Property owners in San Diego know that their commercial leases are valuable assets. In the face of a struggling market and conflicting input from accountants and lawyers, they recognize the benefits that a long term existing tenant offers. They are inundated with bad news from the media. The San Diego Union-Tribune tells them that the commercial real estate market will not begin recovering until late 2011 or early 2012. They are reminded daily of the recession and its particular affect on the San Diego leasing market because of the abundance of “For Lease” signs around town. While well capitalized REITs (Real Estate Investment Trusts), pension funds, insurance companies and other large commercial property owners should weather the storm, mid-level and smaller companies face difficult times, especially those that purchased at the peak of the market.
Many would rather accept a short or long term rent reduction than face the prospect of losing their tenants to failed businesses. The solution is particularly attractive to smaller-scale landlords facing vacancies rates approaching 25%. By offering rent reductions to help potentially failing businesses survive the recession the property owner not only keeps the particular space filled, she strengthens the business relationship with the tenant and creates a goodwill that cannot be valued highly enough. In addition, the business owner is less tempted to take advantage of the lease opportunities offered elsewhere around the San Diego County.
Under the right circumstances, rent reductions offer a viable business solution to a tough economic dilemma. This is a forward looking approach that leads to long term prolific relationships. When the time comes for current tenants’ businesses to expand, they will look to the property owner that took care of them during hard times first. Rent reductions present a short term practical solution for the commercial property owner while simultaneously creating invaluable goodwill. Consider contacting a San Diego business lawyer to evaluate your lease.