Power Shifts in Lease Negotiations
Power Shifts in Lease Negotiations
You may have heard the words “buyers’ market” and “sellers’ market” when shopping for a house. These terms describe which side of the deal (buyer vs seller) is tending to have the upper hand in negotiations during a sale. The same thing goes for the commercial leasing market and it all has to do with supply and demand of space for lease.
When there is a lot of property on the market (high supply), but not as many tenants looking to lease the space (low demand), tenants are usually in a better position than the landlord to negotiate a better deal for themselves. This could mean asking for a lower rent price, getting free rent, and having the landlord pay for improvements to the space before they move in. Since the recession, tenants have had the upper hand in negotiating new leases for their businesses. We saw so many companies close up or downsize, that the supply of space available for lease grew significantly. If a landlord couldn’t offer a potential tenant the terms they desired, that tenant could easily walk down the street and find another space just as fitting.
But now the tables are starting to turn. As the economy improves we are seeing those vacant offices fill up and empty storefronts open their doors. The more the supply of available commercial space decreases the more balanced the negotiation will be and the less likely the tenant is to negotiate a great deal in their favor.