By Guest Writer: Stefan Zelich, Broker, CARR Healthcare
Every landlord is different. Same goes for every deal too. We’ve seen some landlords give concessions we typically wouldn’t, whiles others are now willing to budge off their pre-Covid pricing.
- How to approach a landlord for temporary rent relief: Every situation is different, so healthcare organizations should approach each conversation differently. For example, if there are multiple years left on a lease (2-3 years) a good place to start would be asking the landlord for a reduced rent over the next several months with the tenant agreeing to pay back the reduced rent over the remaining term of the lease. Most landlords I’ve seen are willing to get creative to help a good tenant stay in business. If the lease is expiring in the next 12-18 months, then it might make the most sense to discuss extending the lease and acquiring additional concessions from the landlord in exchange for a longer commitment.
- How to approach extending my lease and what concessions are possible: Again every situation is different, but most landlords will get aggressive to keep a strong tenant and will offer the same concessions on a lease renewal that they would offer on a brand new lease (reduced rent, improvement allowance, free rent, etc.). By committing to a longer term, you’ll allow the landlord to get more aggressive in what they’re able to offer. We’ve seen many clients get several months free rent and tens to hundreds of thousands in rent savings over the course of a long-term lease renewal. The key is leaving yourself enough time and leveraging real estate professionals to help ensure you get the best deal.
- Who should I talk to for help: A real estate broker and a good real estate attorney. A real estate broker knows the market and can help guide you through what business terms are realistically achievable and what terms are not. You should always consult a broker anytime you sign a lease extension because they will level the negotiating playing field to help achieve the best possible outcome, and it doesn’t cost anything to have them handle negotiations for you. An attorney can then be used to iron out the legal language of the extension and possibly review the original lease to see if there’s any outstanding legal issues that need to be addressed.
- Why/how are such savings possible on a renewal: We typically find healthcare organizations pay too much in rent for several reasons. It starts with the higher cost of construction for a healthcare practice vs general office. If a landlord is contributing money towards the buildout, they’re likely building it into the rental rate, which inflates their rent when compared to neighboring tenants with less costly buildouts. Typically, the lease escalations outpace the market, and when you combine this with the fact that healthcare practices tend to stay in the same location for many years it compounds the issue. Because of this, it’s not uncommon for us to negotiate tens to hundreds of thousands in savings at the time of a lease renewal. However, it all starts with assembling the right team of professionals and leaving yourself enough time to apply maximum pressure on your landlord.
The key takeaway is there could be an opportunity for many healthcare practice owners who are leasing their office space. And, as always, if you are dealing with any expiring leases, please reach out to us soon for help with the lease negotiating. We represent you as your broker and the landlord generally pays our fee.
Stefan Zelich is a real estate broker for CARR Healthcare in New England and can be reached by phone at 617-487-3460 or email at firstname.lastname@example.org
CARR Healthcare is the nation’s leading provider of commercial real estate services for healthcare tenants and buyers. Every year, thousands of healthcare practices trust CARR to achieve the most favorable terms on their lease and purchase negotiations. CARR’s team of experts assist with start-ups, lease renewals, expansions, relocations, additional offices, purchases, and practice transitions. Healthcare practices choose CARR to save them a substantial amount of time and money, while ensuring their interests are always first.