Negotiating Rent

We were coming up on the end of our lease for a business I own recently and were debating what to do. The business hasn’t done well, but the fourth quarter is typically the worst time for us, and have been debating about giving it through Q1 or so next year.

However rent was an issue. We have a space that costs a couple thousand a month, and over six months, that’s not an insignificant amount of money. It’s not make or break money, but it is funding that we could do something else with. It’s also potentially money that could fund another month of salary for my partner.

Our primary need is space for people to meet and learn, and we have alternatives. If we only schedule a few classes, we could rent hotel space for a few days at a reasonable rate and conduct things there. A little more setup, but not unreasonable.

One thing we’ve noticed over the last two years is that there are spaces in our building that have been vacant the whole time. It appears the economics of commercial real estate are such that a landlord can survive on 50% or less occupancy, so we decided to approach him and ask for a short term lease and reduction in rent.

Our goal was $500 a month to hold the space for six months and then we’d take a new lease, or leave the space. Our landlord came back with a $1000/month “bottom line” figure.

On the surface, it seems silly to us. He could get $0 for 6 months, and not necessarily a better deal. He’s not going to renovate our space until he has a tenant, and the electric/water/utility stuff is negligible. We pay a little rent and try to see if we can revive a failing business.

From his side, I can see he’s negotiating, looking to get more $$, and also possibly not looking to get trapped in a long term cycle of “6 month extensions” at a low rate. Likely lots of tenants would do that, but we wouldn’t, and I guess this is a case where our reputations aren’t strong enough.

We’ll see if he comes down, or we close things down sooner.