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3 Things to Consider Before Negotiating a Commercial Lease in the COVID-19 Market


The commercial and retail real estate market has been one of the hardest-hit industries during the COVID-19 pandemic. Many rents have plummeted while incentives jumped due to sublease availability.

There have been significant changes in commercial real estate and how tenants can negotiate their lease. This also includes the opportunity to renegotiate a lease at an option renewal.

Here are three things you should know when negotiating a lease during economic uncertainty:

1. Times have changed, everything is negotiable

The COVID-19 pandemic has put some tenants in the driver’s seat and the landlord in the passenger's seat in the majority of cases. In these unprecedented times, everything is negotiable and landlords are reluctantly being forced to re-negotiate terms with their tenants to avoid vacancy.

Tenants are urged to express their ideal terms and negotiate hard. This may not come naturally to you. You may feel intimidated. You may not want to “rock the boat” with your current or potential landlord. Let Lease Negotiation Services take the stress out of this for you and allow their knowledge, expertise and tenacity get the best deal for you.

2. You can play the market, but you should know how.

Whilst commercial rentals have noted a drop in the past year, any successful negotiation will depend upon the market availability of stock.

As the market depreciates, tenants are becoming more favoured due to competition. This could mean higher incentives and lower rents. You can use an upcoming lease expiry as leverage to renegotiate terms.

To do that, you can start by informing your landlord that you are looking at other options on the market. Name your terms and negotiate as hard as you can. Don’t decide until you feel like you have the best terms.

Talk to multiple agents to get access to different properties. Also, use your landlord’s new offer against going to the market to assess your options. It’s best to play both sides to get the best deal.

If you choose to negotiate the deal yourself, feel free to call on Lease Negotiation Services before you sign the Heads of Agreement to see how much more they could save you – no savings no fee basis.

3. Some landlords are willing to go the extra mile to retain tenants and sign new ones.

How long the effect of the COVID-19 pandemic will remain is uncertain and, of course, tenants will remain extremely cautious of entering into a lease commitment they may not be comfortable with. So long as vacancy rates climb, landlords generally will keep tenants and acquire new ones at great lengths.

When supply outweighs demand, it is more difficult for landlords to lease their space to good tenants. Because of this, they are more willing to cater to the tenant’s needs, offer high incentives, and consider their demands.

Conclusion

Now is the time that tenants can negotiate the deal according to their terms. And there are increasingly higher chances they will be heard. During the COVID-19 pandemic and the post-pandemic era, commercial lease negotiations are expected to dominate the real estate market.

If you are looking to negotiate a commercial lease, Lease Negotiation Services offers an exclusive service to tenants in New South Wales. No conflict of interest with landlords, agents or developers. We will help you negotiate the lease to a commercial property or retail store to ensure you gain the maximum beneficial terms for your new lease. Give us a call and let us know how we can extend our services, knowledge and expertise to you.

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