Back when the market was good, price per square foot wasn’t nearly as negotiable as it is now. What with the economy being pretty beat up, landlords are eager and sometimes desperate to fill their buildings – often at a much lower price than they would have offered a few years ago. In NYC for example, prices have dropped over 40% in the last 18 months.  Commercial space is usually priced by the square foot and figured by the year; $20 a square foot, for example, means $20 per square foot per year. Though it’s less likely, space is sometimes priced by the month; $1.60 a square foot would mean $1.60 per square foot per month, or $18 a square foot figured yearly. Either way, it’s sensible to check out rates for comparable spaces and ask for a reduction.

v Your negotiating power depends on whether your local rental market is hot or cold. If plenty of commercial space is available, you can probably win many landlord concessions. If your area’s rental market is tight or you are after a unique space, you’ll have considerably less leverage.

v Tenants are looking at potentially negotiating a savings of up to 20% off of the asking price, and in some cases, even more. Whether you’re considering a new lease, or renewing your current one, you definitely have wiggle room. If you’ve got a tenant representative broker on your side, you’ll do even better. Negotiating is part of the game, especially when you’re playing multiple buildings against one another.

v The more “must haves” you require, the less negotiating room you have. Know what you’d like versus what you must have – views are nice, but does it have to be of Central Park from every window? The smaller your list of “must-haves” is, the more negotiating power you’ll have.

v  Know what concessions landlords are giving in other spaces or buildings similar to the one you’re looking at.  For example, if a landlord is offering a full build out worth $50/s.f. and you can live with the existing condition of the build out, ask for that $50/s.f. in additional free rent.  You might just get it.

v It costs a lot of money for a landlord to lose an existing tenant.  What’s a lot?  12-18 months of lost rental revenue.  Sometimes more.  When tenants fully understand their value to a landlord, they get more concessions.  Often a lot more.

The lessons to be learned here:

• In this market, if you’re renewing a lease or looking for a new one, the odds are in your favor more than you think. Hire a tenant representative and a good commercial real estate attorney, and start saving money.
• The concept of negotiating price per square foot is entirely dependent on the market. Right now, the odds are in the favor of the tenant thanks to the recession, but it wasn’t like this before and it’s likely that it won’t stay like this forever. Take advantage of your negotiation opportunities while you can!