What commercial real estate “distress” can mean for businesses

On Behalf of | Mar 10, 2023 | Commercial Real Estate |

If you have a brick-and-mortar location for your business, which isn’t necessarily a guarantee, you will likely have a landlord of some sort. Relatively few businesses outright own their primary location, and there are some growing signs that commercial real estate is seeing a cool-down moment, leading to stressed investors

Investors are facing new worries each day, especially here in California. Stressed and pressed commercial real estate investors can make things difficult for businesses in two ways.

Increasing your costs

Unfortunately, concerns for real property owners tend to trickle down to their commercial tenants. When renegotiating terms to renew or extend a lease, your landlord may push for much higher rents. In some contracts, they may be able to increase rents as they see fit.

Forcing a move

Another risk for your business is losing out on your location entirely. If a commercial property owner is sufficiently spooked, they may actively look to remove a tenant to pursue a more lucrative contract.

Commercial evictions in California are extremely complex matters, but a motivated property owner can and will take action if they feel threatened by the market.

Do you have any defenses?

The issue at hand is that your commercial leases may not be as friendly to you as you may think. At the very base of things, a lease is a contract. And you have every opportunity to abide by the lease you sign and pursue favorable conditions.

Before signing a lease, it’s often wise to have an attorney review your lease to identify issues you may want to stop. Leverage is a hard thing to come by as a commercial lessee, but that doesn’t mean you don’t have any.



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