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How long to negotiate a commercial lease?

Posted by admin on April 6, 2021
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how to negotiate commercial leases

Key Takeaways: 

  •         Negotiating a lease can take a day or a year but usually takes three to nine months
  •         The process of negotiating a commercial lease can be complex
  •         The right brokerage can help you get more of what you want from your lease

Renting a space for your business can be both an exciting next step and a stressful negotiation process. It is common practice to negotiate leases for commercial spaces. Therefore, if you just accept the initial offer, you are likely paying more than you have to. However, the negotiation process can take some serious time and effort to complete.

What is the average length of negotiating a commercial lease?

Negotiating a commercial lease can take anywhere from one day to a year or more. It all comes down to how close the parties are in terms of expectations at the beginning. Additionally, if neither party is willing to give much leeway, the process can take time.

However, the average length is about three to nine months. This is for a fairly moderate amount of granularity and back-and-forth.

Some of the factors that can impact the negotiation process include the size of the space, the market value of the lease, each party’s willingness to negotiate, the number of rounds, and the parties’ experience. Both parties want to get good terms on the lease. However, neither party benefits from an unnecessarily protracted process (especially the landlord if the space is vacant).

How to negotiate a commercial lease agreement?

If you are new to negotiating commercial leases, the process may seem a little intimidating at first. From a high level, it is quite simple. You just need to make and receive counteroffers until both parties are happy. Of course, the details can get much more complicated. These are the basic steps for negotiating a commercial lease:

  1. Express Interest in Leasing Space: The process starts simply by indicating that you are interested in leasing the space. This usually happens after you have toured the place. You or your representative will likely already have some contact with the landlord or leasing agent.
  2. Prepare Offer or Receive Offer: Next, you will likely receive a proposed lease from the landlord. In some cases, the parties will negotiate the top-line terms before getting into the specifics of a lease. However, it can be helpful to discuss the agreement in its complete form from the start to ensure that everyone is on the same page. If you prefer, you can make an initial offer. This may help you to start the conversation from a favorable point, but you run the risk of overshooting.
  3. Prepare Counteroffer: After this, you and the landlord will make a series of counteroffers. When you make a counter, you can redline the current proposed agreement. Alternatively, you can send a letter indicating the terms that you want to change.
  4. Repeat as Needed: This process will continue until both parties come to an agreement. In some cases, this may not be possible. The landlord may consider the space to be more valuable than you do. Alternatively, there may be some terms of the lease that won’t work for you both. Of course, this means going back to square one. So, it is often worthwhile being willing to budge.
  5. Sign Lease and Begin Tenancy: Finally, you can sign the lease. Then, you will begin your tenancy for the lease term.

Tips for Getting the Most From Your Commercial Lease

When you are negotiating a commercial lease, there are a lot of factors to consider. Keeping the following tips in mind will help you to get the best terms possible.

  • Always Negotiate: Don’t just accept the base rent suggested by the landlord. Chances are they are coming in high expecting you to negotiate down. It is a good idea to make a counteroffer on every lease.
  • Have a Few Possible Spaces: Ideally, you should be looking at two or more spaces. When you have options, you are negotiating from a position of strength.
  • Get Legal Help: Commercial leases are complicated. It is a good idea to have a lawyer or broker help you with the process. They will understand the terms and what you should be asking for.
  • Know What You Want: Don’t negotiate just for the sake of it. Know what you want from your lease. Have a target rent in mind and know what other perks and costs you are expecting. This will help you come to an agreement more easily.
  • Pay Attention to the Details: There are a lot of details in leases. Factors such as maintenance responsibility for the HVAC system can affect the overall cost of your tenancy. Pay close attention to your rights and responsibilities.
  • Consider Perks: Rent and expenses aren’t the only factors in leases. Perks such as parking spaces, renovations and even utilities may be included.

What are common points of commercial lease negotiation?

There are many elements of a lease that you can negotiate beyond the base rent. Perhaps the most common is the length of the lease. If you are confident about your business prospects, consider negotiating a longer-term in exchange for a reduced rent. However, try to avoid getting stuck with a long lease if your business hits difficulties.

You may also negotiate over the condition of the space. Some leases are written, “as is.” Others may require the landlord to make some renovations. In some cases, you may even be able to negotiate a budget that the landlord will pay for changes to the space to prepare for your tenancy.

Consider asking for a longer cure period. This is the time you have to rectify any breach of the lease before legal action is taken. You don’t want to be faced with fees and legal problems because you were a day late paying.

What are the benefits of a commercial real estate broker?

Strongly consider working with a commercial real estate broker to help with negotiating your commercial lease. Brokers are experienced with negotiating leases and can provide you with zealous advocacy. Additionally, they can provide guidance on what you can realistically negotiate based on their experience with the market.

Having someone act as your representative will save you time. If you are busy running your business, you don’t want to be spending all your time going back and forth on the lease. Most business owners are not experts on lease negotiation and can benefit significantly from having help.

Reasons To Choose Unique Properties, Inc.

Unique Properties, Inc. can help you get the most from your commercial lease negotiation. We are here to protect your interests throughout the negotiation process. Our mission is to deliver unparalleled representation and advocacy for our clients throughout Colorado.

We bring experience, tenacity, and creative solutions to every negotiation. These help us to deliver the results you want. Our team members offer local market expertise that can be essential for finding the best options for your business. However, we also have global resources thanks to our affiliation with TCN Worldwide.

Contact Us Today

If you are in Colorado and need help with leasing commercial space, Unique Properties, Inc. is here to help. Contact us today to learn more about what we can do for you.

Image credit: Shuttershock/By fizkes

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