Leasing space is usually a great way to both save money and reduce your company's debt load. Doing it the right way can save you even more, though. Here are some tips for how to manage your commercial lease and minimize costs as much as possible.
Reuse More, Build Less
The tenant improvement allowance that you get from your landlord won't go as far as you expect. Between having to follow the building's arbitrary rules and choose contractors that are acceptable to your landlord, you will probably find that you have much less latitude over what you end up spending than you expect. However, if you're rebuilding existing space, look to reuse as much as possible. Something as simple as reusing ceiling tiles and grids could save you a few dollars per square foot. Doors and interior glass features that can be moved or reused in place can also add up to thousands of dollars in construction savings.
Remeasure Everything -- And Negotiate That
If you think measuring commercial lease space is a simple process that takes a tape measure and a few minutes, you're sorely mistaken. Coming up with the rentable area of your next office is an extremely complicated process that can include making theoretical measurements from the inside of walls, adding in or subtracting outside spaces covered by awnings and calculating the total area of a multi-building park. Believe it or not, many landlords get it wrong. Shockingly, they are more likely to get it wrong in their own favor.
Especially if you are leasing a large space, hire a professional to do your own measurements. In addition, read the proposed commercial lease carefully to see which measurement system the landlord is using. You may be able to renegotiate the way that the space is measured to come up with a system that is more favorable to you.
Control Your CAMs
Common area maintenance charges can be a major source of surprises for commercial lease tenants. The challenge with CAMs is that they get paid by you but are under your landlord's control. Many are also pro-rated charges across the whole building, so if your neighbor uses a lot of water, you'll end up paying more, too.
Consider having as much of your CAMs unbundled as possible, if your landlord will allow it. You might be able to do small repairs in your space by yourself, saving you from being billed trip charges and inflated hourly rates. The more utilities that you can have separately metered, the better, especially if you are a company that values conservatism. Since many leases contain CAM administration fees, even if you don't save anything on the base cost of the task by doing it yourself, you will avoid that fee, which can be 10 or 15 percent of your total CAMs.
Prenegotiate Options
If your commercial lease has an option to renew, try your best to prenegotiate the rent in the option period. Many landlords will put language in that says that the lease will renew at fair market value (or at 95% of FMV). This might seem like a good deal, but what it means is that if rents skyrocket, you'll have to renew at much higher rent. Instead, try to write in a specific amount that is anywhere from 0 to 10 percent higher than your rent at the end of the lease. That way, if rents skyrocket, yours will have been fixed at a reasonable level. If rents stay flat or drop and your option isn't a good deal, you can always renegotiate. Either way, you win.
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