Why would any landlord, whether in distress or not, agree to renegotiate a tenant’s lease? Afterall, didn’t the landlord and tenant most likely spend a lot of time, energy, and resources negotiating that lease the first time around? Why would a landlord agree to change lease terms, especially if doing so would probably include lowering rents at a time when many landlords need every dime of revenue they can capture?
The answer is, because money isn’t everything? At least, rent isn’t everything. Understanding the benefits that tenants can derive by renegotiating leases is simple. Those benefits may include the ability to:
1. Reduce occupancy costs
2. Lengthen or shorten the term of the lease
3. Lock-in a long-term rental structure
4. Secure expansion space
5. Dispose of surplus space
6. Eliminate unfavorable lease terms
7. Secure greater flexibility
8. Achieve more favorable business terms
9. Expand existing rights and options, and secure new ones
10. Resolve landlord / tenant disputes
Landlords can benefit greatly from renegotiated leases, too by:
1. Converting short-term leases to long-term leases, thereby improving the building’s value and the likelihood of successfully refinancing or selling the building
2. Expanding tenant space
3. Modifying and / or eliminating lease terms, rights, and options held by the tenant that may be unfavorable to the landlord
4. Contracting tenant space to make available more desirable space, space that might achieve higher rents, or to make way for a new tenant or another existing tenant’s growth
5. Achieving higher square foot rents, while lowering a tenant’s overall costs
6. Repositioning the image or perception of the building in the marketplace
7. Resolution of landlord / tenant disputes
There exist many reasons why landlords and tenants would, and perhaps should, say no to a lease renegotiation. In some cases, renegotiated leases can mean the difference between success and failure for landlords and tenants.
Lease renegotiations are happening everywhere, in every kind of commercial real estate. Interestingly, lease renegotiations are not new. But, they substantially picked up speed since the economic downturn.
Could renegotiating your company’s real estate leases create positive results?
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Real Estate Strategies Corporation is a respected corporate advisory and transaction services firm that provides thought-leadership, decision-making, planning, project management, and transaction execution services to financial and senior executives at management team-led public, private, and portfolio companies, and not-for-profit organizations. Under the leadership of its award-winning CEO, Andrew B. Zezas, RealStrat’s clients engage the firm when acquiring, disposing, renegotiating, or enhancing occupied leased or owned real estate in New Jersey, Pennsylvania, New York, Connecticut, and throughout North America. By creating and executing Business DRIVEN Real Estate Solutions and identifying hidden Opportunities, RealStrat drives greater operational and financial performance in support of its clients’ stakeholder objectives, M&A requirements, and exit strategies.
In the current economic environment, RealStrat’s efforts are focused on uncovering, capturing, and re-purposing hidden liquidity and minimizing risk in its clients’ leased and owned real estate. The firm provides counsel as to competitive advantage strategies in preparation for the eventual economic recovery. Visit www.RealStrat.com.
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