Commercial Leases: Negotiate the Best Terms
Save money by knowing where landlords are willing to make concessions.
When you get serious about an available business space, chances are you'll be presented with a typed or printed commercial lease prepared by the landlord or the landlord's lawyer. As you read the lease, keep these points in mind:
- Rule 1: The terms almost always favor the landlord.
- Rule 2: With a little effort you can almost always negotiate significant improvements to the terms.
In theory, all terms of a lease are negotiable. But your negotiating power depends on whether your local rental market is hot or cold. If plenty of commercial space is available, you can probably win many landlord concessions. If your area's rental market is tight or you are chasing a unique space, you'll have considerably less leverage.
Length of the Lease
One area of the lease you should always focus on is its length -- also called its "term." A short-term lease is almost always to your benefit. Shorter leases give you more flexibility if the needs of your business change -- for example, you want more space or decide that a different location would be better. There is a trade-off here, of course. A long-term lease ensures that you'll have an affordable business space for a predictable period of time. And landlords are often willing to make more concessions on longer-term leases.
If your business isn't particularly location-sensitive (a mail-order business or software testing lab, for example) and plenty of commercial space is available in your area, then a short-term lease makes sense. Even if the landlord doesn't renew your lease, finding comparable space won't be a problem.
On the other hand, if you have found an especially favorable location for a retail shop, restaurant or other business where location is key, deciding on the best lease term is more problematic. If your business does well, you'll want the right to stay on for an extended period. On the other hand, you'll probably be nervous about signing a four-year lease in case your business goes kaput.
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