Commercial Tenants, Take Advantage of the Recession!
Overview
The writing is on the wall! According to expert reports, the United States economy is headed for recession. While no one likes the term recession and may think that only liabilities and heartache lie at the end of the recession road, there are actually many opportunities to capture while this tumultuous path. One of the key opportunities is for those who rent commercial space. Commercial tenants can take advantage of the economic slump to renegotiate their leases for better terms and lower rent.
Options for Tenants
Many commercial tenants believe that no matter what they always need to stick to the terms of their rent unless they want to be subject to penalties and termination of their tenancy. While this may be the reality during economic boom (when plenty of people have rental income to spend and a landlord isn’t worried about losing a consistent source of income), during a recession the tenant has much of the power.
On average during a recession, landlords are primarily interested in keeping a steady stream of income to weather the storm of the recession itself. As the economy takes its toll on individuals and businesses, there is simply less money to rent space. This is especially true in the post-COVID world where businesses have learned that 40 hours a week in the office is not necessary to operate.
Businesses are adapting. They are moving to hybrid models that don’t require the same amount of rental space in commercial real estate. During times like these, landlords are interested in having long-term tenants that can provide a consistent stream of income. They don’t have time or energy to think about getting another tenant to replace their current one during a recession. They want to know that the tenant they have will stay their tenant. The tenant, on the other hands, wants to know why they should stay the tenant (or at least why they should rent the same amount of space) when being in the office isn’t necessary. While the tenant may have to pay a penalty to breach a lease, ultimately paying the penalty may be worth it if paying years of rent simply doesn’t make sense during these economic times.
Conclusion
Because of the landlord’s desire to have this stream of income and because of the tenant’s desire to maximize their dollars during these economic times, renegotiating a current lease could be in everyone’s best interest. As an example of the simplest way this could look, the tenant can approach a landlord to renegotiate a lease for less rent and/or better terms while also offering a longer period of tenancy. This situation is basically a win/win for everyone. The tenant gets to take advantage of a discount on rent while the landlord can be assured that a stream of income will be coming his or her way throughout the recession period.
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Editor’s Note
The above article is for general information purposes only and should not be relied upon as specific legal advice. This article, or using the contact@apexlg.com form, does not in any way form an attorney-client relationship. If you have any questions or would like to learn more, please contact Jacob Ferrari at jacob@apexlg.com.
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