Landlord-tenant relationships are shifting rapidly as commercial real estate regains its footing in the wake of the COVID-19 crisis⁠—and in a "complete 180" of pre-pandemic norms, tenants now appear to hold the bulk of negotiating power. 

"In the past five or six years, landlords have had all the negotiating power so they were able to be relatively bullish on what their renewal rates are, their terms, and prices they could set," said Trepp's Lonnie Hendry in a recent analysis. "This dynamic has changed in many cases throughout the pandemic. Now, it has done a complete 180, to where it is in the tenants' favor."

The current market is rich in two important variables: sublease space and supply constraints. The sublease market is currently bifurcated, "meaning you may have contract rent (per the contract today) but this may not be reflective of market rent in the open and exposed environment," Hendry says. That means that if market rent is lessened by a glut of sublease space, the market gets reset to the new rental rate when those leases roll.