At first There are other costs aside your monthly rent that you will be required to pay when you rent an office space. One of these We believe that we have a responsibility to leave the world in a better state than what we found it in. Learn More. Rent Abatement Rent abatement means free rent. Tenant Improvement Allowance The longer your lease, the more tenant improvement TI allowance you will be able to negotiate. Enhanced Negotiation Power Most landlords typically prefer long-term leases, and if you're willing to commit to one, you have more leverage to bargain for an improved deal.
Stability When you sign a long term commercial lease, you can plan for the future. Expansion A long term commercial lease enables stability which in turn allows you to plan expansion. Complex and Lengthy Negotiations The complex nature of long-term leases can make for a slower negotiation process. Lack of Flexibility When you sign a long term commercial lease, you lack the flexibility to move into a different market or to expand into a new location.
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. 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. 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. Most business owners are not experts on lease negotiation and can benefit significantly from having help.
Unique Properties, Inc. Although these factors usually dictate the market standard for lease terms, each landlord may behave differently. Typically, landlords offer more concessions like additional TI allowance, free rent and more attractive rates in exchange for longer leases. Most landlords will prefer to have tenants sign a longer lease, as it gives them stability within a building. The more competitive the market and the more concessions you ask them for, the more leverage the landlord has to demand a longer lease.
Most new leases come with some amount of Tenant Improvement TI allowance. Often times, the dollar amount required to build out a space is larger than what the landlord initially offers. If you need additional TI allowance dollars, a landlord may be more willing to offer these if you commit to a longer lease term in exchange. This way the landlord can recoup the additional tenant improvement dollars over the life of your lease. Shell spaces , which lack interior walls, carpet, doors and other basics features of a functioning office space, require higher TIs to finish out.
Because of the higher TI requirement, most landlords require a longer lease commitment — typically seven or more years. Because most new developments deliver interiors in shell condition, it is typical to see longer lease requirements in new construction. Market conditions also dictate lease terms landlords are willing to agree on. In competitive markets like Austin where there are a number of companies opening offices and expanding, traditional landlords typically will not agree to a lease under three years.
Each time a tenant vacates a space, the landlord has to spend time and money to market the space, pay additional broker commissions and TIs.
That way if things don't work out you are not stuck with a lot of lease term to pay for. Keep in mind that a shorter lease term typically means you will have less leverage to negotiate concessions such as tenant improvements or rent discounts.
Depending on the space and building you are interested your only option maybe a year lease or longer. If the space needs a lot of build out and you are asking the landlord to pay for most of that then expect to have to sign a longer term lease.
If the market is hot and there is a lot of interest in the space you want then expect to have to sign a longer lease. For example a 5 year lease with a year option to renew. If you are in doubt of the longevity of your business then stick to shorter business lease terms. If your business is stable with consistent sales then there is no reason to unnecessarily sign short term office leases because you will end up paying a premium to do so.
With the right help from a tenant representative you will be able to evaluate your current needs and determine the right commercial lease term for your company. Receive a free list of available spaces custom to your needs complete with lease rates, photos, and floor plans:.
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