NFIB

Commercial Real Estate Opportunities Abound During Tough Economy
04/ 11/ 2002

If you've been thinking of leasing a new office, or if your lease is coming up for renewal, this could be an excellent time to pick up a bargain. Jeffrey Moses explains why in today's Workshop.

Only a year or so ago, office space was at a premium in many U.S. metropolitan areas. Many prime locations had waiting lists, but that has changed during the last six months, as the economy has fallen on hard times.

Since the beginning of the year, vacancies have climbed nationwide -- and along with them, prices per square foot have fallen as leasers begin to negotiate. In New York City, for example, monthly prices per square foot have fallen about 20 percent and vacancies have increased nearly 100 percent in the last six months. In Seattle, a city hit hard by the tech bubble burst, vacancies have risen by almost 1,000 percent. Down the coast in San Francisco, things are hardly better. Vacancies have doubled, and prices have dropped by a third or more in many instances.

Bottom line: This is the best time in recent years to negotiate for an excellent price on office space. In addition, you may be able to name your own terms for extras such as free rent for several months of your lease, reduced rates for janitorial services, upgraded carpeting and other interior features and the option to renegotiate lease price and terms after a specific time, all of which would have been unthinkable a year ago.

Don't let a low per-square foot lease price go to your head. Some office complexes may be almost completely empty, allowing you to negotiate a dream deal, but the empty offices all around you may make the complex seem uninviting to your customers.

Another point to consider: when negotiating for space in sparsely inhabited office complexes, make sure that the management of the facility has the resources to keep up landscaping, building and sign maintenance, garbage removal and security personnel. As their rentals go unused, their cash flow could suffer, causing them to cut back on the niceties that make a location attractive. Stipulate in your lease that all items of concern are maintained adequately.

Even though the commercial real estate market has suddenly become a leaser's dream, you'll still need to negotiate for what you want. Many owners and managers of office space have been hit hard financially, and won't hand over lower prices and added benefits without a struggle. If you're not adept and experienced at negotiating, consider hiring a professional agent to do it for you. Polish up your negotiating skills by reading the former Workshop: "Power Negotiating: Art and Science."

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