When you're leasing an office or building for your business, you should think of the first contract provided by the prospective landlord as a rough draft. Unlike residential leases, commercial leases typically involve multiple rounds of negotiation. The first lease agreement will likely be written in the landlord's favor, leaving it up to you to request the modifications to even the score. Following these tips will help to ensure that you win at the negotiation table and walk away with a fair lease.
1. Create a Winning Team
You can't win a team sport if you go on the field alone, and you shouldn't head to the negotiating table by yourself either. An accountant can help you determine if the proposed costs make sense for your business, and an experienced real estate attorney can spot potential problems lurking in lease clauses.
A tenant representative broker is also an important part of your lease negotiation team. Brokers don't just help tenants find the right offices and buildings for their needs; they also act as advocates to help ensure that their clients get the best possible deals. In contrast to other professionals that you may hire for your team, a tenant rep broker's services don't cost your company a thing. The landlord covers the cost of their fees.
2. Don't Go in Blind
Winning any game would be much harder if you play wearing a blindfold, and that's exactly the position you put yourself in if you sit down to negotiate without any knowledge of the current real estate market. COVID-19 has dramatically changed the commercial real estate landscape in many areas, so even if this isn't your first commercial lease, vacancies and average rent rates may be very different from the last time you signed. Make sure that you do some research and have a clear picture of current market conditions before you begin negotiations. An experienced tenant rep broker can assist you with this.
3. Go Long-Term When You Can
Landlords are typically more willing to make concessions during negotiations for tenants who are signing long-term leases; however, being locked into a lengthy lease may be less than ideal for your business. Weigh the pros and cons of going long term after you conduct your market research. In areas with higher vacancy rates, you may be able to get favorable treatment even with a short-term lease.
4. Build in Flexibility
If you do opt for a long-term lease, negotiate to maximize flexibility. Introducing early termination and right to sublease and assign clauses will help to future-proof your lease. Although it may cost you money or require landlord permission to exercise the rights they give you, this type of language helps to ensure that you're not trapped in a space that no longer meets your business needs.
5. Leave a Back Door Open
Even if you strongly prefer one office or building over all the others, make sure you always have a backup plan in place. Should negotiations fall through, you don't want to find yourself having to return to square one and begin looking at potential spaces all over again.
Here are a few other articles we think you'll enjoy:
The Importance of An Office Layout
Ways to Know It Might Be Time for New Office Space
8 Things to Be Aware of in Your Commercial Leases
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