LOS ANGELES-Landlords and tenants alike are finding that the economic downturn is creating opportunities, along with the challenges and difficulties it presents, according to area office brokers. They say that as office vacancies go north and rents slide south, the immediate impression is that rents and location are the only factors affecting leasing decisions, but that is not so.

Among other factors that both sides are scrutinizing these days are balance sheets, notes Steve Marcussen, a managing director with Cushman & Wakefield. Astute landlords will not only ponder the tenant’s balance sheet, but also the outlook for the industry it is in and its past record of growth, Marcussen says. He adds that it’s also important for tenants to know the financial status of the landlord because a building owner who is not well-capitalized may not be able to deliver tenant improvements. “We’ve also seen numerous examples of class A buildings that are showing evidence of cutting back on maintenance and trash collection,” Marcussen says.

Timing of lease renewals is also a crucial factor in today’s market because landlords and tenants alike can benefit or lose negotiating leverage as a result of it. “Time is a powerful negotiating tool,” says Stefan Rogers of Voit Real Estate Services. He points out that the typical time required to negotiate a 5,000-square-foot lease is about two months, excluding lease review, so last-minute negotiations “are dangerous as you become a captive tenant.”

Timing of negotiation is important to landlords and tenants alike, Rogers points out. Since tenant retention is a key to sustaining values, landlords today are more likely than ever to renegotiate leases early, he says, because available spaces can easily sit vacant right now for up to 18 months. Available concessions include several months rent free, moving allowances, turn key tenant improvement allowances and significantly discounted rental rates compared with 18 months ago, he adds.

Christopher Bonbright, CEO of Ramsey-Shilling Commercial Real Estate Services, cites the mind-set that landlords adopt as one of the factors in tenant retention. Psychologically, too many landlords take the position that tenants are their adversaries, Bonbright observes. The effects of this attitude are now becoming readily apparent as tenants trade up to higher-quality, better managed buildings, where leasing rates are about the same as the building they’re in,” adds Bonbright. “Tenants do not want to feel that they are being exploited,” he says.

The same dynamics affecting office leasing are also at play in the industrial sector, according to Craig Meyer, managing director with Jones Lang LaSalle’s US industrial brokerage division. Well-capitalized landlords who can accommodate the specialized needs of both big and smaller tenants, Meyer maintains, not only will thrive in the current downturn but also will vastly strengthen their positions for the long term. These special needs, he explains, include lease terms that provide flexibility to expand or contract space requirements, reduce or lengthen lease terms and include adjustable leasing rates.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Dig Deeper



Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2023 ALM Global, LLC. All Rights Reserved.