Of golf and short-term leases



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June is here, and that brings my favorite season - golf season. I look forward to once again beginning my annual pilgrimage to find my classic golf swing of 40 years ago. Golf is a frustrating game. When you finally put all the pieces of your game together, it starts to snow and you put the clubs in the basement for five and half months. Come spring you start all over again.It is a good thing I have a calming, relaxing career in commercial real estate. Seriously - we are very busy as clients across the board are trying to figure out what their options are. We have some clients looking to lock down a long-term lease at current low rents. And we have just as many clients who are uncertain of the future and want to "go short" with a series of one-year leases or perhaps a two-year lease with a few options to extend.It is far from clear what the overall economy is going to do. "Clear as mud," as Mark Twain used to say. The ideal strategy is to hedge in both directions by locking in set rates for several years, but doing so with options to extend, not a fixed/committed lease term.Sometimes this is accomplished with an early termination clause, where the tenant can cancel the lease commitment upon written notice at a certain date by paying the landlord unamortized fit-up costs and commissions. But presenting such a strategy is often met with resistance by landlords who fear inflation. This is compounded by their mortgages being short term (typically five or 10 years) and subject to a bump in the interest rate.Today, there's so much economic data it is hard to tell which way is up - or down. Add in the scary headlines and financial talk shows, and it is a wonder any of us get out from under the covers in the morning.But get up and go to work we must. And thus, we must have a place to go to work (not all of us, but most of us still).So that is where we real estate people come in, using our in-depth knowledge of the market and specific properties to guide folks to the best space for them with the best deal terms. This is not always easy. In uncertain times, these transactions get hairy.Tough times call for tough measures and that includes persistence, perseverance and focus. I've been in some tough closings this year. Neither party was very happy, but for the most part, the transactions were fair given current economic conditions.As stated in this column before, we see slow but steady improvement through 2012 and hopefully an acceleration from there, but that is a long way out and much too early to predict given the myriad factors that impact our global economy.And just as we have barely entered June, "we are still in early innings of this economic recovery," said Peter Linneman in his last column from the Commercial Property Executive magazine.Or maybe the "front nine" would have been a better analogy.Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE) and a Facilities Management Administrator (FMA) with the Building Owners and Managers Association. He can be reached atwbn@nortonnewengland.com.

 

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