Leasing space in a building for your business enterprise can take negotiating to receive your desired terms. This is not always a simple transaction, and it may be best to find representation by a commercial real estate agent. Even if you work with an agent, you need to understand how you should counter offer.
Have a Lawyer Review the Lease
Upon your initial letter of intent, request a copy of the standard lease so that you can read all of the terms to which you must agree. Have an attorney review this document. Then you will know how to counter offer the response of your original offer by the landlord. If you want a clause in the lease to be changed, this is the time to request it.
Use Commercial Lease Negotiation Tactics
Counter offer on more than one space at a time. Although this requires more work for you and your agent, if you have one, it improves your negotiating posture so that you are not set on one location. If the landlord knows that you are entertaining leases for other spaces, you may have the upper hand.
Measure the Space
Measure the desired space yourself. If the square footage on the lease is not accurate, you can lower the cost of the space by counter offering the actual size.
Ask For a Shorter Lease Term
Reduce the term of the lease to as short as the landlord will agree. Unless you are being offered rent far below market rates for a long term, a short lease is a benefit to you in case you need a larger space or if your company fails during a the time of the commitment. Breaking a lease can be costly. You will pay a higher amount per square foot for a shorter lease, but it may be worth it in the end.
Resist an Automatic Rent Review
Request a limit on the year-to-year rent increases that are incorporated in most commercial building leases. Because they are based on projected higher operating costs or possible vacancies of other units, they may not be accurate. Capping increases will help you realize a higher income from your business activities.
Ask for a Non-Compete Clause
Ask the landlord to include a clause in the lease that prohibits management from allowing a business that competes with yours to be placed in the same building.
Ensure You Can Sublet the Space
Include wording that allows you to sublet the space in case you must vacate before your lease term has expired. If the landlord insists on a long-term lease, then this clause will be more important to completing the transaction.
Avoid a Personal Guarantee
Avoid a personal guarantee as part of your proposal to lease commercial space. Most new business cannot find rental space unless the tenant agrees to continue to personally pay the rent if the business fails and you must move. Using your business name as the only one on the lease is an advantage to you, but you may have to concede this point when it comes time to sign on the dotted line.
Carol Deeb has been an editor and writer since 1988. Her work has appeared in magazines, newspapers and online publications, as well as a book on education. Deeb is a real-estate investor and business owner with professional experience in human resources. She holds a Bachelor of Arts in English from San Diego State University.