Office rental rates are falling so lock in your tenants for the long term by sitting down at the table and negotiating lower rates now.
Nationwide, effective office rents fell almost 9.0% in the third quarter compared with the same period a year ago. Office tenants returned approximately 20 million square feet of space to landlords in the third quarter or 2009 which is an increase over the last quarter. The mean vacancy rate throughout the nation is nearly 17%, according to Reis Inc., a New York real-estate research firm. The falling occupancy rate coupled with rising unemployment and falling real estate values means that banks will have to fess up to the fact that they are holding more bad debt than they once feared. Smelling blood in the water, and perhaps the bottom of this record downturn, tenants are looking to renegotiate deals with their landlords. It is an opportunity to find a low rate and lock it in for the long term.
Advice to Landlords: don’t wait any longer.
Sit down with your tenants and lock them into a deal now. In doing so, you will preserve a lode of incoming rent and much needed long term cash flow that may otherwise be missing if your neighbor decides to send your tenants a fruit basket of competitive rates. This has been a long period of action…courageous action to look inwards at your operating budgets and add efficiencies and optimize your operations; to look outward at the realities of coming market to ensure that your cash flows are secure while you weather this unprecedented storm.