This is according to Org Geldenhuys, managing director of property development and management company, Abacus DIVISIONS.
Geldenhuys said that tenants who sign rentals with landlords and move into existing buildings due, to a large extent, to attractive rentals or TIs should err on the side of caution.

"It might not be a good idea to push hard-pressed landlords for too much. Tenants might end up finding that the landlord is unable to meet the costs of properly servicing the building.

"Additionally, it might be that all is going well – on the face of it – with the building, but, within a few months, things start deteriorating because the landlord is being squeezed by other properties in his portfolio. This can create a folding card scenario. So, where deals are just too good to be true – be careful. The landlord might be signing too many of these deals just to try and preserve cash flow and put bread on this table. If this is the case, the consequences could be dire for the tenant further down the line.

"He could end up in a building that needs urgent things to be fixed - such as plumbing – only to find that the landlord is unable to meet his financial obligations."

Geldenhuys said that before the Great Recession it seemed as if financing was within easy reach for nearly any commercial real estate project. In fact, whether the money was used for new developments, renovations, TIs or operating expenses, credit was not a major problem. Today, however, it is a huge problem.

"It is against this backdrop that tenants must make their decisions. As the hangover affect from the recession continues to linger, an increasing number of landlords – and their property portfolios – are coming under pressure. Previously unscathed landlords are now feeling the pinch and, the longer the soft market continues, the sooner many financial positions will become more perilous. There is a heightened risk that owners will battle to stay abreast of costs, such as day to day maintenance – forget unexpected maintenance.

"Tenants should bear this in mind, take advantage of the better offers – but make sure their landlords can stand the test of time.
"Sure," said Geldenhuys, "now is the time to round up as many benefits you can as a tenant. These benefits could certainly have a very favorable impact on cash flow now and in the future. But make sure you do some homework and, as best you can, look at the backgrounds and capital positions of potential landlords and their buildings."