There is a term that has been born over the past seven years, “The New Normal.” What does this mean when we say it? How has it changed the landscape of negotiating and more importantly, how does it fit in to how we actually complete transactions today?
So what is “The New Normal?” This term has been redefined over the past seven years. “The New Normal” is defined by how Owners and Tenants conduct business now that the recession has changed the playing field. Tenants had a decided advantage and the market shifted dramatically during this difficult period:
- Tenants, of almost any size and credit, were granted abundant concessions- free rent, half rent, large improvement dollars and limited or no personal guarantees.
- Tenants, 5,000 sf or less, were also given caps on CAM fees, termination rights, co-tenancy clauses, sales performance kick outs and HVAC warranties- items typically only reserved for Big Boxes.
If this is “The New Normal,” where do we go from here?
Wouldn’t these expectations carry over today and create friction making it extremely difficult to complete lease transactions in a now improving market? The truth is, YES they do.
The Owner and the Tenant are not on the same page and perceive the “recovered” market differently. Owners see an improved market moving to their advantage, while Tenants still believe they call the shots and all incentives are still available to them. Why do they each see it so differently? Incomplete and imperfect information.
Owners hear bits and pieces of information about deals getting done without complete economics/deal information and Tenants talk to other tenants about their great deals (often exaggerated) to make it appear like they pulled one over on the Owners in the market. What is missing here is quite simple… a market savvy, fully informed broker who can supply actual facts and current market conditions to support today’s recovering market and find a way for Owners & Tenants to move away from their own perceived “New Normal”.
Jason Fessinger | Partner
602.778.3833 | firstname.lastname@example.org