Seize the Day

Seize the Deal

With greater than 50% of Chicagoland’s workforce inoculated and schools expected to resume in-person attendance this fall, pent-up office demand is resulting in an increased number of space tours; yet getting to the finish line is proving to be challenging, particularly in the Central Business District (CBD) and certain outposts throughout the suburban market.

Tenants willing to commit to new office space are looking to find value coupled with flexibility. They know this is a moment in time where they can demand more flexible terms than they could in the past. Correspondingly, landlords need to be nimble to satisfy the tenants who want space today and do not want to wait until tomorrow. Both sides need clear objectives and a winning strategy before they go to the negotiation table. In the end, the goal is not only to secure a space commitment, but to create a lasting relationship between the parties involved.

There is no better time than today to secure the future of your business. The following sections outline the points that tenants and landlords should consider as they navigate the space acquisition/disposition process in today’s office market.

During this moment in time, tenants may either be hesitant to commit or, conversely, require an office ready for immediate occupancy. Owners need to be nimble to navigate the leasing process and set expectations without losing the deal at hand. Here are some thoughts to get tenants to the finish line:

1. Be Aggressive

With so many space options potentially at the tenants’ disposal, make sure the property can make it to the final selection round by coming out of the gate with aggressive terms.

2. Be Prepared

To avoid delays, create a standing project team with resources at the ready. Tenants who do not know how they want to configure their offices in the post-Covid era may lean on the landlord for guidance. Here is the property owners’ opportunity to ease their new clients’ anxieties with definitive solutions delivered seamlessly.

• Create a Landlord Project Management Team. The lineup includes representatives from the leasing group, property management, a dedicated general contractor, and an architect. This team can be consulted during negotiations and deployed immediately upon lease signing.
• Provide multiple, flexible layout templates. Keep options manageable. Have a construction team ready to work with buildout materials (drywall, carpet, furniture systems) on hand.

3. Make Improvements

Make overall capital improvements to enhance the building experience:

• Update the lobby
• Improve air infiltration systems
• Offer on-site amenities like a restaurant, fitness center, and conference facilities
• Provide secure and resilient internet infrastructure for cabling, power, and safety measures

4. Be Open-Minded

During negotiations, be open to the non-traditional:

• Offer furnished suites to compete with plug-and-play subleases and furnished spec suites
• Allow term flexibility with larger concessions in exchange for longer-term commitments

5. Hold Firm

However:

• Increase lease guaranty if there is a concern about a tenant’s ability to pay rent. Conversely, a tenant with excellent credit or a willingness to provide more guaranty/security may do so in return for higher concessions.
• Protect the building’s tax liability through incorporating triple net rates, especially in Cook County.
• Require tenants to carry business interruption insurance to ensure tenants still pay their rents despite their income streams disrupted.