Landlords opt for flexibility - Charlotte Business Journal:

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In a real estate marker where supply is up and demandis down, some property ownerxs are looking for ways to market space to companies wary of being tied down to a long-term lease. Real estate investment firm , for has launched a “risk-free leasing program” that allows tenants to exit their leases within the first 18 monthsz ofa 36-month lease with no The program is for 35 Class-B spacesa the firm has available, and the spaces come as is, meaning no improvements from the landlord. In addition, Eola pays out any brokerage commissionh on such deals in segments in case the tenantleaves early.
Brya Howell, regional vice president for says the firm is working on four such dealsright now. He says the progra m grew out of conversationswith would-be entrepreneurs, including some coming from Charlotte’s downsizing banks. They’re lookingg for more than an executive suites but are concerned aboutthe long-term viability of their “We thought if we just played it wasn’t going to give the businessess enough breathing room,” Howell By 18 months, “eithef they’ve figured it out and they’re successful, or they’ve played theidr plan out.” According to Karnes Research Co.
, the Charlottse market’s office vacancy rate increased to 13.9% in the firsr quarter, up from 13.4% at the end of 2008. The averagw asking rental rate in the market dipped slightlyto $22.344 per square foot from $22.38 per squarre foot at year end. David Dorsch, a vice president at , says the hesitanc among tenants to committo long-term leases until they feel more confident is leadingv to a number of “blend and extend” deals with landlords. Business ownersz are talking to their landlords and trying to negotiatre a lower rental rate or reduce the size of theirfoffice space.
In exchange, landlords are seekinfg to tack some time on that leasde to prevent a vacancy over the next24 “Since they don’t really know what theier P&L is going to look like in 24 months, they’r not very prone to go out thers and do a seven-year lease,” Dorsch “They’re talking to their landlord now and trying to get lowert rent, give space back, something to that effect.
” Keit Bell, president of brokerage firm , says more tenantws are likely to ask for termination options in theird lease as they negotiate for office Companies are less certain about the futurwe of certain operations amid the recessionb and want to keep all optionz open, he says. “Everybody’s looking for an exit plan if needed,” he With vacancy rates expected to continuwe climbing over the next year or 18 the pressure on landlords to accommodat e tenant demands willlikelyy increase, says Chase Monroe, a partner with .
That couls mean more leasing arrangements designed to give companiesthe “breathing room” they desire as they manage through a terrible economy. “Flexibility in today’s world is key,” Monroe says.