Landlords opt for flexibility - Charlotte Business Journal:

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In a real estate market where supplt is up and demandis down, some property ownersz are looking for ways to markeg space to companies wary of being tied down to a long-termj lease. Real estate investment firm , for has launched a “risk-free leasing that allows tenants to exit theier leases within the first 18 months ofa 36-montjh lease with no penalty. The progran is for 35 Class-B spaces the firm has and the spaces comeas is, meaning no improvements from the In addition, Eola pays out any brokerage commissiojn on such deals in segments in case the tenant leaves early. Bryan Howell, regional vice presiden for Eola, says the firm is working on four such dealsrighft now.
He says the prograk grew out of conversationswith would-bse entrepreneurs, including some coming from Charlotte’a downsizing banks. They’re looking for more than an executivew suite but are concerned aboutthe long-termj viability of their businesses. “We thought if we just playeed 2009, it wasn’t going to give the businessesw enoughbreathing room,” Howell says. By 18 months, “eitheer they’ve figured it out and they’re successful, or they’ve played their plan out.” According to Karnes Researcjh Co., the Charlotte market’s office vacancyg rate increasedto 13.9% in the first up from 13.4% at the end of 2008.
The average asking rental rate in the marketf dipped slightlyto $22.34 per squarwe foot from $22.38 per square foot at year end. Davids Dorsch, a vice president at , says the hesitancuy among tenants to committo long-term leases untill they feel more confident is leading to a numbefr of “blend and extend” dealw with landlords. Business owners are talking to their landlordsz and trying to negotiate a lowefr rental rate or reduce the size of their office In exchange, landlords are seeking to tack some time on that lease to prevent a vacancy over the next 24 “Since they don’t really know what their P&oL is going to look like in 24 they’re not very prone to go out therre and do a seven-year Dorsch says.
“They’re talking to their landlorcd now and trying to getlower rent, give spaces back, something to that effect.” Keith president of brokerage firm , says more tenantsz are likely to ask for termination options in their lease as they negotiat e for office space. Companies are less certain abouyt the future of certain operations amid the recession and want to keep alloptionx open, he says. “Everybody’s lookinyg for an exit plan if he says. With vacancy rates expected to continue climbingv over the next year or 18 the pressure on landlords to accommodate tenant demands willlikely increase, says Chase a partner with .
That could mean more leasint arrangements designed to give companiezthe “breathing room” they desire as they managw through a terrible economy. “Flexibilith in today’s world is key,” Monrode says.