With all the attention given to the glutted commercial real estate market in and around the District, John Butz of Northlight Film & Video decided to do what many businesses are doing: Find a better deal on office space.
After three years downtown, the small video production company decided to forgo its address in a "broadcast neighborhood" for more space outside of the city.
Because Butz and the two other full-time staffers lived near Alexandria, he looked in Old Town for space, first by walking around and reading signs, then talking to building owners and tenants. Eventually the company settled on a space one block from the waterfront.
With the company's lawyer, Butz negotiated what he called a good deal. For $100 more a month than Northlight had been paying, it got three times as much space.
"They, like everybody else in town, had space that wasn't renting," Butz said, "and we were able to come in and with a little bit of negotiation get a really good deal."
Concessions building owners are forking over go far beyond rent reductions. The economic and legal incentives run the gamut from cash for decorating to clauses making it easy for the tenant to move out before the lease is up.
"There is tremendous selection of alternatives in basically every market sector and every product type," said Robert Borris, senior vice president of The Amend Group, a Dallas-based consulting firm that represents tenants in lease negotiations. "The smaller user is in really good shape because there is such a huge selection."
That tenants are negotiating for lower prices, free parking and build-out cash is nothing new. What is surprising many business owners is how much the laws of supply and demand have put them in a better bargaining position because vacancy rates -- especially in the suburbs -- are so high.
The soft market has created some other new alternatives for tenants.
Many tenants, given all the options, are grabbing space in new buildings -- leaving modern buildings that are less than 10 years old empty.
Some of the best bargains are coming in a new market of sub-leases, said Jim Underhill, senior vice president of the Dallas-based Staubach Company, another tenant representative.
Many big companies are scaling back the space they use, leasing it out to save on overhead expenses. Small operations can find furnished space at reasonable rates with very flexible, usually month-to-month, leases.
What they cannot find in arrangements like these is the freedom to decorate or rebuild the space because the company probably will want to move back someday.
One caveat to all office space seekers in today's uncertain market is to avoid building owners who are in financial trouble, Underhill said.
Although financial particulars may not be easy to come by, tenants can talk to others in the real estate industry to determine whom to avoid.
Although Borris said that he knew of no instance in which the insolvency of a building owner resulted in a tenant being locked out, the landlord's solvency is a valid concern.
When a building changes hands, there is no guarantee that services, such as trash collection and plant watering, will continue. A well-constructed lease agreement can contain safeguards, such as a non-disturbance agreement to prevent a new building owner from kicking out tenants.
"Two years ago the landlord was worried about the credit-worthiness of the tenant," Borris said. "Today the tenant has to be maybe more worried about the credit-worthiness of the landlord."