Dec 09, 2019

7 Ways to Save Money on Your Next Commercial Lease

By Don Catalano


7 Ways to Save Money on Your Next Commercial Lease
Commercial leases are major expenses for any company, so naturally, you want to ensure that you're getting the best deal possible when you're moving into a new office or building. Following these tips will help you reduce initial, ongoing and final costs to positively impact your bottom line.


1. Hire a Tenant Rep Broker

Having a tenant broker represent you during the leasing process is the simplest way to control costs. A tenant representative's fees are paid by the landlord, so their services don't add to your expenses. Tenant reps can ensure that you're not opting for an office that is too large for your company, provide insight about market conditions and act as your advocate during the negotiation process. Plus, tenant reps complete much of the legwork for you, freeing you up to focus on your business.


2. Consider the Lease a Work in Progress

Don't make the mistake of accepting the first lease agreement that your landlord gives you.  The first draft of the lease will be written heavily in the landlords favor and should be considered a starting point. Negotiations are an expected part of the leasing process, so you should be prepared to counter.


3. Arm Yourself With Knowledge

Having a thorough knowledge of market conditions allows you to expertly analyze the lease and negotiate from a position of power. Taking the time to do research at the beginning of the process can lead to big savings.


4. Be Smart About Build-Outs

Any expenditures beyond the tenant improvement allowance specified in the lease will come out of your own pocket. While it may be possible to convince the landlord to provide a more favorable allowance, you'll want to limit the costs of your build-out as much as possible. Try to reuse as much of the existing structure as possible and be sure that the lease gives you the right to remain involved in the process, so you can provide input about which contractor's bid to select.


5. Do the Math

Don't assume that the figures specified in your lease are correct just because they appear in black and white. Take the time to crunch the numbers to determine that the base rent is accurate given on the square footage provided. Also, ask the landlord how they arrived at the load factor, the number that is used to determine your share of common spaces in the building. Double check the math to ensure that your common area maintenance fees are assessed fairly.


6. Break Out Your Measuring Tape

Even small errors with measuring can result in unnecessary costs for tenants, and unscrupulous landlords may try to pad numbers by adding in space that is not actually used—like elevator shafts and external facades. Hire an architect to measure both your office and the areas that are being included in common areas.


7. Keep Your Options Open

Always have one or two backup offices in mind, so that you can walk away from a negotiation that isn't going anywhere without having to start back at square one.


Here are a few older articles we know you'll like:

10 Commercial Office Site Selection Tips

What to Avoid in Commercial Real Estate

Top Deal Breakers for Tenants in Commercial Real Estate


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Topics: Commercial Lease

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Don Catalano

Don Catalano