Commercial Rent Savings and Higher Incentives Post-COVID

July 7, 2020 | Commercial Real Estate

In May, Tenant CS partnered with the German-Australian Chamber of Industry and Commerce to deliver a workshop around achieving commercial rent savings and higher incentives. During the session, Matthew Pollak and Sophia Bockisch shared some great insights on what to do if you’re rethinking your lease.

If you missed it, we’ve included a link to the video (above) and a quick recap of key learnings.

1) A reduction in space requirements

Efficiencies gained through leaner workforces and maintaining remote working arrangements can potentially reduce space requirements by 60%. However, this figure is offset by various factors which may increase a business’s space requirements by up to 40%, including:

  • Designing for collaboration
  • Maintaining social distancing
  • Contingency for growth

Keeping all this in mind, overall, the average company needs 20% less space today then they did pre-COVID. And this potential space-saving can really improve a business’s bottom line.

2) Impacts on market rents and incentives

Off the back of businesses reducing their space requirements and some companies closing their doors, by Q4 2021, Sydney and Melbourne vacancy rates are predicted to spike to 9.7% and 9.9% respectively. Commercial rents across Australia and New Zealand will also fall, while incentives will increase to entice quality tenants.

Watch the video above for further details and assumptions, or contact the team at Tenant CS for market breakdowns in other locations.

3) Tenant Opportunities post-COVID

There are several savings scenarios that commercial tenants can take advantage of in the current climate: 

  • Immediate commercial rent savings – If you’re no longer able to pay rent, in the middle of negotiations or have signed a Heads of Agreement (but have not executed the lease), it’s recommended that you go back to the negotiating table to renegotiate terms and get a better deal.
  • Short term commercial rent savings – If you have between 6-12 months before your lease expires, take full advantage of the market by conducting a stay vs go analysis. Here, compare what your current landlord is offering with what is available on the market to understand where and how you can save on costs.
  • Long term commercial rent savings – In a post-COVID world with rents plummeting and vacancy rates soaring, the only way a landlord can retain property value is to secure high-quality tenants on long leases. So, for tenants signed onto leases with more than 12-months remaining, act now. Start planning your strategy and talk to your landlord about potentially negotiating an early renewal with revised lease terms. 

Engage Tenant CS

Are you looking to increase your commercial rent savings or incentives

Having a tenant rep on your side is more valuable than ever. Over the last few months, Tenant CS collectively achieved millions of dollars worth of savings for our clients. Make the most of the office rental crisis, contact our team today for a free rent review!

View the original video post here.

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