Negotiating to purchase any kind of real estate requires a good knowledge of the business and good bargaining skills. This is especially true when dealing with commercial real estate, where the sales and leasing process is much different than most other transactions. Commercial lease negotiations can get very creative depending on the property involved and the owner’s desire to lease with certain business clients. Moving forward with any kind of commercial lease means knowing what to expect and how to best negotiate.
A lease is a crucial record of the agreement between the property owner and the company leasing the property. It protects both parties against any issues that may arise after the lease is signed, so it is very important that a commercial lease include all what is expected from each party. Leases should be written in language that is easily understood to ensure everything is included. It is the job of an experienced commercial lease negotiator to avoid the risk of missing important inclusions and exclusions in the document.
Lease Negotiation Timing
A company nearing the end of a lease should begin planning well in advance. Finding the right property can take time and negotiating a commercial lease for existing or new property requires time as well. Smaller businesses need six to twelve months, while larger companies may need up to two years. Renegotiating a lease is easier but should still be done well ahead of time, so that any new details or concerns can be included in negotiations.
Lease Negotiation Feasibility
Almost every real estate transaction involves some type of negotiation, therefore, a company must understand where there is room to make requests. Bargaining with commercial property usually involves two main elements: base rent and improvements. The person handling negotiations for commercial property must know how to handle these two potentially flexible areas.
Experienced agents who arrange commercial leases agree that a tenant should never pay base rent price without negotiating for concessions. A landlord who is more flexible and willing to give more when it comes to improvements usually wants the guarantee of a longer lease contract. The bargaining could go on for a while, as both sides likely need to do some research before negotiating. Eventually, an agreement will be reached that works for both sides. Of course, knowing how to get certain benefits is important for optimal bargaining power.
Yes, all of this can be a bit overwhelming; commercial real estate is definitely in a world of its own. The wise choice for many companies with little experience in this area is to hire a tenant representative with the knowledge and skill to help with commercial lease negotiations every step of the way. What is the final result? A business gets what it needs, when it is needed, and with fewer headaches with the help of professionals!
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