WHERE DO YOU STAND ON CONCESSIONS?
Executive Watch ‘We’ve been to this dance before, and it spells big trouble.’
The respondents to last week’s Quick Poll, “Where Do You Stand on Concessions?” were nearly evenly split: 38% chose “Tenants Have Us Where They Want Us,” while
43% were a bit more positive, responding on the side of “We're Standing Pat—But It's Getting Tough.” Only 19% said “We Don't Need No Stinking Concessions.” Some experts aren’t limiting themselves to our suggested responses. Jonathan Larsen, executive managing director of Transwestern’s Tenant Advisory Group in Los Angeles, would like a few more options in such a murky market:
I almost wish there was another option. My best answer is that good credit tenants can still get what they want. I think at least 85% to 100% of those tenants can get what they want and if they can’t get what they want they can go to other properties and get what they want—in every major market in the US. Even in Southern California, there are still so many options for tenants.
And if landlords do step up and put their foot down, there are other options for tenants. Now, if it’s company XYZ that happens to be only about five years old with may be one office, the landlords are having their way with that tenant. But if it’s a national or international company, landlords are probably going to strive for that tenant and probably offer some concessions.
In terms of too hot, too cold or just right, I would say that it’s been a hot landlord market, but the porridge is staring to cool down.
So, those tenants with good credit, these landlords are banking on those particular tenants to stay around and hopefully grow and keep their building occupied in these tough times coming up. There are definitely cracks starting to appear, and definitely the porridge is not as hot as it was, especially in the major markets that were on fire.
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