My wife and I toured some retail spaces for an idea she had about a year ago. One baby later and we had to put it off. However, one of the spaces we toured in Westchester has me puzzled. It was January we saw it, the landlord was eager to fill it. A month after we saw it, the “for rent” sign was taken down and clearly some work had begun. Fast forward to now, almost a year later and the place is still yet to open. They are clearly still doing renovations, albeit very slowly, like molasses compared to the City.
Is this lessee paying rent the entire time to the lessor? Do landlords work out some sort of interim rents while not open for the lessee, typically? I can’t imagine paying rent on a space and moving so slowly to open.
Depends entirely on the lease agreement that was signed. My wife owns a bakery. We recently leased a new space to upgrade to a much larger facility. The least we signed with the new building states that we don’t have to pay anything in rent until 4 months after we open. Doesn’t matter how long that takes.
There is a fixturing period, where no rent is paid. This is when you build out the space, and you are not open for business. Then you can negotiate a free rent period as well, when you are open.
12 months is quite a long time though. I imagine something has gone sideways.
I used to work on leases for large retailers in malls or strip centers. The most common language was free rent from possession until the open date. But there were usually limits such as 90 or 120 days. If it were a smaller landlord, the language might be more lax or non-existent.
It could be free rent, tenant improvement budget with possible delays in permitting, discounted rent, etc. All are normal options in commercial leases. I usually get a few months free and the landlord paying the improvements to ready the space for my tenancy, but I require the use of my contractors because they’re better.
I negotiated 3 months rent free for renovations. That’s how long it took to get permits. Took another 3 months to actually open my bar.
6 months to open in my area seems pretty fast though for a place that needs real work. Most seem to take 12-18 months.
Perhaps the landlord is doing updates to the space on their own. But if it’s a full renovation, yes, I’ve seen some take an extremely long time. Perhaps the new tenant moving in required a lot of tenant improvements, in which case they certainly negotiated with the landlord on timing and cost and rent payments.
Could be lots of reasons.
Every business owner and landlord negotiates a different contract with regards to T&I, free rent, etc…
The smart owners don’t sign the lease till they have permits in hand, contract ready to sign for build out, to get build out going.
But even then that doesn’t mean there arent uncontrollable issues that pop up during construction that bring things to a halt.
There are others that sign a lease, then get architect, get permits, and hope it will work and hope the build out fits in budget.
You never know if it’s a case of something where everything was planned and something odd was found in construction and they need to get extra permits and it’s led to cost overruns and huge delays
Could be the Reddit posts of someone that that had $50k to start a business, signed the lease, then got drawings, then it took months for permits, then they started construction, they had to start paying rent, then their $50k ran out, rent started, and they still have $50k left of build out……
Or everywhere in between
Maybe they are idiots who tried to renovate themselves and are now in over their heads. It happens.
I believe most property owners care about their tenants. However, the bottom line is meeting NNN every month.
I can’t image these folks haven’t paid rent.