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Tips for negotiating a commercial lease

On Behalf of | Nov 29, 2022 | Real Estate Law |

Running a business is challenging and costly. One of your highest costs is the mortgage or rental payments for your buildings.

Whether your company is new or well-established, you understand the importance of reducing your costs as much as possible. Therefore, these are a few tips to help you negotiate your commercial lease.

Evaluate your budget

First, you should do an in-depth review of all your costs. Then, determine what costs you will pay when you move into a new building. For example, your insurance, utilities and rental rates may change. Determine how much you can place in an account for incidentals for building maintenance and other unexpected costs. Make sure you can afford all the costs associated with your move.

Determine your needs

You obviously want enough space that you can grow your company without having to move again, at least for a few years. Therefore, consider your current and future needs with regard to space and amenities. Also, identify your ideal location and any locations you would consider. You should also clarify your ideal lease terms, including your lease period.

Do some research

Commercial leases typically come in several formats: gross rent, percentage rent and net leases. Pay attention to the additional expenses, such as property taxes, maintenance, insurance and other expenses you may be responsible for.

Next, research the rental market, including current market lease rates and available properties in the area you hope to lease. In addition, investigate the properties in the area, including their tenants, location traffic and types of businesses. Check into the landlord’s reputation and business practices.

To gain a stronger negotiation position, identify tenant inducements, such as vacancy time, renovation requirements and other incidentals that could reduce your rent or gain you a few months of free rent.