I recently negotiated a lease for a retail tenant with twelve months of free rent up front. You might be wondering what I slipped into the landlord’s coffee before we started negotiating but that wasn’t the case at all. The key to negotiating free rent was not to argue the tenant’s financial weakness and need but rather their strength and intelligence.
As we have all observed, the most vulnerable time for a retail business is in its first couple of years. In most retail leasing situations, the tenant invests a significant amount of capital into the premises for FF&E, or furniture, fixtures and equipment. And then there is the investment in marketing and advertising that is absolutely necessary to draw customer traffic to their new location. As the tenant’s broker, I confidently touted the strength of the client’s business based on its one other established location and convinced the landlord that by allowing the tenant to preserve his operating capital for marketing and promotions, he would be giving them enough “runway” to get the business off to a successful start, greatly improving their chances of enjoying a reliable rent stream over the long term. It didn’t hurt that this particular landlord had just cancelled a lease for a restaurant tenant that never even opened because they ran out of capital – I researched the situation and worked it to my client’s advantage.
An experienced tenant advocate knows that the objective is not a generic “good deal”, but a deal geared to the tenant’s long term success.