What is the Blend & Extend Strategy?
In commercial real estate, blend and extend refers to a negotiation strategy in which a tenant and landlord agree to extend the term of a lease in exchange for a lower rent rate. This can be a way for the tenant to lower their monthly rent payments or overall leasing costs, while the landlord can potentially benefit by maintaining the tenant as a customer and potentially earning a longer-term return on their investment.
In a blend and extend negotiation, the tenant and landlord may agree to extend the term of the lease by a certain number of years, and the landlord may also agree to lower the rent rate for the extended term. The tenant may then have the option to either accept the lower rental rate for the entire term of the lease, or to "blend" the old and new rent rates, resulting in a weighted average rate for the extended term.
Blend and extend negotiations are often used by landlords as a way to stabilize a property's cash flow over an extended period. The tenant also benefits from the agreement as they secure lower monthly rent payments and more time to continue occupying the property. However, it's important for tenants to carefully consider the long-term implications of extending the term of a lease, as it can ultimately result in paying more in rent over the life of the lease.
Over the course of my career, I've worked with many tenants to help them identify, negotiate and secure a commercial space that best aligns with their business goals. If you're interested in acquiring commercial property in Louisville, KY or its surrounding areas, I'd be happy to help you find the perfect space for you and your business! Feel free to call/text me at (502) 536-7315 or email me at email@example.com.