Winston Churchill once said "With great challenge comes great opportunity". While the COVID-19 has created challenges for many small businesses, the market for commercial space has (and we predict will continue) change and evolve. Commercial tenants with upcoming expiring leases have an opportunity to lock-in extremely favorable lease agreements. As landlords are facing historic vacancies and continuing uncertainties, they will want to ensure that their properties have tenants. To do so, landlords may consider providing incentives to tenants that they would never have considered one year ago.
Among other concessions, data suggests that commercial landlords across the United States are offering more free rent. On average, landlords are offering 5% free rent of the total lease term for recently executed leases. This is an increase of about 30% compared to this quarter last year (See: CompStak-Trepp-Final-National-Report).
Moreover, the average spread between Starting Rent and Net Effective Rent has increased by 27%. Starting Rent is defined as the amount a tenant pays prior to any concessions, whereas Net Effective Rent is defined as the amount a tenant actually pays after concessions are deducted. This increase in Starting Rent and Net Effective Rent resembles times similar to the Great Depression of 1929. For a commercial tenant with the financial capacity to renegotiate a lease, the opportunity to lock in a lease with plenty of concessions is ripe for the taking (See: CompStak-Trepp-Final-National-Report).
The bottom line is that if you are a commercial tenant in a position to extend your lease (either via an option or basic renewal), now may be the most optimal time to do so as leverage on the Tenant side hasn't been this good for many years. If you have further questions regarding negotiating Kirkland Commercial Estate, please consider contacting a Kirkland Commercial Real Estate Brokerage.
150 Lake Street S; Ste 216
Kirkland, WA 98033