Although the current economic market is unstable, unpredictable, and outright not good for many individuals across San Diego, the United States, and globally right now may be the greatest opportunity in many decades for tenants to renegotiate favorable lease terms.
In addition to attractive rates, many landlords are agreeing to other request of tenants, as these landlords are trying keep their building profitable or in many cases just no lose ownership to the banks.
Many tenants in San Diego market are now able to get immediate release from their current lease obligations so they can renegotiate new terms that are more in line with the current market levels. Landlords are often trying to attract tenant with free rent negotiated through out the term of the lease. Many of Synergy’s client’s have been able to obtain more than one month of free rent per year, depending on the term of the lease. For instance we recently negotiated a deal for a client in San Diego that committed to a term slightly longer than five years, and we were able to negotiate seven months of free rent for our client. The majority of the free rent was given at the beginning of the term and distributed between full months of free rent and half months of free rent.
Another tactic that landlords are often given into in the current market is “phase-in” type rental rates. By this I mean that the landlords are willing to have the tenant pay for a certain percentage of the space they will occupy for the first year and then gradually pay for more and more space until they are eventually paying rent on the full space. For example we recently had a client who moved into a about a 5,000SF space in Encinitas. For the first six months they will only be paying for 3,500SF. During month seven through twenty four they will be paying for 4,500SF and for the remainder of the five year term they will pay for the full 5,000SF. This is a good example of how landlords are willing to work with creative tenants to make a deal happen and in the end save the Tenant money and make the landlord happy because his building now has less vacancy.
Landlords are also being more flexible on the type of options they are allowing the tenant to have negotiated into the lease giving the tenant more flexibility on their real estate decisions. Often the landlords will allow options to terminate the lease or to extend the lease with predetermined rates. The option to terminated most of the time will come with a monetary penalty for the tenant. Synergy has negotiated many of these types of options into our clients’ leases.