It's important with lease negotiations of any sort to pay attention to a myriad of factors, even more so with commercial property. Just as every business is unique, so too is negotiating a commercial lease. There is no set or standardized way to negotiate in every real estate instance, but there is a basic commercial lease checklist one can follow that can help ensure the lease signed is good for your company.
Commercial Leasing Checklist
Read our commercial lease negotiation checklist below for guidance through the negotiation process and to help avoid the common pitfalls people make.
What are the Needs of the Business?
Before negotiating your lease, it's important to have a clear vision of the business's needs. Not only the current needs of your business but future ones as well. Companies evolve, grow, and need change, as well as the need for more commercial space. For example, if you know it is likely that the company will outgrow the size space you're looking at then it would be wise to negotiate first right to additional space that becomes available before it is listed.
Alternative Real Estate in the Same Area
Locking yourself into a single opportunity is never a good thing and would have you negotiate leases from a place of weakness. Before entering negotiations, be sure you have several suitable alternatives so that you're not dependent on securing this one property. Looking around at other commercial spaces also gives you insight into the local real estate market as well, knowing what the value of a space is rather than depending on the value you're being told.
Research the Property
Having identified the space you're interested in leasing and knowing the other options available to you, it's essential that you assess the space carefully. Consider the changes or improvements you would make and the needs of your business, and how those improvements could be included in lease clauses. Also, consider who would pay for any of these adjustments and bring these questions up in the discussion before signing the lease. Researching the property you're interested in is an essential step, but don't only look online, also ask around the neighborhood or other businesses in the property about issues that you should be aware of.
Understand the Types of Leases
There is more than one type of lease with commercial real estate and it's important to know which kind of lease would suit you best:
Single Net Lease: the tenant pays rent plus a pro-rata share of the building's property taxes
Double Net Lease: the tenant pays a portion of the property insurance on top of rent and property taxes
Triple Net Lease: the tenant pays the pro-rata share of property taxes, property insurance, and common area maintenance items. These are more common with restaurant and retail commercial spaces.
Full-Service Lease: the most common type and usually offered with office space. The landlord is responsible for insurance, taxes, maintenance, utilities, and janitorial services. The tenant need only pay their rent
Modified Gross Lease: a commercial tenant might pay for their portion of the property taxes, insurance, and common area maintenance items, but in a lump sum along with the rent. The utilities and janitorial services are covered by the landlord and if the taxes, insurance, or common area maintenance items increases the rent still stays the same
Lease Negotiation Assistance
One part of negotiating a commercial lease that shouldn't be overlooked is working with a broker or a tenant representative, someone who has extensive experience with leases and commercial real estate itself. We at Goodale & Barbieri, provide tenant representation and as one of the largest developers, property managers, and a leading real estate firm, we understand what to look for with tenants and the nuances of negotiating a lease, as well as the market. Since 1937 we've handled properties of all sorts and currently over 4 million square feet of commercial property. Discover more about working with experienced experts by following the link below.
