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Concessions Are Back, Industry Experts Report

NEW YORK CITY-Experts report seeing an increase in the amount of concessions offered to tenants. With a slowing market, tenants should prepare to bargain for more in terms of free rent, construction time and more.

By Betsy Kraat | Updated on April 08, 2001

NEW YORK CITY-”Concessions, once minimal, are in vogue again,” says Robert B. Emden, executive managing director at Grubb & Ellis. “They are market-driven, of course, and now that the market is slowing down, tenants will be looking for them more than in the past.” Concessions, while most often taking the form of free rent, can include a subtenant getting a windfall when the former tenant backs out of a lease.

“Many tenants ‘forward-leased’ space before it was even available. And then that company’s growth plans changed, so whoever subleases that space will get a concessions package in terms of whatever that former tenant already paid for, as far as insurance, etc.,” says Bruce Rothman, managing director at Julien J. Studley. “And we have seen significant subleasing activity, especially with the trouble in the dot-com sector and other companies experiencing growth shifts.” Rothman points to a large sublease deal–33,000 sf– negotiated on behalf of Lazard Freres at 600 Fifth Ave. as evidence of this.

“Owners want to lock in the deals they can make today, while tenants want to make sure they know exactly how much space they really need, and if the price is fair, given the downward slide,” says Brian G. Schwagerl, senior manager of facilities planning at the Hearst Corp. Emden adds that he has seen decreases in rent as well as concession offerings.

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