Should Commercial Tenants Expect Lease Flexibility?

Should Commercial Tenants Expect Lease Flexibility?


Jim Dixon

Ashford Properties - Principal

For the purpose of clarity, everything in this article is written as an opinion – an extension of what we believe and how we work. We write these articles as commercial building owners, and a property management team from Moncton, New Brunswick. During our more than two decades in the category called ‘commercial real estate’ we’ve always believed creating mutually beneficial partnerships, and putting people first will ultimately define a company’s long-term success. We hope you find a nugget or two of information that will help your team’s culture thrive as a result.

This is an interesting question, especially in light of the recent closure of various businesses due to the COVID-19 pandemic.

First let’s talk about lease flexibility before COVID-19 appeared.
Should a tenant expect lease flexibility? From a legal stand point probably not. There are lots of commercial building owners who prefer sticking hard and fast to the letter of the lease. They see space as a commodity, and ask themselves why they should take a financial hit because a tenant’s business might be experiencing an unforeseen challenge. We are not saying that this approach is wrong, but we decided years ago to do things a bit differently.

We’re huge fans of lease flexibility.
It’s important to understand that our client experience and business model is built upon a foundation of mutually beneficial partnerships. It requires taking a long-term or big picture perspective in terms of business growth, respect and loyalty. If you take more of a short-term approach as a commercial building owner, then flexibility might be harder to justify for your bottom line.

There are many different ways to create flexibility.
Perhaps it means investing in a tenant’s space design or fit-up costs because they’re willing to agree to a longer lease term. Maybe it’s a proven start-up that needs a graduated lease rate over a longer term. It could even be a company that needs to downsize their space.

In the spirit of total transparency – in some cases giving tenants flexibility becomes easier when you have several commercial buildings to leverage. For example; if a client needs more space in the middle of a lease term, and you can create temporary space in another building while you find them a long-term solution, why penalize them? There are times when it works the other way as well – a client is willing to give up their space, and as a building owner you find them a better space and thank them with a bit of help on the fit-up.

Bottom line – it only works if you are willing to think and work as partners.

Flexibility during COVID-19 is an extension of shared accountability and trust.
During this period of unparalleled disruption to families and businesses the notion of commercial lease flexibility has never been more important. The culture of tenant partnerships we’ve had the opportunity evolve over the years has proven its worth beyond words. Many tenants indicated they did not need our support, which allowed us to increase our ability to find creative solutions for those who did.

At the end of the day it may sound like a simple concept – ‘put people first’, ‘build relationships’, ‘get innovative’ – and lease flexibility will become a natural part of your growth strategy.

Finding The Right Commercial Real Estate Broker

Space to Grow – A Business Strategy for Success

Finding The Right Commercial Real Estate Broker

Space to Grow – A Business Strategy for Success

2020-07-24T17:26:14+00:00
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