Feb 20, 2017

10 Commercial Leasing Tips for Tenants

By Don Catalano


10 Commercial Leasing Tips for Tenants.jpg

While the art of negotiation means making compromises, you want to ensure that you walk away with a commercial lease that isn't all in your landlord's favor. To ensure that you're getting the best deal when leasing commercial real estate, follow these 10 tips:


1.  Have an expert by your side

A tenant rep broker can help to ensure that your interests are protected at the negotiating table. As experts in commercial real estate, brokers know the market and can help you decide when you have a fair deal. Best of all, a broker's fees are paid by the landlord, so their services won't cost you a thing.


2.  Think past the contract

When you're presented with an initial contract, the landlord may tell you that it's standard and act as if every other tenant simply signs without any discussion. Don't be fooled by this practice. The first version of the contract will be written only with the landlord's interest in mind. Think of it as a starting point or spring board for a negotiation.


3.  Calculate all of the costs

Never make the mistake of only calculating the cost of rent. You'll also need to add in the Common Area Maintenance or CAM and any other fees that are being assessed to ensure that your monthly payment fits your budget and is fair.


4.  Start as early as possible 

Waiting too long to start looking for commercial office space can make it harder to negotiate a fair contract. When you have time on your side, the landlord won't be able to take advantage of your sense of urgency, and you'll have time to start your search anew if you can't reach a fair agreement.


5.  Comb over the entire contract 

Read over every line of the contract and make sure you understand all of the terms. Seek clarification on any confusing points before you sign.


6.  Prioritize your wants

Make a list of all of the amendments and concessions that you want to have added to the contract before you get back to the landlord. Prioritize them, deciding which ones are deal breakers and which ones you can live without, so you'll be able to compromise during the negotiation.


7.  Know the market going in

Having a working knowledge of what other tenants in the area are paying and what types of contracts truly are the standard will have you armed and ready to prove that your requests are reasonable. If you don't follow tip number one, make sure you do plenty of research before you negotiate.


8.  Include your team 

Before you sign the contract, have members of your management, finance, legal and operations team review it and provide feedback. You never know what fresh sets of eyes may find in the text.


9.  Fight for flexibility

Whenever possible, try to provide some way to keep your lease flexible in case your needs change. Subletting clauses or the right to renegotiate or end your lease early can save you from hassles in the future.


10.  Be willing to leave the table

Most importantly, be willing to walk away if your landlord won't meet you halfway and give you the concessions at the top of your list. You'll be better off going for your second choice property for a fairer deal than you will be settling for terms that aren't the right fit for your business.  Here are some terms you should look for in a commercial lease.


Like this article? You might want to check these out:

10 Must-Know Commercial Real Estate Terms

Top Deal Breakers for Tenants in Commercial Real Estate

Four Myths About Commercial Real Estate...Debunked


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Don Catalano

Don Catalano