Friday, 09 July 2021 14:05

How to Negotiate a Commercial Lease: 8 Tips + Tricks

Unlike leases for residential properties, commercial leases are expected to go through multiple rounds of negotiation. The initial lease that is provided to you is essentially a rough draft. Your potential landlord or property owner is anticipating that you will request changes to the proposed lease. Here’s how to negotiate a commercial lease to ensure you get the best possible outcome for your organization.

1. Be aware of leasing agreement timelines

Negotiating a business lease is likely to take longer than you expect, so get started on your hunt for the ideal workplace as soon as possible. And once you receive a leasing agreement, get started on your negotiations right away. Taking too long to negotiate a lease could lead you to sign a less-than-ideal agreement due to a lack of time.

2. Consider term length

Tenants who are willing to sign a long-term lease tend to have more bargaining power. When a landlord understands that an office space will be occupied for a long time, he or she is more likely to agree to concessions. Keep in mind though that long-term leases are not appropriate for every business. A short-term lease may be a better fit for your firm if your future demands are uncertain or you're establishing a start-up.

3. Decide which items from your wish list are most important

Negotiations are a two-way street. It's unlikely that you'll be able to persuade the landlord to follow through on all of your requests. Instead, prioritize the items from your wish list. Doing so will help inform you which things you can be flexible on and which things you need to be firm on.

4. Equip yourself with CRE knowledge

Understanding your local commercial real estate market gives you an advantage during the negotiation process. This is especially true in the aftermath of COVID-19 when the commercial real estate market is in turmoil.

5. Focus on flexibility

If you decide to sign a long-term lease, you should concentrate on expanding your flexibility during the negotiating process. Including early termination, sublease, and assignment options in your contract will help safeguard your company from unexpected changes that could drastically alter your office requirements (such as a potential second shift to remote work as the Delta variant of COVID-19 spreads).

6. Review tenant improvements

Take the time to examine what improvements to the office space will be required for your team and conduct some research to determine the estimated cost of the job. Remember that landlords are frequently hesitant to offer big tenant improvement allowances. If you've reached a stalemate, you might be able to shift tactics and ask the landlord for a rent reduction to help cover your out-of-pocket expenses.

7. Double-check the information

Make sure you run through all of the calculations to ensure that all of the numbers are correct. You might employ an architect to assess the measurements if you have any doubts about the usable or rentable square footage.

8. Hire a professional

If you’re feeling at all overwhelmed or underqualified during the lease negotiation process, hire a CRE professional. Throughout the negotiation, a tenant representative will be on your side, working as your advocate. Hiring a tenant rep broker is a straightforward, cost-effective approach to tip the negotiating scales considerably in your favor because their fees are reimbursed by landlords.

Learn more about how to negotiate a commercial lease

If you’re interested in learning more about how to negotiate a commercial lease, reach out to us today at Lavoro Consulting. We’ve helped save clients millions of dollars through lease negotiations, and we’ll put our best foot forward for your needs too.

Contact us today to learn more.