Empowered by market softness, renters whose leases expire this year or next should immediately launch talks with their landlord and begin courting others. Savvy, aggressive building owners are eager to ink long-term leases now (since that increases the property's value). Some with vacancies are signing new tenants who won't move in until their current lease expires, even though the space remains unoccupied until then.
Other landlords are reducing rents in return for an extension. Berkman says, "If a small business has always paid the rent on time and is paying $30 per square foot but the market today is $23, it may be able to get a rent adjustment (on the remaining lease term) if it is willing to sign a new five-year term on top of (that)." The rent might drop to $23 or $24 for the remainder of the original lease, he estimates, and perhaps you'd pay $25 per square foot during the five additional years. Smart building owners will absolutely consider such deals, Berkman avers.
Another facet of weak commercial property markets is a glut of sublease space. In the late 1990s, go-go corporations contracted for more office space than they were using, in anticipation of growth. But instead there have been cutbacks, leaving tenants with caverns of unused office space and fat monthly rents. Many are willing to sub-let to another business very cheaply, "just to get somebody in there to share the pain," Berkman says, adding that subleasing can also be used in tandem with straight leasing. "You can take a sublease for the balance of a tenant's term, enter into a direct lease now with the building owner that starts (when the sublease expires), and lock in a good rent for the entire period," Berkman says.
Call In The Marines
In a tenant-kind market, engaging a seasoned commercial real estate broker is vital for capturing maximum benefits. Veteran brokers in an area often know the sticking points on which a particular landlord will, or will not, give way. "That can be a big help in the negotiations," says Boone, the Seattle-area planner.
Moreover, business owners (including advisors) who take the do-it-yourself approach despite a lack of expertise in commercial real estate can easily be outgunned. Building owners have hardened pros who routinely dicker with sophisticated corporate buyers of office space. The small-business person goes head to head against the same tough negotiators-not a match-up that favors greenhorns.
Besides, a broker saves the busy owner time. Boone gave his broker specifics about square footage, amenities desired and more, then toured only the properties that met muster.
Location, Location, Location
With rents for business tenants falling in many areas, now may be a good time for advisory firms that lease their offices to shop for new digs. Price, however, is not the only factor to consider. Others may be at least as important in your decision about where to locate your office. Certainly the facilities should be attractive, if not impressive. "People (consumers) who work with attorneys and CPAs expect us to have the same quality of offices. That's our perspective on it," says Michael Boone, a certified financial planner in Bellevue, Wash. Relocating also presents a chance to literally get closer to other professionals, such as accountants and lawyers, to forge strategic alliances that can improve your business. Some say that location, as it relates to client convenience, is perhaps the most important criterion for selecting office space. "You need to be where you need to be for your type of practice and clientele," says David H. Diesslin, a veteran planner in Fort Worth, Texas. "We've found that clients really prefer convenience, and location is a significant part of that convenience." By extension, when relocating a planning firm, it's probably best to stay in the same general neighborhood. When Karl H. Romero decided to move his Santa Ana, Calif., branch office of LPL Financial Services after 18 years in one spot, he was determined to remain within a five-mile radius of it. "I didn't want to move too far because my clients were used to coming to that area," says Romero, "and freeway access is very good."