Negotiating favorable terms for your commercial lease can have a tremendous impact on the viability of your project and your long-term ROI. Here are some tips to help you enter the negotiating process with confidence in your ability to obtain a lease that will correspond to your budget—and steer clear of hidden costs as you move forward:
1. Know your resources, wants, and needs going in. Before approaching any negotiation, have a firm grasp on exactly what your budget will allow, as well as what items are non-negotiable for you, and which ones would simply be nice to have but aren’t deal breakers.
2. Do your homework. Research the property and the area to see if
3. Think about competitors. Part of your research should include finding out if space is being rented to a competitor nearby. You’ll also want to be sure to ask about a competitor clause in the lease—depending on the terms, this may give you some leverage by requiring the landlord to get your permission before leasing other space to a competitor.
4. Don’t go it alone. While it’s important to be educated on the terms and issues surrounding lease negotiation, ultimately the legalities of commercial leases are complex, and unless you are working with a lawyer you run the risk of signing an agreement that is not as favorable to you as it could be, or that has hidden costs you were not aware of. Be sure that when engaging a lawyer you chose someone who specializes in commercial leases to benefit from their expertise in the area.
5. Ask about inducements or “free rent” periods. It’s not uncommon for landlords to offer inducements to rent in the form of a couple free months or, even better, a couple “free rent” periods per year for the life of the lease.
6. Look out for hidden costs. There are many different types of leases, and depending on which type the landlord is offering, you may be responsible for some costs you hadn’t counted on, like maintenance of major systems—think HVAC or the property’s roof—janitorial services, property taxes, upkeep of common areas, snow removal, and more.
7. Pay attention to the lease’s default and termination clauses. Ask about what the penalties are in the event that you default on the lease by failing to make a rental payment. You’ll want to negotiate a lease with a fair “cure period,” which is an agreed upon period of time you have to make good on any lapse. You also want to be sure to understand whether you’ll incur penalties for early termination if you end up needing to leave the lease early.
With the right knowledge, you can negotiate a commercial lease that sets you and your business up for success. At A.F. Alber, we focus on adding value to our clients’ projects from day one, including consulting on site selection and leasing. Talk to a trusted professional today to ensure you have the support you need to negotiate a commercial lease with terms that serve your best interest.