How to Get the Best Deal on a Commercial Lease

Getting the best deal possible on a commercial lease is an important part of starting or running a growing business. For example negotiate poorly or focus on the wrong terms you will end up in an Austin commercial lease contract that will suck the profits out of your company. The more prepared you are the more leverage you will have in commercial lease negotiations. To get the best deal on a commercial lease consider these tips below.

Hire a Commercial Real Estate Agent

Don’t expect the landlord’s agent to help you. They represent the building owner’s best interest. They may give you a little guidance however they CANNOT help you negotiate. They legally cannot tell you what concessions the owner is willing to give up. Their fiduciary duty is ONLY to the Landlord/Building Owner. Having your own agent who has your best interests in mind can help ensure you find the right space and negotiate the best commercial lease possible.

Have Your Financials In Order

Landlords will require that you show some sort of financials when leasing commercial space. Having those ready will prove to the landlord that you know what you are doing. If you don’t have them prepared beforehand it may indicate to the landlord that you may be a risky tenant. The ore prepared you are the more leverage you will have in negotiations. If you are a start up you will more than likely have to sign a personal guarantee. They may also want you to provide a business plan, fill out a personal financial statement, provide a proforma that shows projected income and expenses, show bank statements, If borrowing money show docs proving that you are approved for a loan, etc. If you are an existing business they will want to see 2-3 years of profit / lost statements, balance sheets, etc.

Start Commercial Lease Search Earlier Than You Think You Need To

In a hot market you will have to start the process at least 6-12 months before you ideal open date or before your existing lease expires. Landlords are getting a lot of interest, attorney’s and contractors are slammed, architects are managing multiple projects, etc. Find and negotiating a good deal on a commercial lease takes longer than you think. Do not wait until the last minute or you will end up paying more than you should for space.

Be Familiar With Commercial Lease Terminology

It’s important that you are familiar with the common lease terminology before starting negotiations with landlords. This also gives you more leverage in negotiations if the landlord knows you know what your doing. If you hire an agent they can educate you along the way. Know the commercial lease lingo will help you understand which deal is a better one when evaluating multiple properties.

Review the Commercial Lease Contract

Negotiating the basic deal points on the proposal is only part of the process. Once the lease is drafted you need to review the commercial lease contract. It is negotiable so you need evaluate your company’s current and future needs and goals………and make sure the lease language aligns with your company’s objectives. Even if you are having an attorney review it you still need to interpret and understand how the lease affects your company. What are the tenant responsibilities and expectations? What are the landlords responsibilities and expectations? Do not always assume the landlord got the lease contract right. Check the commencement date, expiration date, rents and escalations and any other negotiated items to ensure they are the same as negotiated on the letter of intent (LOI) and/or proposal.

Lease Only the Commercial Space You Need

Don’t let the landlord agent talk you into taking more space than you need. If you plan on growing make sure you have the ability to expand. For example getting a right of first refusal clause.

Negotiate a Good Common Area Maintenance (CAM) Clause

Make sure you are not paying for things that the landlord should be such as their marketing of space, legal fees incurred with other tenant lease negotiations, benefits for landlord employees, build out costs for other tenant spaces, etc…. Who is responsible for the maintenance of the HVAC units? Who handles janitorial services? What is the tenant responsible for vs the landlord? Make sure you understand who is responsible for what and get all of this in writing. Do not just take the landlords word for it.