Is Now the Time to Renegotiate Or Right-Size?

Is Now the Time to Renegotiate Or Right-Size?

Recessions don’t have many redeeming qualities, but they do create opportunities that wouldn’t exist otherwise.

Let me explain myself with an example. During our current economic downturn, commercial and retail spaces have often been leasing at reduced rates. Many of the prime locations already have been scooped up by opportunistic businesses.

There still are good options. According to a recent article in The Wall Street Journal titled, “Time is Ripe for Negotiation,” annual leases for U.S. office properties averaged $23.20 a square foot during the fourth quarter of 2010, down from $25.02 in 2008. Meanwhile, despite the discounts, office vacancies have increased to 13.4 percent from 11.8 percent.

Trends are similar in the retail and industrial sectors.

  • Retail property leases averaged $15.56 per square foot during the fourth quarter of 2010, down from $17.51 in 2008.
  • Retail vacancies rose to 7.3 percent from 6.6 percent.
  • Industrial property leases dropped from $6.28 a square foot in 2008 to $5.47 last year.
  • Industrial vacancies bumped up to 10.2 percent from 8.8.

Having more available space on the market combined with lower rates means this is an excellent time to negotiate with landlords. They would prefer to lease part of the space rather than let the entire building sit empty.

This is also a good opportunity to right-size. We’re increasingly seeing retail boxes get smaller in an attempt to be more effective and profitable.

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Merrill Stewart is Founder and President of the Stewart Perry Company, a commercial building contractor based in Birmingham, Ala. Contact him via email

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