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Case Study

Lease renegotiation helps healthcare company right-size, reduce net rent and save $4 million in annual occupancy costs

​Faced with political, economic and consumer pressure on the healthcare industry, a healthcare-benefits company wanted to lower real estate costs so they could focus investments on delivering affordable services and keep insurance premiums low.

The company’s IT team had occupied the same office building in New Jersey for 10 years which was in need of capital improvements. The space needed a complete retrofit and major building systems required significant upgrades, which would require some capital investment. Due to changing business requirements, the company needed less space, but didn’t want to deal with the disruption of relocating. However, the landlord didn’t believe the company would rather invest in the current space than relocate, so although market conditions favored tenants, negotiations were challenging.

JLL applied a systematic, Six Sigma-based approach to site selection and lease negotiations that supported the client’s goal of right-sizing their space, and eroded the landlord’s perceived leverage. We negotiated a deal that reduced net rent by 58 percent, reduced owned space by 61,000 square feet, and included rent terms that lowered costs and ensured financial flexibility—delivering $4 million in annual occupancy cost savings.

JLL also secured the landlord’s agreement to deliver $3.4 million in capital improvements to the building’s structure and systems, expand parking at no cost to the client, and deliver cafeteria and fitness-center rights, while also obtaining a right for the tenant to terminate the lease in the future.  

Through this deal, we helped the company’s CRE team definitively demonstrate its commitment to lower costs and lean operations, thus doing its part to help the company maintain low premiums for consumers and remain competitive.

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