How to Negotiate Better Commercial Leases
For companies that choose not to buy their office space, a commercial lease may be the biggest expense your business has each month. Something that's so central to your work needs proper attention.
Figuring out the details of the lease is important to small business owners but in many circumstances they don't take the time to go over it and negotiate the terms. That means every month the company paying out money that could go somewhere else.
While it may take some time to figure out the lease, you can help your bottom line by figuring out how to better negotiate your commercial lease.
- Be clear on what's covered. Just like a residential lease, a commercial lease covers more than just the premises. It also includes who pays utilities, who performs maintenance, and who is responsible for insurance, among other things. Being familiar with that is a good jumping off point to start negotiating.
- Don't go it alone. You're a small business owner, not a real estate broker, so don't make the mistake of representing yourself. There's a good chance the landlord has a broker or attorney on his side which could leave you at a disadvantage. Find a good broker or an attorney who can negotiate your lease and even the playing field or even tip it in your favor.
- Consider the long term. If you like your space and want to stay for a while, consider taking out a multi-year lease. The longer you're willing to stay, the more leverage you have to ask for things you want. Your landlord may be more likely to make some concessions if you're willing to stay and pay rent from more than one year.
- Cap your expenses. The downside to signing a multi-year lease is you might find yourself locked into fees that go up every year with no sign of stopping. One way to counter that is to set a cap on things like management and operating fees based on a percent of your base rent fee. Your broker or attorney could also help you negotiate an overall cap on increases in fees.
- Be mindful of deadlines. Nothing destroys your leverage like coming to your landlord 30 days before the lease is over and asking for concessions. If you want to stay in your current place, start considering what you want several months before and talk to the landlord and renegotiating the lease. That gives you more time to reach an agreement and more time to look for a new place if the landlord is unwilling to compromise.