Manhattan landlords resorting to tenant freebies
Tenant-improvement allowances are now a key part of new leases; the sweeteners signal that the balance of power is tilting toward merchants after a relentless surge in rents
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MANHATTAN landlords, who have seen retail occupancy plummet after boosting rents to record levels, are trying to avoid big price cuts. Instead, they're writing cheques for things like interior redesigns and moving expenses to keep storefronts from going empty.
Tenant-improvement allowances haven't been typical in the Manhattan retail market. But now the concessions, which can pay for anything from lighting and displays to a complete overhaul, are becoming a key component in some new leases, particularly for large, flagship stores in high-profile areas, such as Madison Avenue and Fifth Avenue, according to Steve Soutendijk, an executive director at brokerage Cushman & Wakefield Inc. "We're seeing tenant-improvement and concession packages that retail landlords never, ever contemplated before," he noted.
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