Landlords can dig in their heels when negotiating rent concessions.  Like with rental rates, they want to achieve deal terms that are in line with the market and hold their ground to preserve the valuation of the building.  On top of that, somehow the word gets on the street on what the landlord gave away on the last deal  even though deal terms are supposed to be confidential.  But I found some free rent in a special circumstance that was totally off the radar…and a wonderful surprise for my office client.

 

I was negotiating on their behalf for space in downtown Los Angeles in a couple of buildings to hedge our bet.  The tenant was feeling a lot of pressure to make a decision as their current lease expiration date was coming up fast.  Then they were blindsided by their landlord: move out on the expiration date or be prepared to pay 200% of your current rate per the “holdover” provision in the lease.  (Beware – this provision is buried deep in all leases!)  The tenant felt like they were over a barrel.

 

I reached out to the broker for each building owner we were negotiating with and asked if perhaps they had some empty space in the building where my client could set up their offices temporarily while their permanent space was being remodeled.  Both responded yes which took the pressure off of my client.  One building owner offered the temporary space at a nice discount to the permanent space rent we had negotiated.  The other building owner also offered temporary space, but for FREE!

 

What inspired this magnanimous gesture?  Well, it was certainly very accommodating on the part of the building owner but they were not really losing any money.  You see, the temporary occupancy period was outside of the lease term (which meant it would not dilute the rent stream of the lease) and the temporary space was vacant anyway.  But what it meant to my client was that in addition to the free rent we negotiated in the lease, they would get another $14,000 break that went straight to their bottom line.  They were ecstatic.

 

This is what you call “turning a sow’s ear into a silk purse.”  And in this case, the purse had quite a bit of money in it!