With any perishable commodity, you need to sell it before it is
no longer usable. With apples and pears, you can pick up
bargains at the fruit-counter the week after a delivery. With
property, an empty building is the landlord's equivalent of rotten
fruit. Every day of vacancy is lost income for the commercial
property landowner. Landlords now also have to pay empty
rates on their vacant buildings.
There is plenty of incentive therefore for landlords to get
tenants into buildings.
When vacancy rates are high landlords will offer incentives to
tenants to sweeten the deal of their occupancy. Some are
obvious - the rent-free period, for example. There are,
however, other possibilities. You won't necessarily have any
of these accepted during your negotiations, but as the old adage
goes - "don't ask, don't get".
Rent Free Period
This is the stalwart of commercial property incentives.
Tenants often need a rent-free period to fit-out or to move
premises. Landlords are familiar with granting these, even in
the good times. The benefits are that you don't have to pay
rent during the period. The benefits for teh landlord are
that they don't have to pay empty rates or cover the service charge
anymore. Rent free periods are usually 1-3 months. As
the market gets tougher for landlords, the periods of incentives
increase. I have heard a (possibly apocryphal) story of a
large building in London with 3-years rent free!
Fit-Out
For the best tenants, a landlord may be willing to carry out
improvements to the building to suit the tenant. This is most
common in retail or leisure areas.
Reduced Rent
As it sounds. A landlord may agree to a period from a
number of months to a number of years at a percentage of the asking
rent (1-year ½ rent for example).
Capped Service Charges
The rent is only one of the outgoings a tenant has to pay
for. Tenants also have to pay rates, and (in a large
building) service charges. Service charges can be anywhere
from £1 or £2 per square foot to £12 or £15 per square foot in
buildings with lifts and large common areas. In a building
which looks like it needs some investment, an unwary tenant could
walk into the clean-up bill for many years worth of dilapidations
of the common parts. If you want certainty therefore, you can
ask for a "cap" on the service charge. If the landlord agrees
to "cap" the service charge below what they would otherwise ask
for, then this works effectively as a rent deduction.
Break Clauses
These give you flexibility and the landlord the headache of not
knowing how long you'll be in the building for. If you are
unsure about how long you want to remain at a property, you can get
more breaks put in. If you configure the breaks to fall
after the rent review dates, then you have a much stronger
negotiating position.
Others
There are no rules in negotiation. If there's something you want
from a property or from a landlord - remember "don't ask, don't
get"