Nearly a quarter of the Las Vegas Valley’s office space is empty, and that could mean good deals for you if you need to move.
Still, to avoid leaving money on the table, you need to be realistic about what concessions you can get. Sure, much of the market favors tenants, but that doesn’t mean you get to dictate all the terms. The breaks in today’s market depend partly on the type of property you’re chasing, and whether you’re a desirable tenant.
Start with what every office tenant should ask for.
The most common concessions are free rent and tenant-improvement allowances.
For free rent, most landlords yield one month for each year on your lease, said Chuck Witters, SIOR, senior vice president of local real estate brokerage Lee & Associates. So if you sign a five-year contract, you get five months gratis. If you’re credit-worthy, you could claim those free months all at once, at the beginning of your lease, Witters said, but if the landlord has any questions about whether you’ll be in a business in a year or two, expect him to spread those free months throughout your contract — say, one month free per year.
Once you have your space, you’ll need to get it ready for move-in. Those upgrades are the other big bargaining chip these days.
“Most tenants are still not really willing to contribute capital to get into space, so the hotter button you see being negotiated is tenant-improvement allowances,” said Ryan Martin, vice president of the Las Vegas office of commercial brokerage Colliers International.
How much you can snag to make the space your own depends on your needs and the suite’s condition. To move into new shell space that hasn’t yet been rented, try asking for $45 to $60 per square foot, Martin said. For second-generation space that’s already built out, you could get $10 per square foot to spruce it up with new carpet and paint, or as much as $30 to $40 a square foot to redesign the office’s flow.
You should also ask about smaller concessions. Landlords today often throw in free business signs, and free covered parking — a perk for which they used to charge $35 to $40 per space, Witters said. What’s more, some landlords are being “creative” with after-hours charges for air-conditioning and heating, an area they traditionally haven’t relented on, Martin said. Martin said he’s even seen landlords cut checks to companies to persuade them to move early.
Don’t expect landlords to write you checks unless you’re a well-known regional or national name with great credit and a long-term lease. The office market might have averaged 23.1 percent vacancy in the first quarter, according to Colliers’ numbers, but that rate is much lower in newer, Class A office buildings with good freeway visibility or access. So you’ll lose some haggling clout if you’re looking for that kind of square footage.
And because big, brand-name businesses are less of a risk, landlords are more willing to discuss terms with them. An office user with major credit backing that’s taking down 30,000 square feet or more of space will get richer concessions than a smaller, lesser-known company, Martin said.
So if you’re a typical tenant with about 4,000 square feet for your locally based service business, you’ll have the best luck sticking with free rent and tenant-improvement allowances. You could also try for a 5 percent to 10 percent discount on rent, which averaged $1.86 per square foot on a full-service-gross basis in the first quarter for all local space classes, according to Colliers.
It also helps to go for a long lease, because landlords can more easily afford concessions if they know they’ll get cash flow from you for years to come. Aim for a five- to 10-year agreement to maximize your negotiating power.
How long will these deals last? Depending on type of space, at least one to three more years, experts said.
Just remember to consult with a professional office broker or attorney before you ink any lease agreement.
• Gatski Commercial handled several new deals in recent weeks. Gatski’s Laramie Bracken represented FFPW Medical Dev LLC in its $782,560 sale of a 10,720-square-foot medical office building at 9050 W. Cheyenne Ave. Jared Bergquist of New Growth Commercial Real Estate Company represented the buyer, CSN Holdings LLC.
Gatski Commercial’s Rob Lujan and Jason Simon represented Sunset CV LLC in a 62.5-month, $561,599 lease of a 5,700-square-foot retail space at 4501 E. Sunset Road. Scot Marker of Colliers International represented the tenant, Nevada Tire Holdings LLC.
Lujan and Simon also represented B&R Receivership LLC in a 35.32-month lease of a 6,375-square-foot office space at 400 S. 4th St. for $906,130. Richard Truesdell of Cornerstone Company represented the tenant, Westar Architectural Group/Nevada.
And Gatski Commercial’s Nick Barber and Jeremy Foley represented CML-NV Fort AR LLC in a 120-month lease renewal of 4,990 square feet at 4170 S. Fort Apache Road to Original Pancake House. The deal is worth $331,157.
Contact reporter Jennifer Robison at firstname.lastname@example.org or 702-380-4512. Follow @J_Robison1 on Twitter.