Negotiating commercial leases: When should the lease end?
Thursday, January 18, 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, savvy real estate agents and brokers are specialized salespeople. 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 business owner as the amount of rent he pays will directly affect the company's financial bottom line.
Whether you are leasing a new location for the first time or negotiating a lease renewal for your business, here are two money-saving tips for tenants:
When should the lease end?
Most commercial tenants try to open their business going into the busy shopping season, which makes perfect sense. However, most lease terms generally expire at the end of a peak season — or just going into your slow period.
If you are running a retail store in a shopping center, it's usually better to negotiate your lease renewal in February rather than October. As a recommendation, instead of taking a five-year (60-month) lease term, opt for either 56 or 64 months. Start and end your lease term when it's best for you — not just the landlord.
Month-to-month leases have their pros and cons. On the pro side, you will have flexibility. On the con side, you will not have security.
Frequently, you can lease commercial premises more cheaply on a month-by-month basis, especially if the commercial space is already built out to suit you and the property has several vacancies. We recommend that commercial tenants negotiate for a one-year lease term that permits them to terminate within 30 to 60 days notice. This way, the tenant remains in total control.
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