Five Things to Negotiate in Your Next Lease
Negotiating concessions in a commercial lease transaction is largely about tailoring certain aspects of the deal to fit the needs of your business. If you work with your real estate advisor you can successfully map out your objectives and priorities.
Here are 5 things to consider when negotiating a concession package with your current or future landlord. Securing market-driven concessions from a landlord can greatly impact the early success of a start business. Also, it can greatly impact the bottom line when renewing or relocating your business. It is important to remember that what is considered “market concessions” is different in each city and submarket. An experienced commercial real estate advisor will know what to ask for and how hard to advocate for you. Here are the top 5 concessions to prioritize:
1. Rent Abatement
Rent abatement is a concession where the landlord agrees to reduce or waive rent payments for a certain period of time. This can be extremely helpful, especially if you’re just starting out or if you’re dealing with relocation expenses. Negotiating for rent abatement can help create the foundation of your
business and start generating revenue. When negotiating for rent abatement, it’s important to determine the amount of rent reduction that aligns with your business needs. The rent abatement period should be long enough to help your business get off the ground. Additionally, the rent abatement period should fall in line with what other landlords are offering at similar buildings.
2. Tenant Improvement Allowance
A tenant improvement allowance is a concession where the landlord agrees to cover the costs of improvements to the leased space. Including paint, carpet, or installing new fixtures. This can help you customize the space to fit your business’s specific needs. When negotiating for a tenant improvement allowance, be sure to understand your space requirements, specifically, the actual cost of the improvements. It might also be possible to negotiate a “turn-key buildout” where the tenant and landlord agree on the work to be done to the space. In a “turn-key buildout” the the landlord is responsible to have the work completed.
Parking is often overlooked in lease negotiations, make sure to negotiate for enough parking spaces for employees and customers. If your business relies heavily on foot traffic, convenient parking can make all the difference for customer or employees. Generally, negotiating for parking will also help you avoid potential disputes with neighboring businesses over parking spaces. In urban centered offices it is common to have to pay for parking which can be negotiated for some amount of abatement to start.
4. Renewal Options
Renewal options are a concession where the landlord gives you the option to renew your lease for an additional term. This can be a great way to secure your space and ensure that you have a stable location for your business. It’s important to negotiate for a reasonable number of renewal options and fair rental rates. Having the ability to renew your lease can allow you to focus on growing your business furthermore having a peace of mind that you can grow and expand in your building without having to move.
5. Moving Allowance
A moving allowance is a concession where the landlord provides financial assistance for your business to relocate to a new space. Negotiating for a moving allowance can help offset the costs of moving and ensure a smoother transition for your business. Additionally, owners will allow you to use this allowance to also pay for new furniture for your office.
Remember to prioritize the ones that are most important and relevant to your business. Your landlord will have a budget for how much they will spend to win your business. Everything you are asking for from the landlord is coming from the same “pot of money.” Rent abatement, tenant improvement allowance, parking, renewal options, and moving allowance can make a big difference in the success of your business. Don’t leave money on the table in your next negotiation. Hire an experience commercial real estate broker in your market. For a small business owner, every dollar counts!
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