For years, the landlord-tenant landscape was calm. For office space, there was the back and forth over cost structure, amenities, and more. Residential rentals were even more cut and dried. Then came the pandemic, which has shifted the balances of power, especially on the commercial front.
"You have a lot of businesses that have gone under because of Covid, lack of demand, lack of support," says Anita DiPietro, manager and owner of AED Asset Management in Washington, D.C., and a CPM (Certified Property Manager), a certification earned from IREM (Institute of Real Estate Management). Less demand means more opportunities for those looking to lease—and less certainty for the people marketing their spaces.
"It has definitely put landlords in a tight position in negotiating lease terms," DiPietro says, as the amount of vacant space has made it more of a renter's market. "As a business owner running a gym out of a 10,000 sq. ft. space, how many are available in DC? Maybe I could open my business in an area that is not so strict and, by the way, that owner is going to give me the space for half the cost because they've been empty for six months."
That's made landlords more flexible out of necessity. "They're tending to the wants and needs of their tenants that are happy and in-location. I've seen commercial properties slash prices, marketing more Covid-safe environments to potential tenants, giving a larger TI allowance to allow for extra safety measures that a business would be required to take on had they taken the space, mostly to comply with local regulations. A lot of new operators are in a unique position to almost tailor their businesses to accommodate [available space]."
In DiPietro's market, multifamily hasn't been spared. "We've seen residential landlords slash their prices almost in half," she says. "The lowest studio rent I saw in a class-A mixed use building, full package of amenities and a concierge was $1,400. You're also seeing some shared amenity spaces changing, mostly highlighting the work-from-home aspect. Some buildings have installed air filtration systems in the hallways, they've increased their cleaning efforts, and some have even mandated masks in common areas."
As DiPietro notes, many property managers could use a boost to their negotiation skills. "It seems like managers are falling short in asking the right questions and providing the right answers," she says. That reduces their effectiveness as they must become an efficient conduit between renter and landlord.
DiPietro suggests taking negotiation training and networking to speak with your peers and see how they're handling the challenges. "A combination of all those things would be helpful."
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