I am still surprised that some landlords are in denial about what is happening out there. A recent case in point, I was working with a client on a tenant renewal. The tenant is a national company with a great balance sheet (which is hard to find nowadays). They came back with an aggressive lease renewal. The initial reaction by the Landlord was one of shock and then it turned quickly to frustration. The tenant proposed a 33% decrease in rent.
When discussing the immediate submarket with the Landlord, I recommended it made more sense to keep the tenant vs the potential down time for lease up and the ongoing costs for CAMs that would never be recaptured if the tenant vacated. Plus, the lease commission and tenant improvements would have to be paid at some point when a new tenant came along.
The Landlord decided to counter at price that would have equated to another $180/month (which represents about 4%). The tenant immediately gave notice. The Landlord was shocked.
Now, the Landlord asked me to get involved and help salvage the deal. It is still in the process, but I think I might have been able to keep a good tenant in the building. Yes, it is lower than the Landlord’s expectations but the “bird in the hand is worth two in the bush.”
What are you seeing out there? I would like to know!