A good lease negotiation process is all about the art of compromise. In the following article, Transworld Commercial Real Estate will share our top tips for negotiating with your landlord to ensure your making the right decisions for your commercial lease and your business when it comes to your lease contract.
How to negotiate a commercial lease?
To start, are commercial leases negotiable? Yes! Commercial leases are negotiable, but you have to know what to negotiate on and what not to. The best way to negotiate a commercial lease is to start early on in your search or renewal process, know your deal breaker priorities and work with a tenant representative who will have the negotiation skills and market knowledge to get the results you’re after.
What can you negotiate in a commercial lease?
Almost all commercial lease terms can be negotiated in a commercial lease, including your base rent, the term length, your expense caps, early termination fees, HVAC responsibilities, clauses renting to competition, and building signage. There is a lot of room to get creative to settle on a lease contract in Colorado that works for both the tenant and the landlord. Using tenant representation services can help you identify where there is wiggle room for your business lease.
Negotiating with Your Landlord
Tip One: Begin the Process Early
Giving yourself the time and space to negotiate on your Denver commercial real estate is paramount for the process to go smoothly. This also gives you space to identify alternative options if they become necessary. If you’re up against the wall on your timeline, it is going to become increasingly difficult to settle on a fair contract.
The same tip applies when you’re searching for new commercial space in Colorado. When there is no sense of urgency or panic, reaching a fair agreement will be easier and you won’t have to settle because you absolutely have to move in now.
Tip Two: Keep Your Priorities Top of Mind
When you’re considering a lease contract keep in mind what you absolutely need to conduct business – those are your number one priorities, your deal breakers. Then build out your list of wants for your commercial real estate lease. These items are where the negotiation and compromise opportunities lie. It is also important to know your financial limits coming into negotiation. A good example of this scenario is to make sure you’re allowed to sublease your space in case your business fails or unforeseen circumstances arise. But negotiating additional free parking spaces are not necessary to conduct business well.
Tip Three: Work with a Tenant Representative
A tenant representative is a commercial real estate broker that works as your advocate during the negotiation process for a new lease or a lease renewal. Their services are complementary (paid by the landlord), so there is no reason to enter negotiations without representation. A tenant representative provides a few benefits during negotiation including the following.
Benefits of a Tenant Rep when Negotiating with Your Landlord
- Market and term familiarity
- Knowledge of creative structure opportunities
- Intermediary to ensure a positive landlord relationship after the transaction
- Negotiation timeline management
- Tenant stress relief
It is simple to see how much value a tenant agent can bring to lease negotiations with a landlord.
Tip Four: Beyond the Initial Lease Contract
Think of the initial lease contract a landlord presents you with as the beginning of the conversation, but don’t settle for the first contract. The first contract is often constructed mainly with the landlord’s best interests in mind and not that of the tenant. Now that you’re aware of what the landlord wants from the contract, it is time to bring your priorities into the conversation. Your tenant representative will help you lead this conversation in a constructive manner to keep the landlord/tenant relationship on good footing.
Tip Five: Look at the Whole Financial Picture
It can be easy to review a lease contract and only calculate your cost in terms of monthly rental fees. But don’t forget there are other fees involved like common area maintenance, utilities, and other fees. Make sure to consider your full financial commitment. This is another area where a tenant representative brings a lot of value, because they would never let this happen.
These top five tips for negotiating with your landlord are a great place to start. It is also important to remember that you should always be willing to walk away from the negotiation table, especially if your landlord is being unreasonable and not providing top priority concessions. To help you navigate the process of negotiating with your landlord for a real estate lease we always recommend working with a professional commercial real estate broker.
Give Transworld Commercial Real Estate a call today or visit transworldcre.com for more information on our tenant representation services.
Rachael Holstein is the Marketing Manager for Transworld Commercial Real Estate, a full service commercial real estate firm in Denver, Colorado. Her work experience has been largely focused on business development and marketing in business brokerage, finance, architecture, property management, and information technology. A long time resident of Cleveland, Ohio, she attained her undergrad from John Carroll University and her Master’s Degree from Cleveland State University. In 2013, she relocated to Denver with her husband, Joe, and her furry companions to explore the mile high lifestyle! Visit transworldcre.com for more information.