We have all been waiting for a better economy to arrive. Although it is taking its time, business is slowly improving. There are more bodies in the stores, and there is more plastic flashing across retail counters.
When we have emerged from recessions in the past, it usually has meant that many landlords have been close behind with rent increases at the next renewal period. Many property owners are reasonable business people with compassion for the merchants and businesses that pay their mortgages every month. But some are just plain greedy, or naive, believing that their tenant’s newly improved business can provide large chunks of additional rent to line their own pockets. Most of us know of a merchant that was run out of business by an aggressive landlord seeking large increases in monthly rent. This not only wrecks an opportunity for the business owner, but it also works to destroy the fabric of the community. One loss may not seem that important, but being animals of habit, our lives are jarred every time a reliable store or business that we have patronized over the years closes up.
There are ways for a tenant to protect themselves from these owners. The greedy actions of a landlord should not put a struggling merchant out of business. Plan ahead. Try to keep your renewal rent flat with reasonable rent bumps every five years, or agree to rent increases limited by the cost-of-living index. Try to include business-protective clauses in your lease at renewal time that will help you avoid a rent-gouging property owner. Many businesses are moving to the internet for part or all of their sales, so a business location is not as important as it once was. Smart landlords are beginning to realize this and are willing to work with their existing tenants to find solutions that keep their building rented.
Unfortunately, many building owners don’t understand the importance of keeping their space rented. If a tenant leaves because of a rent dispute, the lost rent is very hard to make up. Squabbling over a five percent difference in rent could mean four months or more of lost rent, which will take over six and a half years to make up.
Finally, if your lease will be ending in the next year or two, it might be wise to hire a creative consultant or broker to help you extend your present lease early at a slightly higher rent while the market is still recovering.
[author]Geoff Wood is a Cow Hollow resident and can be reached at geoffwoodmarketing.com[/author]