Feb 9, 2010

Location, Location and More LocationBy Raymund FlandezOnline.WSJ.com

For some small-business owners, the terrible economy holds an unexpected silver lining: It’s a lot easier to get more space.

As hosts of businesses close their doors, vacancy rates are soaring and rents are plummeting. So, small companies that are still on their feet—and looking to expand—suddenly have lots of leverage with landlords. And they’re making the most of the chance, snaring prime locations and larger spaces, often at a fraction of the regular asking price.

In early December, for instance, Sindi Major-Martinez, president and chief executive of Sindel Technologies LLC, moved her IT-services firm to a new location in Phoenix. At the new building, she’s paying $21 a square foot for 4,400 square feet—versus $23 per square foot for 3,000 square feet in her previous lease. It’s an even better deal considering that the new location was valued at $29.50 a square foot recently, and the current rent also covers utilities and cleaners.

“It really emphasizes that there are good things out there, even though things are really bad,” says Ms. Major-Martinez, who estimates she’ll save about $60,000 in the first year.

For an idea of the kinds of potential deals out there, consider this: Commercial rents were down 36% in October from a year earlier and were 44% below the peak in October 2007, according to Moody’s Investors Service Inc. In addition, the national office market’s vacancy rate is expected to rise as high as 19% by the end of 2010, the highest on record since Grubb & Ellis Co. began tracking the national market in 1986.

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