Case Study: Catching your landlord’s attention

GUEST BLOG

Michael Coretz
Real Estate Advisor,
Commercial Real Estate Group of Tucson

Business space needs change, even in the middle of a Tucson commercial real estate lease. Enlightened landlords work with their tenants to find a solution that works for both parties.

Renegotiating a lease is a win for both parties. The company saves money on its existing lease. It also avoids moving and tenant improvement costs and the penalties of breaking a lease. The landlord doesn’t have to bear the costs of searching for a new tenant. Those costs include marketing, lease fees, incentives and tenant improvements, not to mention the loss of rent while the space sits vacant. But sometimes, a landlord needs a little push to understand that they may lose a valued tenant and incur those costs if they don’t act.

Challenge:
A local company had to downsize from its 20,000 square feet of Tucson commercial real estate because of unforeseen changes in its operations. The COVID-19 disruption was among the outside influences that occurred through no fault of the company.

In this case, the landlord was unwilling to renegotiate the firm’s lease, so company officials started looking for new space.

Response:
As principal broker for Commercial Real Estate Group of Tucson, I worked with the company to detail its space needs. It turned out it could operate in 5,000 to 6,000 square feet. That would be a substantial savings in rent.

After a market search for suitable sites, I scheduled site tours. At the same time, the landlord was notified of the company’s desire to negotiate breaking the lease.

Results:
The sincere and successful effort by the company to find less Tucson commercial real estate and reduce its rental costs apparently caught the landlord’s attention. Contract negotiations were opened to see how the company could stay in its existing space.

They agreed on a blend and extend provision. Under this provision, the landlord accepted an early renewal of the existing lease with a downsize of the tenant’s space and extended the lease length.

The company won more favorable lease terms and was able to get the smaller space for a lower rental rate.

Take-aways:

• Even if you really don’t want to move, do your due diligence and see what’s available in the market. You might find a deal that will save you money.
• Be realistic about the commercial space you need. Knowing how much room your operation needs will help you focus on appropriate Tucson commercial real estate.
• You can use your site research to renegotiate a lease contract with your current landlord. It’s worth trying to get a better deal with the landlord when the landlord knows you’re serious about moving.

Contact me at Commercial Real Estate Group of Tucson, 520-299-3400, for a free demonstration of the indifference analysis that shows how both landlord and tenant can save by keeping the tenant from moving away.

In his 25-plus years as a commercial real estate tenant representative, Michael Coretz has picked up a wealth of information and expertise. He’s passionate about making sure that corporate users, tenants and buyers like you get a fair deal and the best solution for your business’s bottom line. Commercial Real Estate Group of Tucson specializes in representing tenants and corporate users across the United States, Latin America, Europe and Asia. For more information, call 520-299-3400 or visit www.commercial-real-estate-tucson.com.