Landlords Working Hard to Keep Tenants
Landlords are negotiating terms, dangling concessions and offering improvements to retain rent-paying businesses - hot commodities in this market
Now, empty space is taking longer to lease every month. Amid a credit crunch and a slowing economy, tenants who can pay the rent are suddenly a hot commodity.
That leaves landlords working overtime to keep the tenants they have. They are more focused than ever on renewing leases, willing to negotiate terms and offer concessions such as tenant improvements, months of free rent and sometimes even reduced rental rates.
Landlords are also trying to keep tenants happy by paying more attention to the appearance and upkeep of properties and responding faster to maintenance requests and complaints.
''Typically people don't like to give concessions, but the reality is the reality,'' said Barry Sharpe, whose Hialeah-based Sharpe Properties owns retail, warehouse and office properties.
Some landlords are going so far as to extend help to tenants that are struggling to stay in business.
''We had a wave of them a couple months ago and there seems to be kind of a second wave here that's starting,'' said Andrew Ansin, vice president of Sunbeam Properties and Development, whose holdings include the Miramar Park of Commerce.
The park has a vacancy rate of 5 percent, compared with 3 percent a year ago. To keep tenants, Ansin helps firms he feels have strong future prospects. For example, Sunbeam acts as a source of credit, allowing companies to delay rent payments. Ansin also has renegotiated leases, lowering rent rates in exchange for a longer lease or for dropping contract provisions Sunbeam didn't like. He has also moved tenants into smaller spaces at reduced rents.
''It gives us the opportunity to work with [companies] and hopefully help them stay in business,'' Ansin said. ``We could certainly put them out of business, but we don't want to.''
Sunbeam, which has no debt and is privately held, has the freedom to make such deals. Owners that bought properties during the last five years or so often do not. For them, as for most property owners, the priority is renewing leases that will expire within the next few years.
Coral Gables public relations firm Kreps DeMaria found its landlord eager to negotiate when it renewed its lease in July, after fielding dozens of inquiries to move. The owner ''made it compelling to stay,'' said Israel Kreps, CEO.
The owner agreed to put in new carpets, paint and doors. He also moved the base year for tenant ''pass-throughs'' -- typically, tenants have to pay the difference in expenses such as property taxes and insurance if they go higher than their base year -- to the current year. This reduces Kreps DeMaria's overall leasing expenses, Kreps said.