Negotiating Commercial Space for Your Business

Negotiating Commercial Space For Your Business

Negotiating Commercial Space for Your Business

If you run a brick and mortar business, then your space is one of your most expensive costs and a lease is a liability that you carry. That’s why it’s important to not only maintain a good rapport with your landlord, but negotiate what’s in the best interest of your business. Keep in mind that leases are generally written to favor your landlord, so be diligent and make sure that you are being protected as well. In a good economy, it can feel like you’re getting squeezed as rents rise, so SilverEdge has put together a list of tips to use when you are searching for your perfect space.

Know the Market

Do your own research or speak to a commercial real estate agent to understand what the current market rate is before you start looking. If you find that your ideal neighborhood is too expensive for you, then you’ll be able to do the market research on alternative locations before engaging with landlords. Or, if you want to negotiate a lower price, research the past trends to see what might entice a landlord to give you a lower rate. Being informed gives you the most leverage in negotiating rent.

 

Length of Lease

The health of your business will play a part in determining the length of lease you are comfortable with. Many landlords will expect a 3-5 year lease and the longer commitment you are able to make, the lower your rent will be. Just make sure that you lock in a rate or a maximum price increase per year and if you have to sign a shorter 1-2 year lease then add a first-refusal renewal clause that is in your favor, so that if the location works out for you, you aren’t faced with a costly move. In addition, if your business attracts a lot of foot traffic, that can be used to negotiate a lower rent if you agree to stay longer, as the health of a property depends heavily on the impression of success, which will attract other tenants.

 

Know What’s Included

Oftentimes the only lease a business owner has had personal experience with is for a personal residential situation, which is much different than a commercial lease. Everything from property taxes to janitorial services can be your responsibility, so reviewing everything that is and isn’t included in your rent is essential. Most commercial leases will have a “base rent” which is set for the term of the lease and has a cap increase each year, but operating expenses paid by the tenant, like repairs or maintenance, can increase significantly over time. Therefore, when negotiating the lease try to get the terms of these operating expenses as predictable as possible.

 

Damages

Sometimes, what appears to be a relatively small issue can turn into a big one for tenants. Business owners are not only responsible for damage their employees cause, but also their customers. The thing to remember is that if something were to happen, such as a flood from your kitchen or bathroom, and it affects other tenants, you will pay for all the damage and won’t have any influence over the cost of those repairs. The best thing to do in this case is make sure you have rock solid insurance that covers these types of cases. Landlords very rarely negotiate this term in a lease.

 

Once you’ve found the perfect location for your business, check out the tools that SilverEdge point of sale systems offer that can help you manage other expenses. We’d love to show you how, so contact your SilverEdge representative today for an appointment and we’ll help you make your business richer.