Much has been said over the last 12 months of economic downturn about consumers looking for ways to save money. Some homeowners are eliminating non-essential costs like lawn care or cable TV, while others are turning down the thermostat and switching to CFLs to save on utility costs.
But homeowners aren’t the only cash-strapped folks out there. Consumer spending cutbacks impact small businesses, many of whom have seen decreased sales volumes over the last year, and have had to cut costs in turn.
Recently, in an interview with Remodeling’s sister publication Replacement Contractor, exterior remodeler Phil Isaacs shared details on how he went through his company’s books line-by-line and ended up reducing expenses by $15,000.
In 2000, when business was booming, “people were wondering, how am I going to get all this work done and how am I going to find good help to do it?” Isaacs said. Those were also the times when costs were rising because vendors knew many businesses were flush with revenue. “Now,” he says, “opportunities have surfaced that were weaknesses before. If you’re still in business, you’re the king, and everyone is willing to negotiate. It became easy for us to renegotiate contracts, leases, everything.”
Indeed commercial leases may be an ideal place for small business owners to start cutting costs. The National Association of Realtors (NAR) reported recently that commercial real estate vacancy rates are up. Rates in the office market rose from 16.3% in the fourth quarter of 2009 to 17.6% in the first quarter of 2010, and industrial vacancy rates are also projected to rise a full point from 13.9% to 14.9% for the same time period. NAR chief economist Lawrence Yun noted in the report that in the face of these numbers, "commercial property owners will need to make rent concessions."
This news bodes well for business owners. Recently, professional online community PartnerUp has developed a free commercial real estate marketplace that allows business owners to search for opportunities to relocate their businesses. PartnerUp co-founder and CEO Steve Nielsen offers these tips for renegotiating a commercial lease:
Renew your lease early. If you’re planning to stay in your current building, approach your landlord early and inquire about extending your lease in exchange for discounted lease rates. This gives you more negotiating power, and many landlords may extend retroactive discounts for the duration of your current lease period, in exchange for a lease extension. You can also try negotiating for more space at the same price.
Impacting your wallet. Research whether traffic has decreased in the neighborhood and the vacancy rate for surrounding buildings in the area, and leverage this information to renegotiate your current lease. Even a few dollars in savings per squre foot can add up. Moving to a nearby location for the same price with additional costs covered under the rent might be another money-saving option.
Location, location, location. The prime space on the corner that you’ve always wanted may be available. Look into properties you’ve had your eye on for a while. Changing locations could provide a sales boost to your own company.