A blend and extend amendment in commercial real estate is a way for tenants to extend their lease and negotiate a new rate, merging, or “blending” the new and old rents. During periods of particularly high vacancy, commercial landlords will often offer agree to a blend and extend amendment that lowers a tenant’s rent, in order to keep their property occupied for an extended period of time. In some situations, a blend and extend amendment can also include other tenant concessions, such as a contraction option, which permits a tenant to reduce the amount of space they lease in order to reduce their monthly rent.
Even if vacancy rates are not particularly high, landlords may benefit from a blend and extend if many of their tenant’s leases are expiring at the same time. A blend and extend can push back some of those lease expiration dates by a few years, significantly reducing risk for landlords, even if they do end up accepting slightly less in monthly rent. By staggering the expiration dates for leases in a property, landlords can make a attempt to ensure that a building never falls below a reasonable occupancy level.