How to Negotiate a Favourable Commercial Lease for Your Business
Category Advice
So, you've made the decision to rent space for your business - congrats! This is sure to boost sales and take your business to the next level. But before you can kick your feet up onto your desk, you need to find the perfect location and sign the commercial lease agreement.
Rent can be one of a business' largest expenses. However, many business owners do a poor job of reviewing the lease agreement and negotiating favourable terms. This often leaves business owners stuck in lengthy contracts with hidden costs and unfair clauses.
Landlords are typically open to negotiation. Here's how to negotiate favourable terms for your business' commercial lease.
1. Evaluate Your Business Needs
First things first, make sure you have a clear understanding of your space requirements. Consider and clearly define the following items:
- List your company's current and expected space needs,
- Determine the square meterage required,
- Decide on your preferred location,
- Determine whether a short- or long-term lease will suit you best (pro tip: tenants who are willing to sign a long-term lease gain leverage at the negotiation table), and
- Calculate the monthly budget you are prepared to pay.
These specifications will guide your space hunt.
2. Research Your Area
Arm yourself with knowledge before heading into any negotiations. Conduct market research on rental prices within your preferred location and calculate an average cost per square meter. This will serve as a benchmark for you to compare buildings and better understand the price of property in that location. Ultimately, this knowledge enables you to negotiate a fair price.
3. Find a Space
Now that you have done your research, it's time to head out there and find the perfect commercial space for your business. We recommend bringing in an experienced commercial property broker at this stage to help you find the right property. Their insights and expertise can save you a lot of headaches along the way.
We also recommend searching for 6 to 12 months to get a good feel of your options and truly make an informed decision. This gives you plenty of time to move through the process.
4. Negotiate Your Lease Terms
Once you have found the perfect spot for your business, it's time to head into negotiations with your commercial property broker at your side. Read through the full contract and pay close attention to items like:
- Monthly rent: Based on your research, negotiate the monthly rental fee and ensure it is a fair price based on the size and location.
- Termination: Negotiate the termination clause and aim for lower early termination penalty fees.
- Subletting: Include a clause on subletting. If you need to move to another space, subletting will allow you to recover lost rent.
- Perks: Negotiate for any and every perk available, such as parking and Wi-Fi. These benefits all add up and save your business money.
- Improvements: Ask if the landlord can make improvements to the space to cater to your specific needs.
- Repair and maintenance: Be sure to make it clear who is responsible for what in terms of any initial repair work as well as ongoing maintenance to the property.
- Lease end obligations: Discuss how to deal with any alterations or additions you have made to the space at the end of the lease period.
- Renewal: Be sure to understand and negotiate when and how the lease will be renewed.
5. Final Thoughts
Your commercial lease can impact your business financially and operationally. It's an important decision that can seem daunting. But, if you do your homework and take it slow to carefully consider different properties and negotiate a favourable lease, you can come out on top.
Let our team of experienced commercial brokers help you through the process. Our comprehensive knowledge of the commercial property market and its ever-changing requirements will prove an invaluable asset to you on your property hunt. Get in touch today.
Author: SAProperty.com
