When leasing office space you don’t get what you deserve……you get what you negotiate! The process of negotiating an office lease can be stressful for a lot of decision makers however by keeping the following 5 keys of negotiating in mind can make the process much easier:
1. Create leverage
It doesn’t matter if it’s a Landlord or Tenant’s market there is always a way to find leverage when negotiating an office lease.
- Giving yourself plenty of time to complete a lease deal is the best way to create leverage. Most office lease negotiations take months so the more time you have the more leverage you have.
- Don’t let the landlord or landlords agent know how you really feel about the space. This will help your broker to do a better job negotiating.
- Have more than one office space option. If the other party finds out that you don’t have any other office space options then they have leverage and you don’t. Always have alternatives to consider.
- Be prepared to walk away. If you can’t agree on terms and conditions that are right for your business then walk away.
2. Don’t get stuck on lease rates. Think term
Tenant’s often only think about office lease rates when looking for space. The lease rate you pay is important, especially the effective (aka gross rate), however the lease term can have a huge impact on your finances.
Rather than worry about trying to shave off another 50 cents on the lease rate, spend more time forecasting your current and future space needs and negotiate the right term. You don’t want to end up leasing a space that doesn’t meet your needs longer than you have to.
3. Nothing is “Free” when leasing office space
When leasing office space the length of lease term determines what tenant improvements and other concessions (e.g. free rent) you may receive. Don’t sign a lease for a longer term JUST to get more free rent. If the space meets your current and future space needs then sign a longer lease. However if there is doubt then don’t. Improvements and concessions are never really free. These types of costs are always baked into the lease’s overall value by the landlord. Landlords are in the business to make money on their properties :).
4. Always have an experienced commercial real estate attorney review the lease
Office lease contracts are typically 20 to 40 page documents. Every company different plans for the business so having an experienced attorney review the lease contract should be part of your negotiation process.
5. Try to have an exit strategy
Depending on the market you are in this is not always easy, however you never know until you ask. Having a lease termination clause is nice in case thing go wrong in the future. You may have a good feel or insight for the next 2-3 years however not quite 5 years so try to negotiate some sort of termination option.