You might think that, because you signed that 5-year or 10-year lease, you’re doomed to be paying the same outrageously expensive rent until your contract ends. The problem is, during times of economic downturn, paying the same occupancy rate for your building just isn’t possible for most small businesses. Not to worry, even the most binding contracts are negotiable. Some landlords are relatively inflexible and tend to give rate reductions of approximately 5%, but Matthew Bordwin, managing director of Real Estate Services Team at KPMG Corporate Finance states that it is not uncommon for a tenant to receive a rate reduction of up to 30%.
The principle behind these high reductions is this: Would your tenant rather accept the money that he or she will earn from a 30% rate reduction or earn a $0 income due to the loss of a tenant who is unable to pay the bills? If your office isn’t situated in a 100% occupied building with business owners lined up to take your spot, your landlord will likely offer you a reduction.
To convince your landlord to reduce your payments, you’re going to have to prove that it’s a necessity for keeping your business alive. Be prepared to divulge your current earning information to make your case. Also, be sure that your landlord is aware of any currently open spaces in nearby office buildings. If you’re likely to move to another space, he’s likely to cut your rates. If you’ve been a loyal tenant for years, make your landlord aware of your longtime commitment. If you’ve always paid your bills on-time, make that sure that he or she remembers. Just as much as tenants appreciate good landlords, landlords appreciate good tenants.
One final option is to consider offering to sign up for a lease extension. If your tenant knows that he or she will be able to keep you (and your money) around for the long-term, he’s likely to give you a reduction.
As you can see, there are many ways to negotiate what may seem to be a non-negotiable contract. As the chief executive of RCS Real Estate Advisors in Manhattan states, “Occupancy costs have become a controllable expense.”