tenants in the driver’s seat.
If your business is looking at an upcoming renewal, don’t hesitate because even a few business days can make all the difference. Contact our team today and schedule your lease review as soon as possible so we can get the ball rolling. Remember, when landlords compete, you win.