Tips for Tenants Negotiating a Commercial Lease – Part 2
Negotiating the terms of your lease may seem like just another bump in the road as you work to open or relocate your business, but don’t brush it off too quickly. Ensuring the details of your agreement are in your best interest is an essential step in contributing to the success of your business. Unlike most residential leases, commercial leases are usually longer and more flexible, provided both the landlord and tenant agree. In the first part of this blog, we provided some essential tips for negotiating – Tips for Tenants Negotiating a Commercial Lease – Part 1. Read on for additional considerations that will help you get the most out of your negotiations.
Don’t assume the base rent is fixed. When landlords list their rental properties, they expect to negotiate and will often price the rental near the top of market value. Come in with an initial offer that is 10-15% lower than their asking price and be prepared for some back and forth to reach a final agreement. If you can foresee the space working for you for years to come, you may be able to get the number even lower by negotiating a longer lease term.
Ask for free rent. Sometimes landlords aren’t willing to lower the monthly rent because it can impact the overall assessment for current or future tenants. If negotiating the base rent isn’t feasible, you can ask the landlord to provide free rent for a set period of time instead. This is a common practice in the industry and will likely be considered.
Check everything yourself. Commercial tenants tend to alter spaces to fit their individual needs frequently. Measurements and other aspects in the listing could be wrong. Take it upon yourself to measure the usable square footage yourself. It’s also a good idea to create a checklist of everything you’re expecting the property to include to make sure you’re paying a fair price or are able to ask for necessary changes.
Negotiate a reasonable futurization period. As you move into your new space, you’ll likely need to make changes to meet your business need. You should not agree to pay rent and pay for improvements and renovations. Some landlords prefer to make the changes while you begin paying rent, while others may choose to have you handle the logistics and payment of improvements without charging rent during that time. Whatever you agree upon, consider the changes that need to be made and make sure you allow enough time to complete them.
Don’t leave perks on the table. The best advice we can give you is to negotiate until you are happy and feel confident moving into your new space. Before you start the process, make a list of all the things that could make you more comfortable or help your business and use these items as strategic bargaining chips along the way. Perhaps the landlord won’t budge on the rent or lease structure, but they may be willing to provide free wi-fi, extra parking spaces, a monthly discount on utilities, or an additional allowance for improvements. These perks have value and can add up in the long run.