What You Will Learn in This Video:
- The financial situation of the real estate market is difficult for both landlords and tenants.
- Rents are not going down, even though demand is soft.
- Landlords are facing rising costs, such as debt service, capital expenses, and construction costs.
- Tenants are looking for special deals, such as rent-free periods and construction allowances.
- It is important to find a balance between the needs of landlords and tenants when negotiating deals.
Video Transcript:
“Here in the market, how has the financial situation been? Are rents are now firm? Have things softened? Are clients, you know, looking for special deals? What is happening to the financial end of the market?
Well, I mean, logic would dictate that in an era of soft demand that prices are going to go down, but honestly, it’s really not possible. I’m not crying for landlords, but their costs have gone up significantly, and it’s very hard to pencil out real estate deals today. And, and by the way, in this post-COVID era, there are going to be issues where landlords are just not able to pay their debt service to run their buildings to put the capital expenses into those buildings to upgrade the lobbies, bathrooms, public corridors, mechanical systems, all these different things. So this is going to be a real concern in the future.
And I’ve got to make sure that my clients are committing themselves to the right landlords. But financially, it’s hard to make deals. You know, we’ve been saying for probably 10 or 15 years that seven is the new five. You can’t calculate a five-year deal. It’s going to work today because the capital expenses for the landlords to build out space and so on are very large. But every deal is a multitude of different factors: rent-free rent, construction costs, so on and so forth. And you’ve just got to figure out a balance on those factors that’s going to work for everyone.”
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