If there was ever a time to be talking about your office space lease with your landlord, it is now. Due to the extreme slowdown in office space inspections and transactions as well as return-to-work scheduling in the face of the ongoing pandemic, landlords are increasingly flexible and open to creative solutions.
According to Kate Lister of Global Workforce Analytics, “Our best estimate is that 25-30% of the workforce will be working from home multiple days a week by the end of 2021.” Although each tenant’s situation is unique, from what we are seeing in the marketplace, it is safe to say that a large majority of employees have not returned to the office.
At Gola, we have been working diligently to devise multiple strategies that will mitigate clients’ rent exposure. And to all office tenants, whether there are six months or several years left on a lease, we encourage you to contact your real estate broker without delay to discuss options.
One strategy that has enabled significant rent savings in the present, in exchange for a longer lease term, is the “blend and extend” deal structure. Best described as when tenants trade an early renewal and extended lease length for more favorable lease terms, a well-executed blend and extend results in immediately reduced real estate costs. Under the right market conditions, a tenant can negotiate a blend and extend several years before their current contract expires. Companies that have leases expiring in the next two years or so are in an exceptionally advantageous position to negotiate in this unprecedented market.
Gola has done so with great enthusiasm on behalf of our clients. Over the past seven months, we have negotiated immediate and significant rent abatement periods, space reductions, decreased rental rates for the future lease term, tenant improvement allowances, and other important tenant rights well in advance of the lease expiration.
Bottom line: Go for it! There is nothing to lose and everything to gain by taking the initiative. Good luck and do let us know if we can help.