Today the dark clouds of economic slowdown cover us. We know that these clouds will disappear one day but do not know when this would happen. Even our economist friends are divided on the timing issue. Every company is restoring to cost cutting. The top five items that appears on every company’s list include:- 

1. Staff Cost;

2. Travel Cost;

3. Technology Cost;

4. Advertisement & Marketing; and

5. Space Cost.

We are witnessing an increase in supply of rental properties as companies cut down staff, relocate and shed flab. This is most visible among software, dotcom and IT education companies. Most of the properties are fully furnished and provide a great opportunity to new tenants to move in faster and at a lesser cost. Further, many companies are successfully negotiating rents with landlords to bring the cost down by 10% to 30%. Such cases are frequent in case of companies that took place in year 1999 and 2000 (the period of technology peak) 

Negotiation of rent is welcome as it will align rates as per demand and supply in property markets. Further, such a move in the interest of the landlord too as this will ensure continuous deployment of asset yielding return. 

We present four ways to structure rent as follows: 

1. Reduction in rental for temporary period: - A 10% to 30% reduction in monthly rentals could be negotiated with the landlord with an understanding that the current rentals will be restored after the end of the fixed period (usually six to nine months) 

2. Adjustment in rentals: - Pay 50% rentals now and balance to accumulate. This would be paid after six months to nine months. Many IT companies have adopted this approach. This helps in easing the burden of current cash flow position with a commitment to pay later. 

3. Adjustment in deposit: - Rentals could be adjusted through security deposit. This would entail no fresh cash outflow and also lower the securing deposit placed with the landlord. 

4. No escalation: You could negotiate an escalation free period.

The approach you adopt would depend on your relationship with landlord, comfort levels, objective and specific requirement. But do take a letter in writing documenting your understanding. 

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