In today's world, a large security deposit is a normal part of every commercial lease as landlords protect their interests. While the reason for this deposit is understandable, a company’s desire to reduce such cost at the start of a new lease that is inherent with other expenses is likewise clear and an office lease security deposit may be negotiable. In order to pay the lowest security deposit possible, business tenants should consider the ideas listed below to help negotiate this cost.
Negotiate on Free Rent Terms
An office space commercial lease typically includes a period of initial free rent to help a tenant affordably relocate and transition into a new space more easily. This free rent period can last anywhere from a few months to as long as a year for companies signing an office lease for a longer period of time. It may be possible to trade some of that free rent for a reduced security deposit.
When reducing the free period in exchange for a reduced deposit or similar arrangement, a company may find the benefit they need. This can be an especially favorable option for a company that has properly planned their relocation and is already finding other ways to reduce the costs of starting business in a new location.
Lease Previously Finished Space
A commercial lease for an unfinished, build-to-suit space is desirable for many companies, although this option does come with certain costs. Landlords who agree to a build-to-suit office lease are taking a chance that doing this will be worthwhile and will yield a tenant who pays the rent and stays there for a long time. Companies that are willing to occupy spaces "as is" and require less in terms of improvements are much less of a financial risk to a landlord.
Since the space is already finished, there is less involved in getting a new tenant into it. As a result, a company that agrees to occupy the space the way it is may have some leverage to negotiate a lower security deposit if their move-in requirements stay low.
Establish Good Credit With the Landlord
While establishing good credit and reputation with a landlord is a solution that won't happen overnight, it can also become a good negotiating point over time. Security deposits protect landlords from a number of risks, including a non-paying tenant. Developing a favorable relationship with the landlord can help some companies build the leverage necessary to eventually request a reduction in their deposit. After making timely office lease payments for a while, adhering to all lease terms, and being an otherwise good tenant, some landlords may be willing to negotiate.
The best way to reduce a commercial lease security deposit is to be less of a risk to the landlord. Whether this means accepting fewer perks at the beginning of the office lease or just being a model tenant throughout the duration of the lease, landlords who have less to lose are more willing to negotiate in areas that could benefit their tenants. A company must see a security deposit through the eyes of their landlord and then decide what ways they can reduce risks to gain important benefits!