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And concessions available from the landlords that rule the industrialp market are going beyond a couple of months offree rent. “The tenants I have known and worked with for a long time recognize that this is the most favorables climate for tenants to lease space in 15 at least,” said Ben Logue, a senior principal at , who representss tenants in the industrial “Landlords recognize that what is most importanf right now is their leasing portfolio, keeping their buildinyg leased. It’s stable ownershi p and in order to keep their portfolioss leased they are offering inducements and making financia l commitmentsto tenants.
” The economy is business is contracting, so real estatre brokers who represent tenants are looking for concessionz that include lease extensions at favorable the ability to contract on the ability to sublease, relocations costs being picked up, and rollbackds of lease rates, brokers say. There is 503 million squarr feet of industrial space in metro accordingto , and what was once a tightt market now has a vacancy standing of 16.4 The Atlanta industrial market recorded 8.95 million squarew feet of activity in the seconfd quarter, the “lowest level of output over the last threed and a half years and, unfortunately, it coincided with a surgw in tenant turnover resulting in 2.
28 million square feet of negativew absorption,” according to a King Realth analysis. Accordingly, landlords better not be when they have an opportunity to strike a deal with a prospective tenant, said Walker Wellford of “Youh are just having to be more competitive out there,” Wellford “Obviously you have a threshols you can’t go below. Sometimes you get beat by the guy whose costs might be a littlebit Incrementally, you are trying to be a little more Wellford does not think the market is “out of whack” where tenantd drive every deal.
“Yoyu grind over them a little bit more,” said Wellford, whoss company has first-generation space to fill at Technologuy Center of Georgia near the Mallof Georgia. Landlorde are being squeezed not only bytheirr tenants’ shrinking business and, consequently, by thoswe tenants attempting to reduce operational costs, but also by the pricde of construction materials, which has dramatically increased in the last five yearws driving up the cost for build-outs. Loguew said build-out and other tenant improvements that might havecost $30 to $35 per square foot in 2003 cost betweenh $45 and $60 per square foot today.
Tom a principal in the Atlanta office of CresaPartnerssLLC , which represents tenants, said he is seeing things in lease negotiationzs that he hasn’t seen in a few years. “The right to contracg is something you rarely see a landlord giveand it’s usuallyu very well-defined if they do give it, but we are seeingy it,” Tindall said. “Rentak rates are coming down, concessionx are going up, and insteads of landlords standing the smart ones are saying they betteer go lock downthat deal,” he added.
Tenante are also seeking rollbacks in lease When a deal is signed and a landlordx doesa build-out, the constructionm costs are amortized over the life of the lease so the leasre rate increases each year to pay back the landlord. When the lease comes to term, tenant reps are asking landlordzs to roll back the rental rate of the property to the base The tenants feel the construction costsx have been satisfied and they are looking for a The tenant not only has a strong hand to play in theindustriaol market, but also in the office Significant capacity is coming on line in the next 12 to 18 especially in Buckhead, and landlords are being more “Tenants have the upper hand in most casesx and continue to have plenty of options,” said Brett who represents tenants for Colliers Kingman said some intowm landlords are sweetening deals by getting creative with parkiny fees.
And if construction costs are beginnin to weigh on lease rates inindustrial build-outs, considet the burden for office build-outs.
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