5 Key Tips for Commercial Lease Negotiations

Commercial lease negotiations are tricky. Negotiating with a professional tenant representative gives you a big advantage.

Signing a lease can be one of the biggest business negotiations. It’s like addressing the elephant in the room. When they look for a commercial property for lease, business owners tend to overlook and not negotiate the lease terms. It’s a long-term commercial leasing commitment that needs to be optimized.

Commercial leases are not like your simple day-to-day transactions. Whether you are a start-up company or an established firm, it can be an arduous task to go through a bulk of legal documents, clauses, fine print, and terminology in a lease agreement. You reach a point where you say, “let’s just sign it and get going,” only to realize later that it wasn’t the wisest decision.

A commercial lease, if negotiated proactively, can save you from any hidden charges, protect the stability of the business location, and, in some cases, can also earn you extra perks like free wi-fi or employee parking.

How Do Commercial Leases Work?

Before you approach a landlord to rent a commercial space, you should understand the different commercial leases and how they work. Some of the common types of standard leases include:

• Net Lease?– The tenant agrees to pay their part of the taxes, insurance, maintenance, and operating costs of the building and common area grounds. Within net leases, one can choose from the options of single, double, or triple net.
• Percentage Lease?– In this type, apart from the base rent, the tenant pays a specified percentage of the retail sales or profit. Such leases are most common in shopping malls.
• Gross or Full-Service Lease?– The tenant is responsible for the base rent, and the landlord pays for the operating costs such as insurance, taxes, utilities, amenities, etc. These leases are found for tenants who share spaces in a shared building with multiple tenants. However, additional rent can be charged, and understanding what additional rent you could potentially pay is important.

Here are five tips for negotiating a commercial lease – one that protects your needs and works to your advantage.

1. Evaluate Your Business Needs for Rental Space

It’s crucial to know your business requirements and ask yourself questions before leasing a commercial space. How much space do I need? Do I need an entire office or a hybrid workspace? Is the location convenient for my business operations? Will my lease cover my business expansion plans and the need for more space in the future?

Access your company’s current financial health, projected revenue, and risks before moving forward with a lease to ensure you will be able to afford it. Monitor the changing dynamics in the market, especially now, there could be options to negotiate further and create rental savings.

2. Correct Understanding of the Area/Space on Lease

Seek clarity on the square footage of the commercial space you are looking to lease. Most landlord representatives and brokers present the Rentable Square Feet (RSF). It’s essential to understand how RSF was calculated for a given property. Also, ask them to calculate and explain in the Usable Square Feet (USF).

3. Think Long-Term

Your corporate office or business address adds to the image of your company. While you may not want to commit to a long-term lease, think of the effect it can have on your business if you had to vacate the space suddenly.

Upon business expansion in the future, you may need more office space for your employees. It’s easier to negotiate with an existing landlord than a new one when you are within your lease term. Don’t wait until the end of your current lease to determine your space requirements; staying ahead of the game can give you a head start on negotiations.

4. Renewal Terms and Conditions of the Lease

Commercial leases can be both short-term and long-term, depending on your needs. Take a note of the timeline and process of the lease renewal. Speak to your landlord about the

different options on the lease like renewal clauses, first right of refusal to lease an adjoining space for expansion, and sometimes possible early termination options.

Remember to be mindful of the landlord’s position too. Remember, your relationship with the landlord extends way past the date you sign the lease, so a cordial and professional relationship goes a long way.

5. Hire a Tenant Representative/ Commercial Brokerage Firm

Remember, a commercial property differs from a residential property, and so do the tenant representatives who assist in closing a deal. Suppose you don’t have the time or are not familiar with a commercial property’s legal and market terms. In that case, it’s best to hire a professional who can aid in competitive negotiations. A good broker will add value and guide you through the process to help you meet your business objectives and be happy with your location.

Oliver CRE Has Served Clients for Decades

Finding a suitable commercial space at a convenient location is an uphill task. Oliver CRE Tenant Broker Services is on your side. We can make it easier and help you with the entire process while focusing on what matters most to you – optimizing operating costs, maintaining your brand, and concentrate on the business at hand.

With decades of experience in tenant representation, we look for tenant benefits in the contract. We will help you find the type of space you need – from office spaces, co-working spaces to executive suites and warehouses at unparalleled locations.

Oliver CRE also offers property management services, maintenance and facility services, construction services, and so much more to value add to a relationship that lasts further than lease signing.

Our “under-one-roof” services company understands your business needs. For more information, connect with us at 281-558-1111.