The lease term refers to the length of time a commercial property is rented by the tenant. Typically, Dallas office lease terms range between three, five, or up to ten years depending on what is agreed upon by the property owner and the tenant. Keep in mind that when negotiating the terms of the lease, it is important to choose a term that will benefit the business. Following are some important key points to remember when negotiating the terms of the lease:
- Length of Term – The chosen length of the term in a Dallas office lease has a significant impact on the rental rate. Property owners prefer longer lease terms due to the fact that it can provide them with a regular stream of revenue for a longer period of time. With a long term lease, property owners might be willing to make certain tenant-favorable concessions.
- Long Term Lease – Although choosing a long term lease may favor the tenant when asking for concessions from the property owner, there are also risks involved. One of the disadvantages of going into a long term lease is the business is locked into that particular property for the agreed lease term. If the company outgrows that particular space or if the rate of the commercial lease market declines, the tenant will have no way to make any adjustments until the term of the lease expires.
- Short Term Lease With Options to Renew – To avoid being locked into a long term Dallas office lease, it is advisable to negotiate a short term lease with an option to renew. Having a renewal clause gives the tenant the right to make a decision about extending the lease after expiration of the original lease term. A tenant could instead of signing a ten year lease, sign a two year lease with the property owner and have four renewal options, each one lasting for two years. This should give tenants just about the right amount of time to “test the waters” and make the necessary long term adjustments with the renewal option.
- Cap Planned Rent Increases – It is also important when negotiating renewal options to include a cap on planned rent increases for each term. This is particularly important for a Dallas office lease that is in high demand. Without a cap on the rent increase, the property owner could increase the rent in large increments each term according to fair market rates. If the property owner insists on a rent increase based on the Consumer Price Index, negotiate with the property owner to withhold the CPI increase for at least two years.
Determining the best possible lease term options depends upon the needs of each business. Before negotiating the terms of the lease with the property owner, a business owner should have a list of terms that are necessary for their type of business. To obtain successful negotiation results, seek the aid of a professional realtor. Not only will they help during negotiations; they will also provide assistance in finding a Dallas office lease that is ideal for each individual business and provide assistance throughout the term of the lease!