Commercial lease negotiations are very long and arduous. These are the six steps to take if you want to have a successful commercial lease negotiation:
1. Learn About Leases
The first step you should take is to learn about commercial lease negotiation. Learn the art of negotiating and what you'll be negotiating. One of the most effective ways to acquire knowledge of leases is to research and read a few of them.
Enquire so that you can get to know more of some lease documents and familiarize the diction and vocabularies it entails.
Customarily, leases discuss:
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Your rent worth
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Other expenses
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The dynamics of the rent over time
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Period to move in
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Duration and validity
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Landlord rights and obligations
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Ability to assign the lease
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Your rights and obligations
Step 2: Enquire About the Market
Once you have an idea of what to find, the next step in the commercial lease negotiation procedure is to learn about what is generally normal in your market.
There are various research you can carry out, below are some of the common commercial lease negotiation factors to learn about:
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Lease types
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Rental estimates for similarly sized spaces on comparable buildings
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Rent increase rules
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Normal lease and option terms.
Step 3: Resolve and Decide on What You Want
Once you have made your enquiries about the market, you can start by formulating a goal and decide what you would ask for.
For example, you may be aware that 7,000 square foot class A office spaces usually rent out on 5year terms at $40 to $45 per square foot gross with five months of relieved rent and $25 per square foot in TI allowances.
If what you are looking for is a ten-year lease, which is more landlord’s advantageous, you may ask for $35 rent, 6 free months, and $32 in allowances.
One of the most important things you should consider during your decision is the cardinal rules of lease negotiation. You have to be a little more demanding to get what you want. So if you end up in the above example, you may go in asking for $30 rent, 9 months free, and $37 in allowances.
Step 4: Compose an LOI
LOI means letter of intent. Make a decision on what you want and after that, compose it in a letter of intent and deliver it to the landlord.
The LOI is typically a binding document. Putting something into writing is a very important part of running a commercial lease negotiation. This is also purposeful for future references.
Step 5: Negotiation
Once you've delivered the LOI, the landlord and team will review. Usually, a response is expected from them, compromising your terms to something they find more convenient. You and the landlord will bargain back and forth till there is an agreement.
Step 6: Signature
The final step of the commercial lease negotiation procedure is to get the lease signed. Normally, the attorneys will go back and forth about the legalese. This process is relatively easy since the LOI negotiation has been decided. Once this is done, the document is being signed therefore you are an eligible tenant.
Here are a few other articles we think you'll enjoy:
The Importance of An Office Layout
Ways to Know It Might Be Time for New Office Space
8 Things to Be Aware of in Your Commercial Leases
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