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Start Taking Advantage of a Strong Tenant’s market

Introduction:

When it comes to the office market, it’s been an ongoing struggle for landlords to attract and retain tenants since Q4 of 2019, better known as pre-COVID. Despite increasing face rents, landlords are offering substantial concessions, such as build-out allowances and free rent, to both lure new tenants and keep the existing ones. Given the potential for spaces to remain vacant for extended periods if negotiations with a prospective tenant fall through, tenants possess significant leverage.


In this strong tenant leveraged market, every business should treat the renewal process as if they have one foot out the door. Companies should be reviewing existing leases, even those with several years remaining on the term, and speak with a tenant representative about various avenues available to reduce real estate expenses.  Outlined below are some of the advantages available to tenants within the current market environment.


Short Term Renewals

Short one to two-year lease renewals have become prevalent in Greater Boston as companies reassess their space requirements post-pandemic. Previously, when vacancy rates were low, landlords were reluctant to agree to short-term renewals, preferring longer-term commitments to avoid vacancies. The current market dynamics have shifted this perspective.


Blend & Extend

A "blend and extend" deal is a negotiation tactic where tenants agree on a new lease that merges the remaining term with an extended period, usually at a revised rent. This strategy can be beneficial for tenants seeking to capitalize on favorable market conditions to secure lower rents or amend lease terms. If the existing space is satisfactory, or if adjacent spaces become available, exploring a blend and extend arrangement could be advantageous.


High Concession packages

Landlords are now offering concession packages that exceed 25% of the lease's total value. These concessions help maintain high rental rates to satisfy lenders while providing attractive terms to new and existing tenants.


Landlords Shifting Their Focus to Existing Tenants

Contrary to pre-pandemic times, when new tenants received larger concession packages, landlords are increasingly focusing on retaining current tenants by offering generous concessions to encourage renewals.


Over the past year, we have assisted numerous clients with lease renewals. By effectively leveraging market conditions, we have significantly shifted the deal economics to benefit our clients, achieving terms far more favorable than those initially proposed by landlords.


Plethora of Available Option

Vacancy Rates on average across Greater Boston sit at more than 20%, compared to Q4 2019, when they were below 10%. Creating a plethora of options and leverage for tenants in the market.

More Favorable Lease Terms: 

The current market conditions enhance tenants' negotiating power, allowing for more favorable lease terms that include:

  • Favorable Sublease Clauses

  • Early Termination Rights

  • Expansion & Contraction rights

  • Cap on Operating expenses.

  • Favorable Renewal Options

  • Right of First Refusal (ROFR) & Right of First Offer (ROFO)

 

 

The prevailing market offers exceptional opportunities for tenants to secure favorable and flexible lease terms. In these unprecedented times, going through the leasing process is essential to maximize financial leverage, whether planning to renew or relocate.

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