Update: Manufacturing Index Falls

Industrial owners and developers pay attention to the recent decline in the Manufacturing Index published by the Institute for Supply Management. If the demand for supplies continues to decline, users of manufacturing and storage space may choose to reduce their footprint to accommodate a revised business model.

The index has fallen about 7% over the past month and a whopping 16% over the past two months.

What do you do if a tenant has trouble? Well first, we advise our clients to analyze the tenants business model. If the model or business plan is sound then you might want to work with them within your capacity as the landlord. Over the long-term many businesses will see ebbs and flows of growth and contract. Lord knows, we may see tough economic times that impact most businesses regardless of the soundness of their model.

If you determine that the tenant has a satisfactory plan, you can consider:

• reducing the tenant's footprint.
  
• reducing the tenant's rent.

The tenant's footprint can be altered if their requirements have changed and the physical characteristics of the building allow.

I know landlord's don't like to reduce rent, but in some cases some rent is better than no rent. You should weight market factors in the decision to reduce rent. If you believe in the tenant's plan to survive what they are going through, you should keep any altered rental rates short-term. You could also negotiate that the reductions in rent be reimbursed at a later date when the tenant could have remedied his problems.