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Ed Brock has to start planning for Halloween a bit earlier than most people. Brock, the owner of the Johnnie Brock’s chain of costume stores, typically starts looking in late April for temporary retail space for as many as 10 seasonal locations he operates during the fall.

Usually, landlords delay signing agreements with Brock until June or July. But this year, four have been spurred by the frighteningly bad economy into signing lease agreements for Brock’s little shops of horror — at an average of about 30 percent lower than normal leasing price.

"They’re working out what I need to work out," Brock said of negotiations with commercial landlords. "They know I’m a very good tenant, so they want me to stick around. A year ago, they would have said, ‘Tough noogies.’"

With businesses looking to cut costs, many owners of retail and office space are hearing cries for cut-rate rent from current and potential tenants, say local real estate experts. Owners, in turn, have become open to negotiating and dropping rates slightly as vacancies rise, said Dave Randolph, first vice president for real estate brokerage firm CB Richard Ellis.

"It went from this laundry list of tenants out there kicking tires, and then a lot of tenants said, ‘I’d better hold off on the expense of a move,’" Randolph said.

St. Louis’ commercial market doesn’t tend to have dramatic spikes in price to the north or south, Randolph noted. The average rate for both office space and retail space during the first quarter of 2009 — $18.77 per square foot and $12.97 per square foot, respectively — were down from the previous quarter, but not dramatically, according to agencies that track that data. Fourth-quarter numbers from 2008 were $13.16 for retail space and $19.06 for office space.

Randolph said he had been able to get about 5 percent savings in rent, at most, for some clients. But more often than lowering rent, landlords are renegotiating other terms, Randolph said. Five-year leases are being reduced to two years, for example.

But in extreme cases, landlords sometimes do more. In recent months, Randolph said, he was able to barter for a rent reduction of 15 percent for one large client.

"These office managers ask me to find some way to reduce costs," he said. "I knew if they didn’t get rent reduced, there was going to be some kind of layoffs."

The situation has put large landlords in a difficult position, said Glenn Guenther, principal for Discovery Group, a real estate services firm based in Maryland Heights. Landlords are facing some tenants that make a compelling argument for rent relief, while others make an argument for it but may not need it, he said.

"The key for landlords today is to keep tenants in place and keep that income stream in place, because the cost of losing the tenant, going through the vacancy and having to retrofit the space for the new tenant is extraordinary," Guenther said cashadvance.

The decision is being weighed on a case-by-case basis at Duke Realty, one of the area’s largest property owners. The firm has had only about a dozen requests for renegotiation from its more than 200 St. Louis tenants, said Toby Martin, vice president of Duke’s St. Louis operations. But it has also seen a fair number of clients go through bankruptcies, so Martin said the firm was being sensitive to clients’ financial matters.

"If they can make a case that they have a plan that they’ve really evaluated what they need … and they’ll make good use of the cash flow that would be freed up by that, then we can talk about doing some trade-offs," Martin said.

Brock, for one, has asked for rate cuts at only his temporary locations. However, he said, he has lost first-quarter sales from theater programs that usually drive business, as area schools have faced spending cuts. He said he knew things hadn’t been bad enough to justify lowering rates on his permanent leases — at least not yet. If sales drop further, though, he said he might have to bring his accounting books and ask for relief from the landlords of his permanent locations. Brock owns two costume stores, in St. Louis Hills and McKinley Heights in south St. Louis, and one gift and card store in Shrewsbury.

Unfortunately for many tenants, the economy is too rough for them to take better advantage of the situation, said Piers Pritchard, second vice president for commercial real estate firm Colliers Turley Martin Tucker. Pritchard said he had witnessed this new negotiating environment while representing both tenants and landlords. He said landlords weren’t really losing too much because many business owners were being overly cautious by signing shorter lease extensions. In return, landlords are able to solidify partnerships with most stable businesses, in hopes of emerging from the recession with a core group of healthy and loyal tenants.

Pritchard also noted the adage that all real estate is local has held true. More bargaining has taken place among downtown owners, while top-flight space in hotter markets such as Clayton has seen less turnover, he said. At the Pierre Laclede Center in Clayton, for example, Pritchard said the owner he represented had had just one client leave in the past 18 months despite raising rent rates. However, the owner has also invested millions in facility upgrades, including a renovated lobby and fitness center.

"We’ve been able to retain almost every tenant that’s had a lease roll over in that building the last three years," he said. "They’ve committed to capital improvements. There’s a lot to be said for a strong and stable owner which has really kept a comfort level for all the tenants."

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