Whether you are an entrepreneur preparing for your first brick-and-mortar opening or an established company looking to relocate or expand, establishing favorable terms during lease negotiations can make the difference between struggling and striving.
Businessmen and women themselves, savvy landlords often create lease contracts that ensure the profitability of their own bottom line. One of the most important aspects of negotiating a commercial lease is deciding between a shorter or longer-term contract.
1. Know that landlords often favor longer lease terms
Landlords generally favor longer leases that allow them to realize a stable cash flow while minimizing the expense associated with contracting and installing a new tenant.
On the other hand, business owners often prefer shorter leases for various reasons. New businesses that anticipate rapid growth and the need for more space may prefer to keep options for relocation or expansion open. Meanwhile, entrepreneurial companies may not be ready to commit to a specific space.
2. Consider the potential advantages of a longer lease
Because many landlords prefer longer, stable lease terms, they may be willing to offer prospective tenants certain perks for committing to a long-term lease.
In addition to reducing the cost per square foot of space, a landlord may provide significant tenant improvements if a business owner chooses to commit for a certain period of time. That might include changes to walls, ceilings and lighting as well as custom design elements.
3. Remember to think about renewal options
Business owners considering a lease should also pay close attention to renewal options. Often a contract includes options to renew either via formal request or automatically.
Established companies may benefit from a longer original lease term with multiple options for renewal, while a start-up organization may prefer a short initial contract followed by one or more renewal options.
4. Realize that terms are negotiable
Whether your organization is just getting started or you have an established brand, know that commercial leases are nearly always negotiable. By taking the time to evaluate all your options, you may be able to get more for your money than you anticipated.