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3 Tips for Negotiating A Commercial Lease

3 Tips for Negotiating A Commercial Lease

Prior to deciding on a business location, an entrepreneur and/or business owner should know there are many steps in the location decision process.  Negotiations for the commercial lease location will eventually follow. No matter what stage you are in concerning the location for your business – staying grounded, realistic and professional with a customized market survey of available office space will help you make better decisions.  Hiring a commercial realtor, ideally one specializing as a tenant rep, will help ensure the process is streamlined and the result is beneficial to you and your business.

3 Tips for Negotiating A Commercial Lease

Know length of lease

How long will that office location and size work? Is it too much space or too little space for a three, five, or seven + year period? Who will pay for the tenant improvements? Length of lease term can have benefits for both the tenant and the landlord. Time goes by quickly. Often a new business looks for a lease term of 2-3 years as ideal to allow for flexibility, accommodate growth, and, making sure the business is viable. Longer leases can bring in a better rate with more benefits, and still have some flexibility. In most cases a deal is struck if it is beneficial to both the landlord and tenant. Often the longer term office lease allows the landlord to invest dollars in tenant improvements and include cost (within reason) into the rent. So make sure to talk to a qualified commercial realtor to help you figure out the best deal for your needs. Also, are you interested in options such as renewing the lease? Figure out what your needs are before you enter negotiations. Typically office leases include some services and industrial and retail leases lean toward triple net terms.

Prepare yourself with knowledge

Before you go into negotiations for a commercial lease, prepare yourself by doing a little research. Hiring a real estate professional is a great choice for handling the procedure but knowing a bit of information yourself will be beneficial as well. One thing would be to know the lingo/jargon that will be used, such as the names used for various types of leases (full service, gross, net, triple net, or percentage).  The type of lease is usually associated with specific property types too. In the end it is the lease document that defines what is included – not always what is not included.  Negotiations and knowledge gathering generally begins with three items. Location criteria, a survey of what is available based on your criteria, and the step of touring the available space. The agent or broker you select can assist you with these three steps. Think about other team members such as architect, voice and data provider, project manager for tenant improvements, and real estate attorney.

Read the details carefully

Everything is in the details. Examine the lease thoroughly, even though it could be upwards of 50 pages. While hiring a qualified commercial realtor or tenant rep and a good real estate attorney  to examine the document and negotiate for you is a smart choice, examining it carefully yourself will be a second set of eyes in making sure you’re getting exactly what you want. Items such as a termination clause, non-compete clause, notice periods, common area maintenance (CAM) fees, or annual operating expenses are all important to know and may, or may not be clearly defined. Understanding what you’re responsible for, such as maintenance, repairs and upgrades, is imperative as each can greatly affect your bottom line.

Commercial lease negotiations can become tedious, but hiring a professional commercial realtor and a good real estate attorney to examine the details can make this process much smoother. Contact PG Commercial Real Estate today to speak with someone that can assist you and your business in securing the best deal for the right property at the right price. Market information and knowing the standards that are being used in the area can save you time and money.

Posted in: Commercial Real Estate

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