Negotiate a Midterm Rent Reduction for Your Massage Clinic’s Commercial Lease

Recession Rent Reductions, MASSAGE Magazine

Many massage clinic tenants are impacted by the economic recession and desperately need an immediate rent reduction on the commercial space they lease. The recession has taken its toll on all industries; business expenses are rising and the high cost of leasing space is closing in on tenants. Your monthly lease payment to the landlord is one of your biggest ongoing expenses, so reducing this payment is imperative for clinics like yours to stay viable.

If your clinic is at the end of its lease term, there is hope for a rent reduction on the lease renewal. Unfortunately, many massage clinic tenants find themselves struggling somewhere midterm into a five-year lease agreement.
But don’t give up hope! There are several reasons why a commercial landlord would agree to a midterm rent reduction for your commercial space:

To avoid taking the space back: Replacing a tenant can be very time-consuming and expensive for a landlord. There are real estate commissions to pay, demolition of the existing premises to occur, months of lost revenue while the space sits vacant and so on. In addition, a new tenant moving into the space will probably get a tenant allowance and free rent to boot. It could be quite a few financial steps backward for a landlord to replace your business tenancy, if he can at all.

Other existing or pending vacancies:  If the landlord already has other vacant units within the same property, odds are greater he won’t want another vacancy. Even if the plaza or office building appears to be fully-occupied by other tenants, many of your neighbours may be behind in their rent or planning to close out entirely sooner than you might think. Also, several existing tenants may not be planning to renew their leases, so the landlord knows more space will be coming available in that property soon. These are good reasons your landlord will want to keep your tenancy, even at a lower rental rate.

A downward shift in market rents:  If market rents have reduced because of the recession and the landlord is leasing space to new tenants at a lower rental rate than you currently pay, then replacing you with another tenant is less desirable. Not only have you proven yourself as a more established tenant, but the new tenant would be paying less, making the landlord ultimately no better off.

Competitor closures:  If other massage clinics in your industry are closing out in your area, then the landlord will be more motivated to keep you open, even at a lower rental rate. When any tenant closes out, the landlord (or the landlord’s agent) tends to look for a similar replacement tenant. If no other tenants want to take over your location, the landlord is better off keeping you open.

When I recently spoke at a large business expo in New York, I met with a struggling business owner who told me she just discovered 30 percent of her co-tenants have been paying little or no rent for the past few months due to the recession. Could this be true? If so, how could she also pay less rent? In commercial real estate, it’s every tenant for him/herself. No two landlords are the same, but they all want and need cash flow from rent-paying tenants. Chances are you won’t be the first (or last) tenant to approach the landlord for a rent break—so why not do it now?

Here are a couple realistic tips for getting a rent break.

• Be prepared to ask, ask and ask again.

• Put your request to the landlord or property manager both in writing and verbally.

• Do your homework by determining if market rents have declined, and find out what other tenants are doing.

• If you want some professional help, don’t turn to an attorney (landlords hate getting letters from lawyers about rent reductions). You will need a professional lease consultant who can do a market analysis and speak to your landlord at a real estate level, not from a legal perspective.

If a landlord has to choose between seeing your massage clinic close down or giving you a rent break, it might actually be easier and cheaper for him to reduce your rent, right now, midterm.

Dale Willerton, MASSAGE MagazineDale Willerton, Founder of The Lease Coach, is a certified lease consultant who works exclusively for tenants. Willerton is a professional speaker and author of Negotiate Your Commercial Lease. For consulting inquiries, call Dale at (800) 738-9202, e-mail DaleWillerton@TheLeaseCoach.com or visit www.TheLeaseCoach.com.

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