Once you have found the ideal space or building that is ideal for your business, you've only completed the first stage of the leasing process. Commercial leases are unlike residential rent agreements in that negotiations are expected. As you prepare to head into negotiations with your landlords, it's important that you know the following things:
1. What Their Reputation Is Like
While many of the landlords in a geographic area are reputable, there are a few bad apples in every bunch, as the saying goes. That's why it's vital that you complete due diligence and research your prospective landlord. Start with a google search of their name and their company name. This will typically be enough to uncover any major violations of zoning or safety laws, troubling lawsuits or widespread complaints. You should also plan to visit your potential neighbors in the building. Dissatisfied tenants are often quick to criticize landlords.
2. They Are Acting in Their Own Interests
Even if the landlord is friendly and reputable, they have their own interests in mind at the negotiating table. To even the playing field, enlist the help of a tenant representative broker. A tenant rep will act as your advocate and advisor, ensuring that you get the best terms possible and a fair agreement overall.
3. Stability Has Big Appeal
For landlords, stability is a top priority. The ultimate goal of landlords is generally to keep spaces occupied for as long as possible with stable, trustworthy tenants. As a result, landlords favor long-term lease agreements. If your company is able to agree to long-term leasing, you're likely to find your landlord more willing to be flexible about rent rates and concessions.
4. TIAs Come Out of Their Pocket
TIAs or tenant improvement allowances are major expenses for landlords, so you can expect yours to be stingy when negotiating an amount. Should you find you cannot arrive at a price that will enable you to complete the improvements your company requires, try shifting strategies by asking for a rent abatement instead. Giving you a certain number of months of free rent so that you can pay for improvements out of pocket is often much more appealing to landlords.
5. They Can Make Mistakes
Just like everyone else, landlords can make innocent mistakes. Before you sign the lease, take the time to perform key calculations like the rentable square footage and load factor for yourself. You may even find it beneficial to hire an architect to double check square footage measurements.
6. They May Be Less Than Transparent
Landlords may be intentionally vague in order to protect their interests and leave leases up for interpretation. As you read the agreement, make note of any areas that are not clearly defined. For example, the lease should state in transparent language what is included in the Common Area Maintenance fees or CAM. Have a lawyer double check the all of the drafts of the agreement to ensure that opaque terms don't create loopholes for the landlord to exploit.
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