MELVILLE, N.Y., March 18, 2021 /PRNewswire/ — Despite the possible end of the COVID-19 pandemic this year, corporate decision-makers will continue to face a substantial level of uncertainty about their owned and leased real estate, advises Andy Graiser, Co-President of A&G Real Estate Partners, in the March issue of CoreNet Global’s the LEADER.
Atlanta-based CoreNet Global is a nonprofit association representing more than 11,000 executives with strategic responsibility for the real estate assets of large corporations. In his three-page column for CoreNet’s the LEADER (“Vaccines are Rolling Out. How will it Affect Your Real Estate“), Graiser notes that precisely what life in office and other real estate sectors will look like, post-pandemic, is highly uncertain. He advises companies to put a priority on securing more lease options in the month ahead, which will give them more strategic flexibility with their real estate.
Specifically, the veteran real estate executive recommends that CRE decision-makers seek to secure:
Protective ‘what if’ lease clauses
As they negotiate or renegotiate office leases, CRE stakeholders may want to consider how future crises could affect their real estate—and take action to protect them. “Some landlords are now willing to consider giving office lessees specific protections against business interruptions caused by pandemics as part of the company’s lease-renewal program or in the course of negotiating a new lease,” he writes. “Naturally, these can be tough negotiations … [but] protecting yourself in the lease could be worth the effort.”
Shorter lease terms
Signing shorter lease terms for office space can provide strategic flexibility when the ultimate shape of things is up in the air, Graiser notes. “Today, many landlords are more open to signing shorter leases, so long as the lessee does not require a sizable tenant-improvement investment. … If, ultimately, your need for space proves to be less or more than anticipated, you will be better able to adjust to that reality if you have signed a shorter lease.”
In today’s marketplace, Graiser writes, subleasing excess space tends to be a go-to option for office lessees that are looking to contain their occupancy costs. Indeed, subleasing deals have mushroomed in office real estate in recent quarters. “All of that said,” Graiser writes, “some office lease agreements still contain significant restrictions on subleasing. At the negotiating table, [office lessees] may want to consider seeking maximum flexibility in the agreement with respect to subleasing…”
In conclusion, Graiser points out that lessees should avoid the common mistake at the negotiating table of “dialing for dollars”—merely pleading for rent reductions in a generalized way. “In our experience, the right approach is to bring robust, transparent financial data to the landlord proactively,” he writes. “Make sure the landlord understands the dynamics, not just at your company, but also in your larger industry (again, backed up by solid data). This will enable the landlord to make a confident decision and, perhaps more important, educate its lenders and investors about what’s happening.”
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About A&G Real Estate Partners
A&G is a team of seasoned commercial real estate professionals and subject matter experts that delivers strategies designed to yield the highest possible value for clients’ real estate. Key areas of expertise include occupancy cost reductions, lease terminations, dispositions, real estate sales, real estate due diligence, valuations, acquisitions, and facilitation of growth opportunities. Utilizing its marketing knowledge, reputation and advanced technology, A&G has advised the nation’s most prominent retailers and corporations in both healthy and distressed situations. The firm’s team has achieved rent-reduction and occupancy-cost savings approaching $8 billion on behalf of clients in every real estate sector, while selling more than $12 billion of non-core properties and leases. Founded in 2012, A&G is headquartered in Melville, N.Y. For more information, please visit: http://www.agrep.com/
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SOURCE A&G Real Estate Partners