The Seven Year Itch

The Seven Year Itch

Just because your lease contract says seven years doesn’t mean you can’t negotiate sooner. In fact, it may be in your best interests to do so. If you have two years left on your lease, think about a “blend and extend” option.

What this means is starting with a fresh lease at an earlier date and extending it farther than initially planned. Such a contract may work to both your advantage and the landlord’s. This is a real win-win proposal.  Listen up.

Commercial real estate mortgages – while amortized for 20 to 30 years – are actually written for five years which puts landlords in a big predicament in these troubled times.  Some landlords find they can’t get refinancing because the existing tenants don’t have a long enough commitment to assure constant income for the building owner.

When the landlord has an arm full of new five-year leases he or she looks, more credit-worthy to the banks.  Before you propose this idea, remember to do your due diligence.  Devote time to getting some competitive bids that will shape the rental price.

Then ask your landlord to put aside the remaining lease terms and write a new five-year lease at today’s rates. A five-year contract may look a lot better to this landlord than a two year contract and it locks in a low price should leasing rates skyrocket.  We’ve found a great interest in this sort of plan among solo and corporate landlords.  It provides some stability in an ever changing world.

Will all landlords approve this kind of deal? You can’t predict the future until you present the proposal. If you strike out, you still have two years to develop a better deal. Compass Commercial has accomplished blend and extend deals on about 20 percent of our properties. Not all properties qualify.

This is a far better risk than the lottery or day trading on Wall Street. If we can reduce your rent now instead of two years from now you will be skipping all the way to the bank – enjoy your new found money. Just for fun, here is the trailer,  to that wonderful Marilyn Monroe classic, “Seven Year Itch.”  Enjoy!

About the Author

Lynn Drake’s status is well known in the industry: She’s the commercial realtor focused on maintaining “true north” for her corporate clients. It’s a reputation built on 35 years of commercial real estate experience. Lynn became a commercial realtor in 2001 after 15 years in corporate real estate. Thus far in her career, Lynn has successfully completed over 1,500 real estate transactions ranging from small business tenant leases to the sale and purchase of industrial complexes.