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Tips for Negotiating an Office Lease

February 28, 2012 | Comments: 0 | Views: 118

Create competition for your tenancy. You want as many landlords as possible wanting your tenancy. This will give you the negotiating edge. Look around at other locations and see what's new in the market. Create competition for the landlord. If you're in the process of renewing your lease, make the landlord re-earn your tenancy.

Give yourself enough time. When it comes to a brand new lease agreement, it takes six months to get a business open, a month or so to select a location, a month to negotiate a formal lease agreement and then there's the time needed to design the space. Five or six months can pass by quite quickly. If you're renewing your lease, give yourself at least 9-12 months and do as much negotiating as you can before exercising your renewal option.

Do your homework. Talk to as many tenants as you can. Some of these tenants may be moving out and willing to share what took place during their tenancy and negotiation process. This is valuable information to have before you sign a five year lease and move in yourself. When you're negotiating the term, remember it doesn't have to be 5 years. Also be mindful of when you start your lease, especially if you own a retail business. If your five year lease began in October, 60 months later you'll be moving out during peak season. For this reason you should consider negotiating a 56 month or 63 month lease. The general rule of thumb is that your lease should begin going into your peak season and end going into your slow season. Remember that a deposit is not mandatory. The landlord may call it a security deposit, but you may not be a security risk at all. Deposits are negotiable.

Don't be afraid to ask for more than you think you'll get. For example, you may be negotiating for a tenant allowance, the amount of money a landlord will give you as an incentive or as an inducement to help you build up the location. If you're negotiating for $30,000, it makes sense to start by asking for $40,000 or $50,000, giving yourself room to go back and forth. You may be able to get twelve months rent free because you weren't afraid to ask for eighteen.

Evaluate the real estate agent's role. Real estate agents have historically represented landlords and the landlord has paid the agent's fee. If the agent is showing you all over town at multiple locations represented by other agents, fee splitting could be taking place. Ask yourself who the agent is representing. Is the agent representing you or the landlord? Who is paying this individual? In commercial real estate commissions are typically 6%. If the tenant pays a more rent, then the agent gets a better paycheck.

Measure your space. Landlords rent space by square foot. Often phantom space occurs where tenants don't have as many square feet as they thought. You may think you have 4400 square feet when in reality the space only has 3600 square feet. Measuring the space before you sign the lease could save you thousands of dollars in rent.

Have lease documents professionally reviewed. Nearly half of all commercial tenants don't have anyone review their lease. Your lease document is a valuable asset. You may want to sell your business, assign your lease agreement, take on a new business partner or change partners. The terms and conditions in your lease agreement are there for a reason and in most cases are there to protect the landlord. If there are problems with the agreement now, they'll be there five years from now.

When it comes to commercial leases, you don't get what you deserve, you get what you negotiate.

Source: EzineArticles
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