Tip of the Week: Prepare for Aggressive Concession Requests

Once again, the tumultuous commercial real estate tide has turned. For now, it’s a tenant’s market. So, as an owner or manager, be prepared for potential tenants to take full advantage of their newly acquired negotiating power.

When most tenants have the upper hand, the typical concession requests consist of standard rent reductions and rent abatements. However, more savvy tenants realize that there’s still a lot left on the table, and they will aggressively push for the following:

• Extensions on all favorable lease terms
• Mutual indemnification clauses
• Larger tenant improvement allowances
• Elimination of personal guarantees
• More flexible assignment and sublet rights
• Lower or no security deposit requirements
• Written notice of a late payment and an opportunity to cure before declaration of default

Depending on your situation, you may have to give in to some of these requests if the tenant is an otherwise responsible one. But before you enter negotiations, sit down with your attorney so that you can get a clear understanding of your options and what these concessions could mean to your bottom line.