Negotiating commercial leases: Renewal term allowances
Tuesday, August 14, 2018
For many commercial tenants, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While an entrepreneur focuses on marketing and managing his own business, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate.
Tenants may go through the leasing process only two or three times in their entire lifetime — yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for a commercial tenant as the amount of rent he or she pays will directly affect the entrepreneur’s financial bottom line.
Whether you are leasing a new for the first time or negotiating a lease renewal for your business, here are some tips:
Renewal term free rent
Years ago, commercial tenants were accustomed to renewing their lease agreements with little or no incentives. Today, receiving free base rent from the smallest landlord to the largest shopping center developer (as part of a lease renewal package) is very common with the leasing deals that The Lease Coach negotiates.
Your success will depend on the vacancy rate and your willingness to move. If the landlord is routinely giving three months of free rent to new tenants, why not give three months of free rent (or even more…) to existing tenants to motivate them to stay?
Renewal term allowances
Receiving tenant allowance money has become a standard incentive for lease renewals. Some landlords realize that if you left, they would need to provide an allowance to a new tenant, so why not do the same for you?
If you can’t get money, negotiate for more free basic rent to offset your renovation costs. Generally, the more detailed your renovation list (including the costs…), the more justified the allowance will appear and, therefore, will be easier to get.
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